John Mack is to stand down as chief executive of Morgan Stanley. He does so after managing to steer the investment bank through the worst of the financial crisis to become one of Wall Street’s only two remaining independent brokerages.
Mr Mack – a Morgan lifer who left the bank for a brief spell at the start of this decade to return as leader in 2005 - will step aside at the end of the year in favour of co-president James Gorman.
Mr Gorman runs the bank’s sprawling brokerage arm, which is mid-way through a merger with Citigroup’s Smith Barney division.
Mr Mack – known as “Mack the Knife” for his at times ruthless streak – will stay on as chairman, while Mr Gorman’s fellow co-president, London-based Walid Chammah, will become chairman of Morgan Stanley International.
The announcement seals an extraordinary period for the bank, which has seen then co-president Zoe Cruz – who many saw as a potential successor to Mr Mack - ousted in December 2007 after being blamed for early sub-prime losses and a deal to sell a 21pc stake of the bank’s equity to Mitsubishi UFJ for $9bn (£5.4m).
His tenure has also seen the bank apply for bank holding status alongside Goldman Sachs in order to come under the regulatory auspices of the Federal Reserve, calming fears about future liquidity.
Although Mr Mack had managed to outlast many of his Wall Street peers in that time - including Bear Stearns’ Jimmy Cayne and Lehman Brothers’ Dick Fuld – the news will not come as a surprise to those who blame him for increasing leverage at the bank without appreciating the need to rein risk in as the economy began to turn. In its most recent quarter, for the three months to the end of June, the bank lost $1.26bn while rivals were heralding significant returns to profit.
Reaction to the news was mixed, with Holland & Co’s Michael Holland praising Mr Mack for being able to “right the ship in a very difficult time”, while Wedbush Morgan’s Stephen Massocca described the change as “like rearranging deck chairs”.
Robert Kidder, the bank’s lead director, disclosed that Mr Mack had told the rest of the board some 18 months ago that he wanted to retire when he reached the age of 65 this November.
Headhunters Spencer Stuart are understood to have searched for possible external candidates for the role, but it is thought that Mr Gorman was always the board’s choice, especially as Mr Chammah ruled himself out because of his desire to stay in London for family reasons.
Mr Gorman’s appointment signals the growing importance of wealth management to the bank, as a result of its continuing combination of its own brokers with those from Smith Barney, and perhaps a shift away from the traditional perception of it as a pure-play investment bank.
The chief executive-in-waiting joined Morgan Stanley in February 2006, and was promoted to his current role in November 2007,
A lawyer by training, he spent much of his career at management consultancy McKinsey & Co, before joining Merrill Lynch in 2001.
Mr Gorman, who takes over the top job on January 1, 2010, will become what is thought to be the bank’s first non-American chief executive in its 74-year history. He was born in Melbourne, Australia – although he does hold American citizenship.
Earlier this summer, he admitted to the Australian Financial Review that: “people [on Wall Street] have realised a lot of their performance was because of the market environment and not just because of their individual genius”.
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