July 14, 2024
These are the leading candidates to succeed James Gorman as Morgan Stanley CEO — and what happens next

These are the leading candidates to succeed James Gorman as Morgan Stanley CEO — and what happens next

Morgan Stanley Chief Executive James Gorman said Friday that he plans to step down as the bank’s chief executive officer within a year, observing that the investment bank has a strong bench of internal candidates to serve as its next leader.

“ ‘There’s an old saying … that when you have to hire an outside CEO, sell your stock now.’ ”

— Randall Peterson, London Business School

Attention on the next likely CEO of Morgan Stanley MS, -2.66% has shifted to the executives that run its three main business lines, although the bank has declined to comment on any potential candidates by name:

  • Andy Saperstein, co-president and head of wealth management, previously worked as co-head of the bank’s institutional securities group as well as in senior leadership positions in the bank’s wealth management unit. He joined the firm in 2006 and will represent Morgan Stanley at a Bernstein conference May 31.
  • Edward “Ted” Pick is co-president, head of the institutional securities group and co-head of corporate strategy. He previously worked as global head of sales and trading and was credited with a turnaround of the firm’s fixed income unit, according to his biography on Morgan Stanley’s website. He joined Morgan Stanley in 1990 and became a managing director in 2002.
  • Dan Simkowitz is Morgan Stanley’s head of investment management and co-head of corporate strategy. He joined the bank in 1990 and has worked in New York, Tokyo and Hong Kong. He also was the bank’s co-head of global capital markets, as well as the lead capital-markets partner for Morgan Stanley’s assignments for the U.S. Treasury and Federal Reserve from 2008 to 2012.

With a 215.5% gain since then end of January 2010 when Gorman took over, Morgan Stanley’s stock has outperformed the Financial Select Sector SPDR exchange-traded fund XLF, -0.43%, which has risen 184.5% over that span. But the stock has trailed that of rival JPMorgan Chase & Co. JPM, -0.23%, which us up 258.2% over the period, and has also lagged the 290.9% rise of the broader benchmark S&P 500 SPX, -0.14% during the same span.

Also see: Morgan Stanley’s stock has underperformed the market since James Gorman became CEO in 2010

In the coming months, Morgan Stanley’s compensation, management development and succession committee of the board, which is chaired by Dennis Nally, will continue its succession-planning process. That committee then reports to the full board, headed by lead independent director Tom Glocer, the former Thomson Reuters TRI, +0.23% CEO.

Morgan Stanley representatives contacted by MarketWatch did not offer comment on the three potential candidates.

See also: Morgan Stanley’s stock dips as CEO James Gorman announces departure within ‘next 12 months’

Randall Peterson, professor at London Business School and author of “Disaster in the Boardroom: Six Dysfunctions Everyone Should Understand,” said Morgan Stanley’s apparent decision to look to internal candidates is a sign that the company is moving to extend its current culture into the next generation of leadership.

“There’s an old saying … that when you have to hire an outside CEO, sell your stock now,” Peterson said.

Don’t miss: Retirement tips for Morgan Stanley CEO James Gorman

The question remains whether Gorman will allow the new CEO free rein, since he’s expected to remain chairman for the foreseeable future.

“If the new person comes in and is stable, that’s one thing, but, if there’s any wobble, [Gorman] won’t go anywhere for a while,” Peterson said.

The incoming Morgan Stanley CEO would have to work quickly to score a win of some kind, walking a “tightrope” with the board until that happens, Peterson said.

While it may appear that Saperstein is a leader among the potential successors to Gorman given his speaking role at an upcoming Bernstein conference and his status leading the high-profile wealth-management unit, Peterson said the most predictable outcomes don’t always play out when it comes to internal CEO candidates.

“When it comes to people everyone thought [would be] actually getting the job, it’s kind of 50-50” as far as whether they do end up getting the nod, Peterson said. “The good thing is they have a richness of options here for people they could go to internally. I’d worry if they had to discuss externally.”

Peterson said the language in Gorman’s commentary on Friday indicating that the CEO decision will be made “in the absence of a major change in the external environment” signals that he plans to remain at the helm if an unexpected situation arises in the sector.

It’s also a sign that it could be challenging for Gorman may to fully let go of his responsibilities and allow the new CEO to fully take over, Peterson said.

Read on: Morgan Stanley reportedly plans to lay off thousands more

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