Morgan Stanley CEO Leaving

Morgan Stanley Chairman and CEO Philip J. Purcell said Monday he is planning to retire from the Wall Street investment bank amid calls for his ouster from a group of dissident shareholders and former executives.

The announcement came as Morgan Stanley also warned it expects its second-quarter earnings to be about 15 to 20 percent below last year's second-quarter results.

Earlier Monday, the cable news channel CNBC had reported Purcell had been fired.

Purcell said in a letter to employees that he plans to retire as soon as a successor is named, but no later than the firm's next annual meeting next March.

"It has become clear that in light of the continuing personal attacks on me, and the unprecedented level of negative attention our firm — and each of you — has had to endure, that this is the best thing I can do for you, our clients and our shareholders," Purcell said in the letter.

Morgan Stanley has faced a steady stream of departures since late March, when the promotion of co-presidents Zoe Cruz and Stephen Crawford angered a handful of long-time executives. Since then, five of the 14 members of the company's executive committee have left, along with a number of other managers, mostly in Morgan Stanley's stock trading and institutional banking businesses.

The high-profile departures have highlighted a rift between former Dean Witter employees, who came with Purcell to Morgan Stanley in the 1997 merger between Morgan Stanley and Dean Witter, and longtime Morgan Stanley workers. The dissidents who called for Purcell's ouster all have roots in the pre-merger Morgan Stanley and accused Purcell of using the division in the ranks to shore up his position as chairman and CEO.

In his letter, Purcell defended the merger, saying the combined company has gained market share in almost every category and its stock price has outperformed the S&P 500 nearly threefold.

"I feel strongly that the attacks are unjustified, but unfortunately, they show no signs of abating," Purcell said in the letter. "A simple reality check tells us that people are spending more time reading about the acrimony and not enough time reading about the outstanding work that is being accomplished by our firm."

The string of departures emboldened a group of eight disgruntled shareholders and former executives who called for Purcell's firing. The dissidents' attempted coup was rejected by Morgan Stanley's board of directors, which gave Purcell a vote of confidence at a meeting April 30.

But just last Friday, The Associated Press confirmed that three managing directors and up to six others have left the company's equity derivatives desk, which handles trading in options and futures contracts and works closely with hedge funds and big institutional investors.

Purcell said the company has begun a search for his replacement, led by Chuck Knight, head of the board's compensation, management development and succession committee.

"I will make sure that the firm stays on course until my successor is chosen and that we continue to be relentless in pursuing our business goals," Purcell said.