The History
To this day, Morgan Stanley stands as one of the biggest American multinational investment banks in the world. With offices in more than 40 countries and a workforce of 75,000 employees, the firm has clients ranging from massive corporations to individuals. It was recently announced that the company’s CEO, James Gorman, is stepping down within the next year, which has already caused Morgan Stanley’s stock prices to drop two percent.
The bank's origins trace back to 1935, when it was established as an investment banking firm in New York City. James Gorman assumed the role of CEO during the 2008 financial crisis or Global Financial Crisis (GFC), making several decisive actions that not only helped Morgan Stanley weather the storm but also positioned the bank for long-term success. Under his guidance, the institution emerged as a stronger and more diversified financial powerhouse. Gorman's vision extended beyond mere survival; he strategically positioned the bank to capitalize on emerging opportunities and changing market dynamics.
Beyond the financial aspects, Gorman also fostered a culture of integrity and accountability within Morgan Stanley. He emphasized the importance of strong corporate governance, risk management practices, and regulatory compliance, all of which are essential in maintaining the trust of clients and stakeholders.
The CEO Steps Down
In a recent interview James Gorman said: “In my view, we are not in a banking crisis, but we have had and may continue to have a crisis among certain banks.” He also said that he planned to resign as Morgan Stanley’s CEO, and would do so within the next 12 months.
Before he assumed the role of CEO, Gorman played a crucial role in the acquisition of Smith Barney in 2009, Morgan Stanley’s covetable wealth management business. Since assuming leadership in 2010, Gorman has orchestrated an impressive transformation that stands out even in Wall Street. Morgan Stanley made a remarkable recovery from the brink of collapse during the 2008 financial crisis, ultimately emerging as a dominant force in wealth management.
The bank’s transformative journey began in 2009 with the purchase of Smith Barney from Citigroup, a move that provided Morgan Stanely with a substantial network of financial advisors amidst the turmoil of the crisis. Later, the institution fortified its non-trading operations by investing over $20 billion in acquiring discount brokerage E-Trade and investment manager Eaton Vance in 2020, which bolstered the bank's scale and influence. Gorman has even confidently stated that the bank had the potential to accumulate around $1 trillion in assets every three years, with a long-term goal of reaching $10 trillion.
KBW analyst David Konraid said in a research note: “It is hard to argue that James Gorman has not been one of the elite CEOs in the financial services industry, taking over the company coming out of the” 2008 financial crisis and sharply improving its returns.”
Of the top 25 U.S. financial holding companies, “just five have CEOs who either guided their firms through the financial crisis or began their tenures during it” (Investopedia).
Gorman’s impending departure marks a significant shift in the landscape of the top-tier banks in the US— a changing dynamic in the financial sector. As veteran CEOs eventually fade from the forefront, it begins to raise the questions about the roles of experience and institutional memory in shaping the future of the financial industry. Will the loss of these torchbearer CEOs bring losses of valuable wisdom gained through years of experience?
The absence of these seasoned leaders will also undoubtedly create a void, but whether or not the next generation of leaders can redefine the trajectory of the financial powerhouses will ultimately mark the true consequences.
What’s Next?
Both Gorman and Morgan Stanely refrained from providing a specific date for his departure as CEO, but Gorman anticipates transitioning to the role of executive chairman after he steps down.
Gorman acknowledges three exceptionally strong internal candidates to succeed him, but didn’t reveal their identities. He also humorously emphasized that he had “no plans to go out like Logan Roy,” in the show “Succession,” the departed patriarch. “Succession” is a television series that portrays a gripping narrative of a fierce corporate power struggle.
As Morgan Stanley prepares for this leadership transition, the financial industry awaits the next chapter in its journey. The legacy of James Gorman and his transformational leadership will leave a lasting impact, and the future direction of Morgan Stanley will be shaped by the vision and capabilities of its next CEO.
