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Phil Purcell's People Problem

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The decision served as a wake-up call to the board, which had come to rely entirely on the judgment of Purcell and his chief lieutenant, Donald Kempf, the 68-year-old general counsel. After the Perelman verdict came down, even Purcell’s lackeys on the board stopped taking seriously many of Purcell’s protestations that he had a handle on the firm’s day-to-day business.

Purcell told the board several months ago that things were looking up and that he expected a turn in the firm’s fortunes. When the board members saw the preliminary numbers recently, however, they realized that once again they’d been had, and that another wave of defections, including some key people who previously had pledged allegiance to Purcell, was about to hit. With that, Purcell was shown the door.

Top producers told the board over and over again: “My allegiance is to Morgan, not Purcell.”

Frankly, the brokerage business has become so terrible lately, with super-low commissions, a total lack of trading volume, and big-ticket underwritings, that it’s difficult to imagine that anyone can turn the company around quickly. While some on Wall Street were drawing Purcell parallels to Michael Eisner and Disney, the analogy’s misplaced: At least Eisner promoted Bob Iger. Purcell scorched the earth between him and potential successors, especially the affable, some would say brilliant, Pandit. To me, unless someone’s appointed soon who can either start merger talks, perhaps with JPMorgan, to resuscitate the namesake’s institution, Morgan Stanley will remain rudderless. That beats Purcell’s steering, but for now, Morgan Stanley remains a dog of a stock that’s better sold than bought.

In the end there is a Willy Loman factor on Wall Street that Purcell either forgot or never learned. Although it is not as simple as “be liked and you will never want,” as Loman says, the corollary is true: You can’t be hated by everyone and prosper. By all accounts, Purcell was hated for his intense arrogance by almost everyone who worked for him. His lack of people skills, Wall Street gibberish for “he thought he was better than everyone else,” ate him alive.

James J. Cramer is co-founder of TheStreet.com. He often buys and sells securities that are the subject of his columns and articles, both before and after they are published, and the positions he takes may change at any time. At the time of this writing, he owned Altria (formerly Philip Morris) and JPMorgan Chase. E-mail: jjcletters@thestreet.com. Get all of James J. Cramer’s stock picks via e-mail, before he makes the trades, by subscribing to Action Alert Plus. A two-week trial subscription is available at thestreet.com/aaplus.


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