Morgan Stanley’s board of directors has elected CEO Ted Pick as chairman, effective Jan. 1, the bank announced Thursday.
That’s not surprising. Longtime CEO James Gorman cabled in May that he would step down as chairman of the bank’s board at the end of this year. And Mr. Pick guided Morgan Stanley to a third quarter in which he said the bank’s profits rose 32% from a year earlier. The bank’s stock price has also risen 28% since Pick took over as CEO, marking the biggest single-day gain in four years when third-quarter results were announced.
Gorman has a lot of work to do. Disney on Monday named Gorman its next chairman of the board, effective Jan. 2, as an extension of his role leading the entertainment giant’s succession planning committee.
Of course, Disney is hoping to capture some of the succession lightning that riveted the business world last year when Morgan Stanley named Mr. Pick to replace Mr. Gorman as CEO, but it still manages to do so with Andy Thaper. The company succeeded in retaining two executives, Stein and Dan Simkowitz. He lost his position as CEO. (There’s no magic formula. The bank offered them each $20 million in stock compensation to stay, and gave the pick the same deal.)
To the casual observer, it may appear that Morgan Stanley has had its cake and eaten it too.
After Thursday’s developments, analysts may be inclined to believe that the bank has become accustomed to having its cake and eating it too.
The bank said in a filing Thursday that Mr. Gorman will retire from Morgan Stanley and step down from the board when Mr. Pick becomes chairman, but will retain the title of chairman emeritus. Perhaps more importantly, Mr. Gorman will serve as a non-employee advisor to the bank until the end of 2026, and during his time as CEO, he will continue to work on issues where the company hopes to benefit from the experience, expertise and relationships he has developed. It means “to work on it.” “To strengthen Morgan Stanley’s business and impact the world.”
To do so, the bank agreed to pay Mr. Gorman $400,000 a year and give him access to a car and driver, an office and administrative support, and some control over expenses. Just to be clear, this coincides with his next term as Disney chairman. Morgan Stanley’s board said it may terminate or extend the contract.
Morgan Stanley is not the first bank to bestow the title “emeritus” on its chairman. Goldman Sachs named outgoing CEO Lloyd Blankfein executive chairman in 2018 and gave him access to a company car and security driver for one year. However, the contract did not come with a salary or bonus.
Mr. Pick is pending his appointment to the board of directors, making him the fourth current CEO of the six largest U.S. banks to also serve as chairman. Jamie Dimon holds both positions at JPMorgan Chase. Brian Moynihan holds a concurrent position at Bank of America. David Solomon holds both roles at Goldman. (Citi and Wells Fargo maintain separate chairs.)
Proponents of the unified CEO-chair role point out that it lowers the decision-making hurdle by one level. But opponents say it concentrates too much power in one individual.
Proxy advisors recommended earlier this year to shareholders of JPMorgan, BofA and Goldman to separate the roles of CEO and chairman, but none of the recommendations gained traction. Bank of America shareholders rejected the proposal with 31% support. Goldman rejected this with 33% support. The measure also fell short at J.P. Morgan, with 42.7% support, and the bank issued a statement saying the proposal “underscores the past 18 years of leadership experience by its current chairman and chief executive officer, who has built the company into one of the world’s leading companies. “It is not consistent with the evidence.” It is the largest bank in the United States. ”
Morgan Stanley’s actions on Thursday may be a sign that it will be great to become the next chairman of the board. However, considering the perks, it might be better to become an honorary waitlist.
