Morgan Stanley (NYSE:MS) has announced a shakeup in its top management ranks as one of its Co-Presidents of investment banking, capital markets and trading operations was given sole responsibility for these areas effective January 2013. The other Co-President has announced that he will retire at the end of the year.
Colm Kelleher, the soon-to-be sole President – Institutional Securities, has lately been running Morgan Stanley’s trading operations. Paul Taubman, who will be retiring, focused on investment banking. He was also instrumental in engineering a contract with Mitsubishi UFJ Financial Group Inc. (NYSE:MTU) in 2008 which was critically important in getting Morgan Stanley through the financial crisis. Both Mr. Kelleher and Mr. Taubman were seen as potential successors to Morgan Stanley’s Chairman, President and Chief Executive Officer James Gorman.
By all accounts, the three year co-presidency was contentious. Mr. Taubman is a consummate, career-long and reserved investment banker. Mr. Kelleher has worked in many areas of the firm, including a stint as CFO during the financial crisis, and is described as being much more gregarious.
The main bone of contention was how aggressively to push for additional business from clients raising money in stock or bond sales. While selling additional products such as derivatives to these clients can be lucrative, it can also place the investment bank in a position where its interests are in conflict with those of the client. Mr. Taubman was too conservative in these matters for Mr. Kelleher.
In the company’s announcement, Mr. Gorman was quoted as saying “We are intensely focused on improving returns for our shareholders. I am confident that under Colm’s leadership, we will continue to align sales and trading more closely with investment banking and capital markets to drive synergies between these businesses and optimize our ability to grow our revenue base and drive profits.” So apparently Mr. Gorman was at least partly motivated by potential profits in coming to his decision.
But it’s also true that Mr. Kelleher has broad experience in the business, while Mr. Taubman spent his career in the advisory, M&A and money-raising part of the investment banking business.
The company also named “Mark Eichorn and Franck Petitgas as Global Co-Heads of Investment Banking with day-to-day responsibility globally for client coverage, M&A and capital markets” and Jeff Holzschuh as Chairman of Institutional Securities. They will all report to Mr. Kelleher.