Morgan Stanley Re-Elects Board Slate

A group of pension funds had sought change on the board, including Chairman and CEO John Mack shedding one of his titles.
By Debra Borchardt ,

Morgan Stanley

(MS) - Get Report

shareholders reelected Chairman and CEO John Mack and the company's entire board slate, overcoming opposition mounted by three pension funds.

All members won their seats by a substantial margin. CtW Investment Group, the organization coordinating the pension funds' efforts at Morgan Stanley and other firms like

Citigroup

(C) - Get Report

and

Merrill Lynch

(MER)

, had been very vocal about its criticism of the board, suggesting shareholders

vote against directors

for "failing to exercise independent risk management oversight and for failing to ensure that appropriate and robust risk management controls were present" at the firm.

Bill Patterson, executive director of CtW, publicly questioned the considerable amount of influence that John Mack possessed by being both CEO and chairman. While CtW did not seek Mack's ouster as CEO, it called on Morgan Stanley to set up an independent chair to head the board.

RiskMetrics/ISS, which advises shareholders on proxy matters, recommended the board slate's reelection, but agreed that Mr. Mack, "... may hold too much influence over a board that was largely formed under the CEO's purview."

Also unhappy with the board was the California State Teachers' Retirement System, or CalSTRS, which withheld votes for eight Morgan Stanley directors, including Mack, because the company has underperformed both the market and its peers.

Shareholders also were defeated on a proposal for an executive compensation advisory vote. Last year, Mack turned down an annual bonus after Morgan Stanley suffered losses due to the mortgage crisis. Morgan's overall compensation and benefits expenses jumped 18% in 2007 even though revenue declined by 6%.

Morgan Stanley shares were trading down 12 cents to $47.97.

"We appreciate the strong support that shareholders have shown for the board today through the reelection of our directors by substantial margins," Mack said in a company statement. "Our entire board is deeply engaged and intensely focused on building value for our shareholders through this unprecedented market environment."

Morgan Stanley's board is familiar with leadership drama. In 2005, Chairman Philip Purcell came under fire over his failure to smoothly merge Dean Witter/Discover with the firm. Mack, who had left the firm after a falling out with Purcell, soon after returned to Morgan Stanley.

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