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Philip Purcell

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Philip J. Purcell
BornSeptember 5, 1943 (age 83)
Salt Lake City, Utah, U.S.
NationalityAmerican
EducationCollege of the Holy Cross
University of Notre Dame (B.B.A.)
London School of Economics (M.A., economics)
University of Chicago (M.B.A.)
OccupationBusinessman
CompanyMorgan Stanley; Dean Witter, Discover & Co.; Continental Investors LLC
TitleFormer Chairman and Chief Executive Officer, Morgan Stanley
SpouseAnne McNamara
ChildrenSeven sons, including David P. Purcell and Paul M. Purcell

Philip J. Purcell (born September 5, 1943) is an American businessman who was chairman and chief executive officer of Morgan Stanley from 1997 to 2005, a period that began with his engineering of the merger between Dean Witter, Discover & Co. and Morgan Stanley Group and ended with his forced resignation after a public campaign by eight former Morgan Stanley executives known as the "Group of Eight."[1][2] Before the merger, Purcell spent more than a decade as chairman and chief executive of Dean Witter, Discover & Co., the retail brokerage and credit card business he ran first as a subsidiary of Sears, Roebuck and Co. and then, after 1993, as an independent public company.[3]

At Sears, where he joined in 1978 after eleven years at McKinsey & Company, Purcell rose to become the retailer's senior vice president for corporate administration and planning and was the internal architect of Sears's 1981 acquisition of the brokerage firm Dean Witter Reynolds.[3] He became president of Dean Witter in 1982 and chairman and chief executive in 1986, the same year he built the Discover Card credit card business from scratch.[3] He led Dean Witter, Discover & Co.'s 1993 spin off from Sears and its initial public offering, then in 1997 engineered its merger with the older and longer-established Morgan Stanley Group, becoming chairman and chief executive of the combined firm.[4]

Purcell's later years at Morgan Stanley were marked by falling profitability relative to Wall Street peers, the departure of senior investment bankers, a $1.45 billion jury verdict against the firm in litigation brought by the financier Ronald Perelman, and mounting public criticism from the Group of Eight, a coalition of retired Morgan Stanley partners who accused Purcell of mismanagement and demanded his removal.[5][6] On June 13, 2005, Purcell told the Morgan Stanley board he would retire, and the resignation was announced the following day.[7] Morgan Stanley's board subsequently approved a settlement and release agreement with Purcell that Securities and Exchange Commission filings itemized at $51,996,726 in additional benefits, on top of stock, options and pension amounts he had already accrued, which press accounts at the time valued together at roughly $113.7 million.[8][9]

After leaving Morgan Stanley, Purcell founded Continental Investors LLC, a Chicago based private equity firm investing his own capital in small, internet-related financial services companies, and became more active in philanthropic and university work, including with the University of Notre Dame's board of trustees.[10]

Early life and education

Philip J. Purcell was born on September 5, 1943, and raised in Salt Lake City, Utah, where he attended Judge Memorial Catholic High School.[11] His father, also named Phil J. Purcell, was a Salt Lake City insurance executive who founded and ran Continental Agency Co., described in his own local obituary as one of the oldest independent insurance agencies in Utah; the elder Purcell had likewise attended Judge Memorial and the University of Notre Dame before him and died in Salt Lake City in August 1992.[12] During the school year the younger Purcell sold magazine subscriptions and pressed clothes at a dry cleaner; in the summers he worked road construction and in Utah's national parks. He played center on the school's basketball team and starting tackle on its state championship football team, and met his future wife, Anne, while a student at Judge Memorial.[11]

Purcell won a scholarship to the College of the Holy Cross in Worcester, Massachusetts, and after his freshman year transferred to the University of Notre Dame, where he earned a Bachelor of Business Administration.[11] He then went to the University of Chicago's Graduate School of Business, from which he took a fellowship year at the London School of Economics under the school's international exchange program, earning a master's degree in economics there in 1966 before returning to Chicago to complete his M.B.A. in 1967, finishing top of his class.[3] On graduating, he turned down an offer to work as a junior investment banker at Morgan Stanley in New York, choosing instead a position at the management consultancy McKinsey & Company; he later said he had also seriously considered returning to Salt Lake City to work in his father's insurance agency.[11]

Purcell married Anne McNamara, whom he had met at Judge Memorial, when he was twenty one.[11] The couple had seven sons.[10] Two of them, David P. Purcell and Paul M. Purcell, later worked together as principals of two investment partnerships, Continental Partners, L.P. and Continental Healthcare Fund (QP), L.P., in which their father held a substantial interest.[8]

Career

McKinsey & Company, 1967 to 1978

Purcell began his business career in 1967 at McKinsey & Company, traveling and working with clients across the United States, Europe and Asia.[13] By age 32 he had become a managing director, the youngest person to head a major McKinsey office up to that time.[3]

Sears, Roebuck and Co. and the acquisition of Dean Witter, 1978 to 1982

In 1978, Purcell left McKinsey to join Sears, Roebuck and Co. as vice president of corporate planning, reporting to chairman Edward R. Telling, who became his mentor.[3][11] He was subsequently promoted to senior vice president for corporate administration and planning, a role in which he explored acquisitions and divestitures for the retailer and, together with Telling, pushed the company toward a strategy of diversifying into financial services, over the objection of Sears veterans who saw the plan as fast talk from a former consultant.[11] Purcell played the leading role in Sears's acquisition of the brokerage firm Dean Witter Reynolds, completed on December 31, 1981, and was put in charge of the newly acquired brokerage business the following year.[3]

Dean Witter and Discover, 1982 to 1997

As president of Dean Witter from 1982, Purcell restructured the firm to reduce its exposure to the boom and bust cycles that had hurt other securities firms.[3] In 1985 and 1986 he built the Discover Card credit card business from the ground up, an early instance of a no annual fee, cash rebate credit card; the Discover Card had grown to more than 50 million accounts and roughly $1.5 billion in pre-tax income by the mid 2000s.[13] Purcell became chairman and chief executive officer of Dean Witter in 1986.[8] In 1993 he led the spin off of Dean Witter, Discover & Co. from Sears and took the company public; he later said shareholders who bought into that offering and held the stock made about 20 percent a year, or roughly nine times their original investment, by March 2005.[13] Under Purcell, Dean Witter Discover also moved early into electronic trading, acquiring the online brokerage technology firm Lombard Securities and rebranding its discount trading arm as Discover Brokerage Direct; Purcell said the firm was among the first major Wall Street houses to offer online trading to individual investors.[3]

The Morgan Stanley merger and chairmanship, 1997 to 2005

Purcell was the principal architect of the 1997 merger between Dean Witter, Discover & Co. and the Morgan Stanley Group, an agreement announced in February 1997 that combined Dean Witter's national network of retail brokers with Morgan Stanley's institutional investment banking franchise. Contemporary commentary framed the deal around Wall Street's renewed interest in retail distribution as a route to the growing number of American households investing directly in equities and mutual funds.[14] Dean Witter paid a premium of roughly 10 percent and brought the larger market capitalization to the deal, but resentment persisted among Morgan Stanley bankers who believed their firm, not Dean Witter, was effectively the acquirer and should have received the better jobs and status in the combined company.[11] Purcell became chairman and chief executive of the merged firm, which retained the Morgan Stanley name.[8]

For several years the merger appeared successful: profits and return on equity rose and the stock traded above $80 a share in 2001.[11] John J. Mack, who had run Morgan Stanley's institutional side and became Purcell's president and, briefly, a rival for his job, left the firm in 2001 after Purcell declined to cede the chief executive role to him.[11] Purcell later said he regretted not stepping aside at that point, when the stock was strong and the merger still looked like an unambiguous success.[11] Instead, in the years that followed, integration between the Dean Witter and Morgan Stanley businesses stalled, several potential internal successors including Vikram S. Pandit, John P. Havens, Zoe Cruz and Stephen S. Crawford were seen as not yet ready for the top job, and the retail brokerage and credit card units Purcell favored increasingly dragged on results from the institutional securities business.[11] By 2004 Purcell himself was acknowledging that the firm's returns "had sunk to the middle of the pack."[15]

Leadership and management style

Purcell described his own approach as strategic rather than tactical. "I try to focus as much as I can on strategy, looking ahead three to five years from now," he told his business school's alumni magazine in 1999, arguing that leadership meant "picking the right people and then giving them the freedom they need to run our various businesses" rather than "second guessing each other all the time."[3] Colleagues and critics alike described him as guarded with the press; unlike more media-friendly peers such as Mack and JPMorgan Chase's James Dimon, Purcell rarely gave interviews, on the theory that "as long as your business is well run, the press will take care of itself."[11]

That reticence became a liability during the 2005 crisis. Robert G. Scott, a former Morgan Stanley president and the leading voice of the Group of Eight, argued publicly that Purcell had inverted the firm's traditional values: "At Morgan Stanley, integrity was always the No. 1 value, and competence No. 2. Under Phil's leadership, loyalty became the highest value, and you cannot be a leader in that kind of environment."[11] Purcell's own account of his management style emphasized loyalty to subordinates he believed in even when they lacked broad internal support, a pattern he acknowledged in hindsight with figures such as James F. Higgins, the longtime head of Morgan Stanley's retail division; Philip Raskin, the firm's chief marketing officer; and Stephen S. Crawford, whose rapid promotion to co-president was never fully accepted either inside or outside the firm. "Steve Crawford is one of the most capable people I have met in my whole career," Purcell said in August 2005, "and I have been around a lot of capable people. I feel badly about how he has been portrayed."[11]

Purcell's management of the March to June 2005 boardroom fight itself drew criticism even from people not otherwise hostile to him. As the crisis deepened he removed president Vikram Pandit and oversaw a management shake up that made Crawford co-president, moves that helped trigger a wave of senior departures from the institutional securities division rather than settling the succession question.[11] Compensation analyst Paul Hodgson of the Corporate Library, reviewing the contracts the board approved for Purcell and other departing executives that July, likened the negotiations to "an ice cream war between children, where one wants as much as the other," adding that, in this case, "somebody seems to have got the whole ice cream factory."[9]

Major deals and strategic decisions

  • 1981: As Sears's head of corporate planning, Purcell was the internal architect of Sears, Roebuck and Co.'s acquisition of the brokerage firm Dean Witter Reynolds, completed December 31, 1981.[3]
  • 1985 to 1986: Purcell built the Discover Card business from scratch as a no annual fee, cash rebate credit card, an unconventional bet at the time that grew into one of the largest card issuers in the United States.[13]
  • 1993: Purcell led the spin off and initial public offering of Dean Witter, Discover & Co. from Sears, Roebuck and Co.[13]
  • 1997: Purcell engineered the merger of Dean Witter, Discover & Co. with the Morgan Stanley Group, combining Dean Witter's retail brokerage network with Morgan Stanley's institutional investment bank; he became chairman and chief executive of the merged firm.[16]
  • Late 1990s: Morgan Stanley Dean Witter acquired the online brokerage technology firm Lombard Securities and relaunched its discount trading arm as Discover Brokerage Direct, an early bet on internet trading that Purcell championed even as competitors worried it would cannibalize full-service brokerage revenue.[3]
  • 2005: Facing the Group of Eight's public campaign, Purcell removed president Vikram Pandit and installed Stephen S. Crawford as co-president alongside Zoe Cruz, a restructuring that failed to quiet dissent and instead accelerated senior departures from institutional securities.[11]
  • June 2005: Purcell agreed to retire as chairman and chief executive, ending his tenure at the firm; John J. Mack returned as his successor.[8]

Financial and market performance

Morgan Stanley's own proxy statement for fiscal 2005 included a five-year stock performance comparison, indexed to a $100 investment made on November 30, 2000. On that basis, Morgan Stanley shares stood at $88.89 at the end of fiscal 2001, $73.96 at the end of fiscal 2002, $92.22 at the end of fiscal 2003, $86.29 at the end of fiscal 2004, and $97.19 at the end of fiscal 2005, versus $100.00, $87.79, $73.30, $84.35, $95.18 and $103.21 for the S&P 500 index over the same dates, and higher figures still for the S&P 500 Diversified Financials index.[8] A University of Notre Dame account of Purcell's departure separately reported that Morgan Stanley's stock fell 28 percent over the five years preceding his 2005 exit.[10] Purcell himself, defending his record to a reporter later that summer, pointed to a longer window, saying Morgan Stanley's stock had risen 690 percent since Dean Witter went public in 1993, trailing Citigroup's 998 percent gain over the same period but ahead of JPMorgan Chase and Merrill Lynch.[11] By the time of his resignation the stock had fallen from more than $80 a share in 2001 to close at $52.04 the Friday before his August 2005 interview.[11] Morgan Stanley also warned, on the day Purcell's retirement was announced, that its second quarter earnings would decline by as much as 20 percent from a year earlier.[17]

Purcell's compensation and exit benefits were disclosed in detail in Morgan Stanley's 2006 proxy statement. His salary was $775,000 in both fiscal 2003 and fiscal 2004, with bonuses of $7,112,500 and $7,428,750 respectively; his fiscal 2005 salary, covering a partial year, was $450,137.[8] The settlement and release agreement the board approved on the day of his resignation itemized a $44,000,000 bonus payment (half paid in January 2006 and half in January 2007), a present value of $3,149,596 for annual payments of $250,000 a year for life, a present value of $2,903,425 for annual charitable contributions of $250,000 a year made in his name, a present value of $1,883,755 for lifetime administrative support, $40,863 in perquisites for 30 days after his retirement, and $19,087 in reimbursed legal expenses, for a total of $51,996,726.[8] Separately, Purcell received a lump sum pension payment of $773,897 in August 2005 and a further lump sum of $14,507,524 in September 2005 under the Dean Witter, Discover & Co. Transferred Executives Pension Supplement, plus a continuing pension benefit of $18,500 a year.[8] At the time of his retirement he also held 474,850 restricted stock units valued at $26,605,845 and options on 1,910,948 shares.[8] Contemporaneous press coverage, valuing his full severance including previously earned stock, options and retirement benefits together, put the total near $113.7 million, made up of a $42.7 million one time departure bonus tied to the firm's 2005 performance, $34.7 million in restricted stock, about $20.1 million in stock options, and roughly $11 million in retirement benefits, plus medical benefits and continuing perquisites.[9]

Board memberships and outside roles

After leaving Morgan Stanley, Purcell increased his involvement with the University of Notre Dame's board of trustees.[10]

Controversies

The central controversy of Purcell's career was the campaign that forced his resignation from Morgan Stanley in 2005. In March 2005, eight retired Morgan Stanley partners and significant shareholders, Anson M. Beard Jr., Lewis W. Bernard, Richard A. Debs, Joseph G. Fogg, S. Parker Gilbert, Robert G. Scott, Frederick B. Whittemore and John H. T. Wilson, calling themselves the Group of Eight, wrote publicly to Morgan Stanley's board demanding Purcell's removal, citing what they described as poor corporate governance and years of stock underperformance.[18] Morgan Stanley's board initially voted its support for Purcell, but the pressure intensified through the spring as a Florida jury awarded the financier Ronald O. Perelman $1.45 billion in punitive and compensatory damages against the firm; Morgan Stanley said it would appeal, with Purcell stating in a company release that the verdict was "unjust to the firm's employees and shareholders" and that the company would "fight to have this decision overturned."[19][5]

Through the spring of 2005 a wave of senior departures followed a management shake up in which Purcell removed president Vikram Pandit and installed Stephen S. Crawford as co-president; nine stock traders and the investment banker Joseph Perella also left the firm.[20] By June, with departures continuing and the board's earlier vote of confidence eroded, Purcell told directors at an unscheduled board meeting in Chicago that he would step down; he announced the decision to more than one hundred Morgan Stanley managing directors in an emotional address at the firm's Midtown Manhattan headquarters, and to the public the same day.[21] In his own telling, the outcome was not a fair verdict on his record but the product of "a personal vendetta" by the dissident executives: "They are damaging the firm by waging personal attacks on me," he said the day of the announcement. "The good of the firm has to take precedence."[22] Months later he was still unreconciled to it, telling a reporter, "The G-8 political campaign was waged with real passion. And I don't believe it was fair or accurate. But as your dad tells you when you are a kid, life is not always fair. I decided for the good of the firm to step down."[11]

The size of Purcell's exit package itself became a subject of public criticism, with compensation analysts questioning both the roughly $113.7 million valuation of his own severance and the large guaranteed contracts the board simultaneously approved for other departing and remaining executives, including Stephen S. Crawford and chief financial officer David H. Sidwell.[9] The events surrounding Purcell's departure were later examined at length in journalist Patricia Beard's 2007 book Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley.

Personal life

Purcell met his wife, Anne McNamara, at Judge Memorial Catholic High School in Salt Lake City and married her when he was twenty one.[11] The couple had seven sons.[10] Following his retirement from Morgan Stanley, Purcell divided his time between Park City, Utah, and Chicago, spent time on golf outings with his sons and cross country road trips with his wife, and told a reporter in 2005 that he intended never to work for another public company.[11][10] He kept an office in Jersey City, New Jersey, with a view of the Hudson River, though he said in 2005 he had rarely used it.[11] Two of his sons, David P. Purcell and Paul M. Purcell, went on to run their own investment partnerships, sharing office space with their father's firm, Continental Investors LLC, in Chicago.[8][10]

Purcell was chairman and chief executive of Morgan Stanley on September 11, 2001, when hijacked aircraft struck the World Trade Center, where more than 3,500 Morgan Stanley employees worked; the firm's evacuation, aided by contingency planning developed after the 1993 World Trade Center bombing, is credited with helping employees reach safety that day.[13]

Philanthropy

As part of his 2005 settlement with Morgan Stanley, the company agreed to make charitable donations of $250,000 a year for the remainder of Purcell's life to institutions of his choosing, consistent with the company's charitable giving strategy; Morgan Stanley's proxy statement valued the present value of this commitment at $2,903,425.[8] After leaving the firm, Purcell also increased his involvement with the University of Notre Dame, his undergraduate alma mater, including through its board of trustees.[10]

Recognition

In 1999, the University of Chicago's Graduate School of Business named Purcell its Distinguished Corporate Alumnus, citing his role in the Dean Witter, Discover & Co. and Morgan Stanley Group merger and the firm's record earnings that year.[3]

See also

References

  1. ↑ <ref>Thomas Jr., Landon."Chief Will Leave Morgan Stanley, Ending Struggle".14 June 2005.Retrieved 28 September 2026.</ref>
  2. ↑ <ref>"Group of Eight Biographies".futureofms.com.2005.Retrieved 28 September 2026.</ref>
  3. ↑ 3.00 3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09 3.10 3.11 3.12 <ref>"Philip Purcell III, '67, Distinguished Corporate Alumnus".University of Chicago Graduate School of Business Magazine.Fall 1999.Retrieved 28 September 2026.</ref>
  4. ↑ <ref>Norris, Floyd."A Deal Reaffirms the Strength of the Individual Investor".6 February 1997.Retrieved 28 September 2026.</ref>
  5. ↑ 5.0 5.1 <ref>Davis, Ann."How Tide Turned Against Purcell In Struggle at Morgan Stanley".14 June 2005.Retrieved 28 September 2026.</ref>
  6. ↑ <ref>"Morgan Stanley told to pay $850 million".NBC News.16 May 2005.Retrieved 28 September 2026.</ref>
  7. ↑ <ref>"Morgan Stanley CEO Purcell steps down".NBC News.13 June 2005.Retrieved 28 September 2026.</ref>
  8. ↑ 8.00 8.01 8.02 8.03 8.04 8.05 8.06 8.07 8.08 8.09 8.10 8.11 <ref>"Morgan Stanley, DEF 14A Proxy Statement (fiscal year 2005)".U.S. Securities and Exchange Commission.24 February 2006.Retrieved 28 September 2026.</ref>
  9. ↑ 9.0 9.1 9.2 9.3 <ref>Dash, Eric."The Reward for Leaving: $113 Million".8 July 2005.Retrieved 28 September 2026.</ref>
  10. ↑ 10.0 10.1 10.2 10.3 10.4 10.5 10.6 10.7 <ref>"Ex-Morgan Stanley boss starts firm here".University of Notre Dame, Mendoza College of Business.26 May 2006.Retrieved 28 September 2026.</ref>
  11. ↑ 11.00 11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17 11.18 11.19 11.20 11.21 11.22 <ref>"Exile From Wall Street".21 August 2005.Retrieved 28 September 2026.</ref>
  12. ↑ <ref>"Death: Phil J. Purcell".Deseret News.19 August 1992.Retrieved 28 September 2026.</ref>
  13. ↑ 13.0 13.1 13.2 13.3 13.4 13.5 <ref>"Exile From Wall Street".21 August 2005.Retrieved 28 September 2026.</ref>
  14. ↑ <ref>Norris, Floyd."A Deal Reaffirms the Strength of the Individual Investor".6 February 1997.Retrieved 28 September 2026.</ref>
  15. ↑ <ref>"Phil Purcell's Credibility Crisis".20 March 2005.Retrieved 28 September 2026.</ref>
  16. ↑ <ref>Norris, Floyd."A Deal Reaffirms the Strength of the Individual Investor".6 February 1997.Retrieved 28 September 2026.</ref>
  17. ↑ <ref>Thomas Jr., Landon."Chief Will Leave Morgan Stanley, Ending Struggle".14 June 2005.Retrieved 28 September 2026.</ref>
  18. ↑ <ref>"Group of Eight Biographies".futureofms.com.2005.Retrieved 28 September 2026.</ref>
  19. ↑ <ref>"Morgan Stanley told to pay $850 million".NBC News.16 May 2005.Retrieved 28 September 2026.</ref>
  20. ↑ <ref>"Morgan Stanley CEO Purcell steps down".NBC News.13 June 2005.Retrieved 28 September 2026.</ref>
  21. ↑ <ref>Thomas Jr., Landon."Chief Will Leave Morgan Stanley, Ending Struggle".14 June 2005.Retrieved 28 September 2026.</ref>
  22. ↑ <ref>Thomas Jr., Landon."Chief Will Leave Morgan Stanley, Ending Struggle".14 June 2005.Retrieved 28 September 2026.</ref>
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