Morgan Stanley trying to build support for embattled chief

Accompanied by Tarek F. Abdel-Meguid, the head of the investment banking department, the co-presidents urged Morgan’s skeptical bankers to rally around the new leadership. But attendance was sparse and the meeting proceeded awkwardly, with few managing directors in attendance and the first 10 rows of the auditorium empty, according to a person who was there.

The tepid response underscores the steep challenge Purcell and his new team faces in unifying the investment bank, where many bankers still feel deeply loyal to the two departed executives — Vikram S. Pandit and John P. Havens — and resent what they feel to be a series of loyalty tests that they have been asked to take.

Also departing was Guru Ramakrishnan, a senior trader, who left on Tuesday.

Strong divisions still remain at the firm between Morgan Stanley and Dean Witter executives that date back to their merger in 1997. “A lot of people have relationships with John and Vikram,” said Byron Wien, a senior investment strategist at the firm. “They now have to re-establish the relationships with a new team. That will take some time. But I’m optimistic that the new team will do that.”

The moves come in the wake of the latest broadside by the group of eight retired Morgan Stanley executives who have been lobbying the Morgan Stanley board to oust Purcell. In a full-page ad in The Wall Street Journal on Thursday, they criticised Purcell for having let crucial executives leave the firm because of their unwillingness to swear loyalty to an ineffective CEO. They also took aim at the board, stating that its support for Purcell’s recent management changes was a “failure of corporate governance.”

Morgan Stanley’s Shares rose sharply for a second day, increasing $1.97 a share, or 3 per cent, to $57.25, as a number of analysts began to speculate about the possibility that the firm may become vulnerable to a takeover. — NYT