Press Releases

Read all press releases issued by the "Group of Eight," who are former senior executives of Morgan Stanley and significant shareholders of the Firm.

May 12, 2005: Shareholders and Former Senior Executives of Morgan Stanley Release Open Letter to Morgan Stanley Shareholders

April 11, 2005: Shareholders and Former Senior Executives of Morgan Stanley Issue Third Letter to the Board of Directors

April 5, 2005: Shareholders and Former Senior Executives of Morgan Stanley Outline Plan to Address Firm Leadership, Strategy and Governance

April 4, 2005: Shareholders and Former Senior Executives of Morgan Stanley Issue Message to Employees

March 31, 2005: Shareholders and Former Senior Executives of Morgan Stanley Issue Second Letter to the Board of Directors

March 29, 2005: Shareholders and Former Senior Executives of Morgan Stanley Release Letter to the Board of Directors


May 12, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY RELEASE OPEN LETTER TO MORGAN STANLEY SHAREHOLDERS

New York, NY - May 12, 2005 - Today a group of shareholders and former members of senior management of Morgan Stanley published an open letter to Morgan Stanley shareholders.

"May 12, 2005

To the Shareholders of Morgan Stanley:

We are today releasing detailed materials outlining a proposal to spin off the Institutional Securities Business (available on www.futureofms.com). As has been reported, this proposal was reviewed in preliminary form with three non-executive directors of the Morgan Stanley Board on April 22, 2005. Since that meeting we have received no direct response from the Board. We have subsequently discussed a spin-off with institutional shareholders and expanded the initial proposal to reflect their input.

The proposed spin-off is motivated by a belief that the Board of Morgan Stanley faces an immediate crisis and that the Firm has been badly served by its present management and leadership. The recent improvements in corporate governance announced by the Board in reaction to pressure from shareholders are overdue, but they fail to address the leadership and structural issues that, if left alone, will continue to damage the Firm and erode shareholder value. The crisis continues and will likely deepen.

Central to any successful resolution of the current crisis is the separation of Philip Purcell from authority over Morgan Stanley's Institutional Securities Business and the installation of a new management team, which can stem the tide of departures and attract key leaders, who have recently departed, back to the Firm. If Morgan Stanley's optimum strategy is to build a fully integrated securities business - an outcome that Mr. Purcell has failed to accomplish in the eight years since the merger with Dean Witter Discover - the strategy requires the immediate replacement of the current leadership team.

Alternatively, a spin-off of the Institutional Securities Business would acknowledge the failure of the integration effort, allow the Institutional Securities Business to regain its stature and reputation and significantly improve its performance. This could be accomplished under the leadership of the five widely respected senior executives who were forced to depart, but who we are highly confident would return to lead the Institutional Securities Business in a spin-off.

The business strategy presented by Mr. Purcell, Ms. Cruz and Mr. Crawford at the UBS Global Financial Services Conference on Tuesday, May 10, 2005, while acknowledging the Company's underperformance, the departure of key managers from the Firm and the high likelihood of more departures in the future, offered no credible solution to the present crisis. In the eight years since the merger, Mr. Purcell has failed to successfully execute the integrated securities business model senior management promoted at the conference. Staying the course under the present leadership is not an acceptable solution. Shareholders deserve better. We strongly believe that new leadership is critical to the success of the Firm and to the creation of shareholder value. We invite you to study the spin-off proposal carefully, before the crisis worsens.

If you believe that a spin-off of the Institutional Securities Business and the return of recently departed and highly respected leaders would be beneficial to shareholders, we urge you to let us know by e-mail on our website (www.futureofms.com) or by contacting us at (212) 372-4005. We also encourage you to make your views known to the Morgan Stanley Board by contacting them directly.

Respectfully,

/s/ Anson M. Beard, Jr.
/s/ Lewis W. Bernard
/s/ Richard A. Debs
/s/ Joseph G. Fogg, III
/s/ S. Parker Gilbert
/s/ Robert G. Scott
/s/ Frederick B. Whittemore
/s/ John H. T. Wilson"

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April 11, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY ISSUE THIRD LETTER TO THE BOARD OF DIRECTORS

New York, NY (April 11, 2005) - Today a group of shareholders and former members of senior management of Morgan Stanley sent a third letter to the Board of Directors.

"April 11, 2005

Open Letter to the Board of Directors of Morgan Stanley:

Last week, in an open letter to Morgan Stanley's employees, in which he discussed recent criticisms of his performance and calls for his replacement, your CEO, Phillip Purcell wrote: "I would not have chosen this debate to be so publicly aired." We agree and demonstrated as much when we wrote to you in advance of the Company's annual meeting in March, to express our concerns and to request a private meeting with you to discuss them. You have stated that you believe there is no "fair and compelling case" to replace Mr. Purcell, yet you have not spoken to us and have so far declined our repeated requests to meet with you. You have chosen instead to react to our concerns and those of others by announcing a radical restructuring that has cost the firm some of its most talented professionals and further entrenched and insulated Mr. Purcell. Additionally, in an abrupt and poorly explained about-face in corporate strategy, you have decided to spin-off Discover.

In his carefully crafted press statements in London last week, Mr. Purcell declared victory and announced that the debate about his performance and leadership was "over." This is not a game of winning and losing. There are already too many losers among Morgan Stanley's employees, shareholders and clients. This is about corporate governance, executive leadership and creating value for shareholders. Before you pledge your continued and unconditional support of Mr. Purcell and before you expend any more corporate resources to do so, we think the Board should answer the following questions:

  • Given that Mr. Purcell has stated that he does not believe "it is in the custom of Morgan Stanley . . . to risk a course of action that would damage our franchise," did the Board approve the decision to relieve Messrs. Newhouse, Pandit and Havens of their responsibilities - thereby causing their departures? Does the Board believe that the departures of these senior executives, highly respected by shareholders, employees and clients, benefit the franchise and enhance shareholder value?

  • Did you believe that you fulfilled your obligations in approving a management restructuring, even though a key management committee member was never interviewed by directors, and most of those in institutional securities were only briefly interviewed by telephone?

  • How many more talented employees must leave before the Board understands that the value of the Morgan Stanley franchise is deteriorating while the Firm is facing a crisis of confidence in the Chairman and CEO?

  • Since the receipt of our March 3 letter, has the Board or any Board Committee approved the payment of "retention" or "stay-on" payments to key employees?

  • In light of the fact that the By-Laws require a 75% vote of the directors to remove the current Chairman and CEO, did you feel it was appropriate to appoint three directors to the Board, one in December of 2004 and two in April of 2005, without a shareholder vote?

  • In the wake of two successive shareholder votes demanding the elimination of the staggered Board, and the Board's own recommendation to de-stagger the Board, why didn't you follow the example of other firms and immediately eliminate the staggered Board? Indeed, why did the Board appoint two of the new directors to multi-year terms, including a director appointed after shareholders approved the de-staggering of the Board?


  • Shouldn't you have disclosed to shareholders before the annual meeting that the Division of Enforcement of the SEC had sent the Company a "Wells notice" in January, 2005 recommending that the SEC pursue an enforcement action relating to the Company's retention of e-mails and the potential violation of a previous Cease and Desist Order?


  • What investigation has the Board conducted in the wake of the Florida Court's finding in the Sunbeam/Perelman litigation that "contrary to federal law" the Company failed to preserve e-mails, and willfully disobeyed the Court's order?

  • Is it true (as has been reported in the April 8, 2005 edition of the Wall Street Journal) that the Sunbeam/Perelman litigation, for which $360 million has now been reserved, could have been settled for approximately $20 million in 2003, and was the Board aware of this?


  • Has an independent committee of the Board reviewed the quality of the Company's relationships with its primary regulators, including the SEC, NYSE, NASD and key state regulatory bodies, and do you believe that the quality of the Company's relationships with its key regulators has deteriorated over the past several years? If so, who should be held accountable for the deterioration?

  • What happened over the weekend of April 2-3, 2005 to cause the Board to depart from the publicly-stated strategy (reaffirmed to institutional shareholders on April 1) that Discover was an integral part of the Company's asset base?

  • How does the Board reconcile the inability of the CFO to answer basic questions on the April 4, 2005 analyst call about the structure of a spun-off Discover with Mr. Purcell's claim that the spin-off had been under review for months?

  • Did the Board meet with clients, major institutional shareholders and key employee groups, including key employees who have recently left the Company to elicit their views on the performance of the Company, the leadership of its Chairman and CEO, and the wisdom of the recently announced restructuring and spin-off of Discover?

  • Since Mr. Purcell declared "I would not have chosen this debate to be so publicly aired," did he recommend that the Board meet with us, and how did the Board determine that our concerns were groundless without even speaking with us?

In recent days, we have heard these and other questions from many of Morgan Stanley's constituents and believe it is critical for members of the Board to address them directly. Moreover, we believe that if the Board engages these constituents and answers these questions, it will conclude that there are "fair and compelling" reasons for Morgan Stanley to remove and replace its current Chairman and CEO. We remain willing to meet privately with the independent directors to discuss our concerns and to learn the response to our inquiries. If shareholders, clients, employees and others agree with us, are interested in learning the Board's response to our questions or have questions of their own, we urge them to contact the Board at: Morgan Stanley, Suite D, 1585 Broadway, New York, NY, 10036. Alternatively, constituents can also send questions and comments to our website, www.futureofms.com.

Respectfully,

/s/ Anson M. Beard, Jr.
/s/ Lewis W. Bernard
/s/ Richard A. Debs
/s/ Joseph G. Fogg, III
/s/ S. Parker Gilbert
/s/ Robert G. Scott
/s/ Frederick B. Whittemore
/s/ John H. T. Wilson"

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April 5, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY OUTLINE PLAN TO ADDRESS FIRM LEADERSHIP, STRATEGY AND GOVERNANCE

New York, NY (April 5, 2005) - In light of the surprising recent changes in Morgan Stanley's strategy and governance, institutional investors have asked us to set forth our plan for restructuring the Firm and improving its performance.

We propose that the Board of Directors immediately replace Philip J. Purcell with Robert G. Scott as President and CEO. Second, we propose that the Board of Directors name a new non-executive Chairman of the Board with substantial financial experience. Third, we propose the establishment of an Office of the President to include senior Morgan Stanley executives. We recognize that these actions will require technical changes in the Firm's bylaws.

Robert Scott said, "My first priority will be to contact the extraordinarily talented individuals who have left the Firm in recent times, including Stephan Newhouse, Vikram Pandit, John Havens, and others and ask them to rejoin the Firm's senior management team.

Second, I would invest in and implement changes to improve the profitability of the Firm's retail business and to increase the rate of growth and profitability of the Firm's asset management business.

Third, I promise to create an environment in which talent is recognized and supported and which encourages free and open discussion."

In authorizing this release, the Group believes that these changes, if acted upon immediately, should rapidly restore the confidence of the Firm's shareholders, employees and clients. The Group also reiterated its request, so far ignored, to meet with the Board of Directors to discuss the magnitude of the crisis which the Board's actions precipitated.

Mr. Scott, age 59, had a distinguished 33-year career at Morgan Stanley, which included roles as Head of Investment Banking, Chief Financial Officer and most recently as President and Chief Operating Officer. Up until April 2004, Mr. Scott also served on the Board of Directors of Morgan Stanley. He has worked with a broad spectrum of clients, employees and shareholders of the Firm.

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April 4, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY ISSUE MESSAGE TO EMPLOYEES

New York, NY (April 4, 2005) - Today a group of shareholders and former members of senior management of Morgan Stanley issued a message to the employees of Morgan Stanley in the form of an ad.

"April 4, 2005

A Message to All the Employees of Morgan Stanley:

We understand that the events of the past seven days are disturbing to all of you; they are upsetting to us as well. To see talented, respected leaders tossed aside by the CEO for unknown reasons raises troubling questions about the leadership, governance and direction of the Firm.

While the recent turmoil is, of course, regrettable, the stakes are important. The leadership problems at the Firm must be addressed and resolved. We want to see the Firm in its entirety begin again to grow and flourish. We want all of you to benefit from an environment like the one we knew: where a commitment to excellence is a core value and where healthy debate can make us all better people.

The most important asset of Morgan Stanley is you, its people. As upsetting as the current situation is, we urge you to remain focused on your clients and your responsibilities. With your continued dedication to the Firm, we know that together we can recreate an environment where you can achieve your goals. We understand that many of you feel that there is an atmosphere of intimidation and fear at the Firm in which you may feel that you cannot express your views without fear of retaliation. We have, therefore, created a vehicle where you can express your feelings without prejudice. You can contact us through our website at www.futureofms.com, or through our financial advisor Greenhill & Co. We will endeavor to communicate your collective views to the Board of Directors, without attributing them to specific individuals.

Please do not lose hope. We pledge our energy and efforts to make Morgan Stanley a firm of which we can all be proud.

Committed to you all.

/s/ Anson M. Beard, Jr.
/s/ Lewis W. Bernard
/s/ Richard A. Debs
/s/ Joseph G. Fogg, III
/s/ S. Parker Gilbert
/s/ Robert G. Scott
/s/ Frederick B. Whittemore
/s/ John H. T. Wilson"

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March 31, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY ISSUE SECOND LETTER TO THE BOARD OF DIRECTORS

New York, NY (March 31, 2005) - Today a group of shareholders and former members of senior management of Morgan Stanley sent a second letter to the Board of Directors.

"March 31, 2005

To the Board of Directors of Morgan Stanley:

We regret that we must resort to another letter, but given your refusal to meet with us, we have concluded that this is the only way we can communicate with you. We are shareholders concerned with the best interests of the Firm, and we are expressing our concerns to you, our Board of Directors.

The issues which are foremost in our minds as we call for a new CEO are at the heart of your responsibilities in the areas of business performance and governance. A common proxy for measuring performance is share price. Morgan Stanley's stock has dramatically underperformed the relevant market indices and its peers over the last five years. The Firm's growth in earnings per share has been negative versus positive growth for our peer companies. Morgan Stanley's premium return on equity has been eroded to where it is actually below that of our peer companies.

When you begin to look at performance by business segment, the reason for our stock's decline becomes clearer. In retail securities, we have experienced negative growth in revenues and our pre-tax margins are unacceptably low. The key to profitability in the asset management business is growth in assets under management, and our performance since 1998 has been mediocre at best.

The performance scorecard above summarizes Mr. Purcell's record since the merger. It is a failing report card.

We are also deeply concerned by the state of Morgan Stanley's relationship with regulators at both the Federal and State levels. Our reputation has been blemished further by a series of ill-handled court cases, most recently the Perelman/Sunbeam case in Florida. This unhappy state of affairs is not consistent with strong leadership at the top.

While Mr. Purcell points out with pride that the Board met three times to discuss our letter of March 3, we view with dismay the process by which the Board concluded that our concerns were groundless. The number of meetings obscures the question of the depth and rigor of the process: we do not believe that having brief telephone conversations with selected management members is the kind of rigorous fact finding called for under these circumstances.

And finally, we view with dismay the manner in which the Board brought this matter to a conclusion this week. The loss of several key executives who were very important contributors to the success of the highly profitable institutional securities business - because they were unwilling to swear loyalty to an ineffective CEO - is an outrage. The departed leaders are highly regarded by the majority of our institutional shareholders. We view the Board's actions, including its apparent support of this "reorganization," as a failure of corporate governance, a failure to fulfill its fiduciary duties and a failure to act in the best interests of the shareholders of Morgan Stanley.

Our worst fears, highlighted in our first letter to you, that Mr. Purcell might remove senior executives in the Institutional Securities Group, have been realized. These departures have precipitated the worst kind of crisis for the Firm - unless immediate action is taken to reverse the loss of talent, the Firm's ability to restore its reputation and its competitive edge will be put at risk. We believe that the immediate removal of Mr. Purcell will stem the tide and possibly convince those who have left to return as leaders.

Finally, please remember that we are not just a small group of dissatisfied former employees. All of us held senior positions of leadership in the Firm and together own more than 11 million shares of Morgan Stanley stock. We care deeply about the Firm and remain ready to meet with you, face to face, to discuss our concerns.

Respectfully,

/s/ Anson M. Beard, Jr.
/s/ Lewis W. Bernard
/s/ Richard A. Debs
/s/ Joseph G. Fogg, III
/s/ S. Parker Gilbert
/s/ Robert G. Scott
/s/ Frederick B. Whittemore
/s/ John H. T. Wilson"

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March 29, 2005

FOR IMMEDIATE RELEASE

Contact:
Andrew Merrill
Edelman
(212) 704-4559
andrew.merrill@edelman.com

SHAREHOLDERS AND FORMER SENIOR EXECUTIVES OF MORGAN STANLEY RELEASE LETTER TO THE BOARD OF DIRECTORS

New York, NY (March 29, 2005) - In response to media inquiries a group of shareholders and former members of senior management of Morgan Stanley released the following letter, which was sent earlier this month to the Board of Directors of Morgan Stanley. It expresses concerns about the underperformance of Morgan Stanley in recent times, which is directly attributable to a failure of leadership at the top.

The Board of Directors of Morgan Stanley did not respond to this letter and has now apparently approved a management restructuring, which may result in the loss of some of Morgan Stanley's most talented and experienced executives.

This "restructuring" is not responsive to the concerns expressed in our letter and, we believe, is not in the best interest of Morgan Stanley's shareholders.

"March 3, 2005

To the Board of Directors of Morgan Stanley:

As retired senior executives of Morgan Stanley and significant shareholders, we care deeply about the Firm, its employees and its reputation for integrity and excellence. The Firm's commitment to excellence is the product of generations of professionals who worked, and sacrificed, tirelessly to assure that Morgan Stanley provided its clients with products and services which represented the highest standards in the industry.

Unfortunately, Morgan Stanley's performance over the past few years and its reputation have declined to the point where we are greatly concerned about the Firm's ability to regain its position as the premier global financial services firm.

Our perception of Morgan Stanley's decline is corroborated by the judgment of the equity markets. For example, the Morgan Stanley 2005 Proxy Materials show that, over the last five years, the Firm's total return has trailed the S&P Diversified Financial Index by nearly 40%, a stunning vote of no confidence for a company that has historically been a market leader. According to an article published in the International Herald Tribune on February 9, 2005, Morgan Stanley's stock was down 27 percent over the past four years, compared with a 4 percent gain for Goldman Sachs, an 18 percent gain for Lehman Brothers and an 11 percent decline for Merrill Lynch. Moreover, the Firm's stock price volatility has been significantly higher than that of other companies in its peer group, a fact which belies the claimed benefits of the Firm's diversified business portfolio.

We believe that the stock's poor performance and price volatility are a function of many factors, including:

  • the failure to continue to earn a premium return on equity;
  • the failure to maintain earnings growth relative to its peers; and
  • the weak performance of the Firm's retail and investment management businesses over the past five years.

More fundamentally, we believe that the overriding cause of the Firm's poor performance is a failure of leadership by Philip Purcell as the Firm's CEO.

Morgan Stanley's role as a leader in the securities industry and its reputation for excellence have always been a function of its ability to attract outstanding professionals and provide strong and supportive leadership. We are deeply concerned that there is a crisis of confidence in the Firm's leadership and governance not only in the market, but also, we fear, among employees of the Firm. We believe that the current CEO will not be able to inspire and lead the Firm back to its rightful position in the financial services industry. We also question whether he has the respect of industry peers or the Firm's regulators necessary to the task of regaining Morgan Stanley's leadership position in our industry.

We note that there is very little financial services experience among the independent directors and there is no Institutional Securities executive on the Board despite that unit's disproportionate contribution to the Firm's profits and reputation. In addition, while the Firm is headquartered in New York, the financial capital of the world, neither the Chairman nor any members of the Board reside in the New York area.

We believe that the loss of morale caused by these factors puts Morgan Stanley at great risk of losing more key professionals which would adversely impact the Firm's ability to serve its clients and to attract the staff necessary to carry on its businesses.

For all these reasons it is imperative that the Board act promptly to change the leadership and governance of Morgan Stanley. It is absolutely critical that Philip Purcell's successor be experienced and well respected by the senior executive group. This change should be accomplished as soon as possible.

We would also recommend the appointment of three outside directors with experience in financial services. At least one of these directors should have experience in institutional securities while another should be experienced in the retail securities business. These additions to the Board could be accomplished with or without increasing the size of the Board.

The signors of this letter include a number of former senior executives and board members of Morgan Stanley. We are fearful that in reaction to this letter Mr. Purcell may reassign or remove more senior executives from the Institutional Securities Group. Such action would damage the Firm's ability to improve its long term business prospects, would undermine the Firm's reputation and, perhaps irretrievably, injure its ability to attract and retain talented professionals.

We are united in our strong support of Morgan Stanley and our concern for its future. While we have not discussed this letter with a wider group of Advisory Directors or others who may share our concerns, we are confident that support for our recommendations will be widespread within and outside of the Firm.

We write this letter with a grave sense of our responsibilities to fellow Morgan Stanley shareholders and employees. We request the opportunity to discuss in private with the independent directors the issues and recommendations contained in this letter. We can be reached through our financial advisor, Robert F. Greenhill, at Greenhill & Co., 212-389-1510. We hope that constructive discussion between ourselves and the Board can result in mutual commitment to a plan which can allow the Firm to regain its position as the premier financial services firm.

Respectfully,

/s/ Anson M. Beard, Jr.
/s/ Lewis W. Bernard
/s/ Richard A. Debs
/s/ Joseph G. Fogg, III
/s/ S. Parker Gilbert
/s/ Robert G. Scott
/s/ Frederick B. Whittemore
/s/ John H. T. Wilson"

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