The activist group urged that shareholders vote against the re-election of Morgan Stanley's director nominees: current chairman and CEO John J. Mack; Robert Kidder, who is chairman and CEO of private equity firm 3Stone Advisors LLC; and Howard J. Davies, director of The London School of Economics and Political Science. CtW charged that as members of Morgan Stanley's audit committee in fall 2005, the directors Davies and Kidder "failed to maintain the integrity of Morgan Stanley's risk management, and thus bear central responsibility for the firm's $9.4 billion in subprime-related write-downs in 2007." Morgan Stanley's mortgage-related write-downs led to a $3.6 billion loss for the fourth quarter ended Nov. 30, 2007, compared with a nearly $2 billion gain for the year-ago period, and forced the firm to turn to sovereign wealth fund Temasek Holdings Pte. Ltd. for a $4.4 billion cash infusion.
CtW's move to unseat Mack is driven by its belief that the risk management failures at Morgan Stanley demonstrate a need for the "best governance practice" of independent leadership. Translation: Mack should not serve simultaneously as chairman and CEO.
CtW, which represents pension funds sponsored by unions affiliated with union federation Change to Win, holds a roughly 0.5% stake in Morgan Stanley.
CtW does not plan to run a proxy contest to nominate its own slate of directors, a company spokesman said. - Michael Rudnick
See earlier stories about CtW from Dealscape
