NEW YORK - The turmoil at Wall Street giant Morgan Stanley took a new twist Tuesday as critics of chief executive Philip Purcell called for his replacement with former number-two executive Robert Scott.
The move came a day after Purcell proposed a spinoff of the Discover credit card business in a move aimed at shoring up the company's financial health.
Purcell's critics, including a group of former executives and major shareholders, issued a new statement Tuesday highlighting "the surprising recent changes in Morgan Stanley's strategy and governance," and proposing a new management structure.
The group also asked the board to name a new nonexecutive chairman and create an office of the president.
Scott, 59, is a 33-year veteran of the firm and has served as head of investment banking, chief financial officer and president and chief operating officer.
In a statement, Scott said his first priority would be to ask that former executives including Vikram Pandit, John Havens and Stephan Newhouse return to the company.
Scott added that he would "create an environment in which talent is recognized and supported and which encourages free and open discussion."
The executives cited resigned after Purcell promoted Zoe Cruz and Stephan Crawford above them.
Late Monday, the brokerage and investment firm made the announcement about the plans for Discover in what was seen as an effort by Purcell to maintain control of the firm in the face of fierce opposition.
"This is the right time for Discover to be on its own," Purcell said during a Monday evening conference call. "Discover can deliver more value to our shareholders as a standalone company."
Purcell said both of Morgan Stanley's main businesses were well positioned for strong growth and noted that Discover would deliver more value to shareholders as a separate company.
Purcell also said the move allows Morgan Stanley to focus on its integrated securities business.
Analyst Dick Bove at Punk Ziegel said that Morgan's move to spin off Discover may not be enough to end shareholder discontent or to really add value for them.
"The spinoff of Discover does not appear to add value," Bove said.
The new Discover may be worth about 11.12 dollars per share, and the restructured Morgan Stanley, about 44.85 dollars per share, Bove said.
"In sum, the two companies are worth apart about the same as they are worth together."
The prominent Wall Street firm has faced a rare display of dissent from its ranks, prompting a warning that its financial outlook may suffer from the turmoil.
The crisis has led to the departure of several key executives, which the dissidents said would worsen problems at the company.
04/05/2005 18:20 GMT