The Morgan Stanley fracas is an opportunity to investors from SRI and Corporate Governance backgrounds to watch the heavyweights fight and reach for tools of shareholder activism. CEO Phillip Purcell is being bumped around by MS alumni who are pressing for a return of ousted ex-President Robert Scott. Yesterday's meeting was packed
As WSJ's Alan Murray pointed out "Corporate America is Getting Rocked Just Like It's 1789" (WSJ 5 Apr A2) it is not clear who is running MS. This CEO star Purcell is finding that sometimes just when you think you're leading, you're really only going for a walk alone. Murray points to the power "the board of directors that should take the reins of power from an autocratic CEO. But the MS board continues to give public support, as well as lavish compensation, to Mr Purcell's lavish compensation." Murray dismisses the employees - there are only so many who could walk away. He identifies the all-powerful, obdurate hedge funds as holding real sway. As investors, they ask very pointed questions, as Scott Sipprelle of Copper Arch Capital did and wrote a letter. Seems when hedge funds get involved, people on Wall Street listen.
Where are the pension funds in this? After smarting from the political power-play at CALPERS last November, maybe trustees are being a little more cautious. This Sunday is the start of the Council of Institutional Investors - mainly big public pension funds - and it will be interesting to see what voice they find. Tied to the debate of who should elect board members, I'm hoping it will be interesting. Phyllis Plitch at DJNewswires (Board Selections Spark a Backlash, 5 Apr) reported on the storms brewing at Caterpillar and Gannet where shareholder activists want a switch to majority voting AND the power not just to withhold but to propose and vote for alternative directors. The union investors are pressing for it. Ed Durkin, director of special programs for the United Brotherhood of Carpenters and Joiners of America, is quoted as saying both institutional and individual investors want it. Durkin says unions have sent resolutions to 80 companies to date this year.
Referencing "institutional" or "individual" investors, Charles Schwab's op-ed in Tuesday's WSJ "May We trade Through" makes for an interesting self-assessment of his business. He describes Schwab as "my business is focussed exclusivley on individual investors and the investment advisors who serve them". The question? What happened to Schwab Institutional?! Is this an admission that the venture to the corporate side has lost its way?
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