Morgan Stanley CEO James Gorman says he hopes to leave successor with a "clean sheet."
Capital increases and block trading investigations are still issues.
James Gorman, one of the longest serving chiefs on Wall Street, took some people by surprise when he announced last month that he expected to step down as chief executive of Morgan Stanley in the next 12 months.
The board has identified 3 internal candidates to succeed him, Gorman told shareholders at the company's annual meeting on May 19. "I definitely have no plans to go out like Logan Roy," he said, according to Reuters.
Why did he make that announcement at that time? On Monday, Gorman explained. At a Morgan Stanley conference on financials, payments, and commercial real estate, Gorman noted that he would review the succession process with the board every couple of years. He said:
About 5 years ago, I said I'd leave in about 5 years. About 3 years ago, I said I'd leave in about 3 years. And I just got back from a trip through the Middle East and France and the U.K. and everybody kept saying to me, 'so you're going to stay another 3 years?' And I think there's something in the general view that people don't mean it when they say it, but I definitely mean it. And I said no. So if the market thinks that we need to sort of rip the Band-Aid off, and I thought an elegant way to do it was around the annual meeting to say before the next annual meeting, I will have stepped down.
The timing, he added, according to a transcript by the research firm Sentieo, is up to Morgan Stanley's board. Still, he noted, there are a number of major issues the firm is dealing with at the moment. They include:
- The Federal Reserve's stress tests on the biggest banks.
- New requirements for the banks to increase their capital buffers.
Talks on a potential resolution of investigations by federal prosecutors and the Securities and Exchange Commission into the firm's handling of block trades, the trading of shares in bulk.
The stress tests will be released later this month, and the new capital rules are expected soon. The status of talks on the block trading inquiries is not clear.
"There's a whole range of things that I wouldn't mind either getting set or dealing with before if I step down," Gorman said. "So whoever replaces me has a complete clean sheet, and I think most of that will happen within a year, maybe well within a year, and we're off to the races."
In early May, Morgan Stanley was reportedly planning to cut 3,000 jobs worldwide. Gorman said on Monday that the number was about 3,500.
Asked about the workforce reduction, Gorman said:
I think it's -- you can never say for sure, but it's unlikely we'll be going back to that well. I think we've got it where we wanted. And we took out a lot of managing directors, creating capacity for others. I feel it's not pleasant. Nobody -- I hate doing this. I've done it many times in my career, but it was the right thing to do. You're trying to ensure you're balancing shareholders' interest with loyalty to employees and keeping the culture in place. And sometimes you got to make the hard call. It's back to where I started on the succession stuff. Sometimes you got to be the person who takes a few arrows because it's the right thing to do, and that's what we did.