Proxy advisory firm Glass, Lewis & Co. LLC's recommendation Monday on Morgan Stanley is a mixed bag for an activist labor union-backed fund. CtW Investment Group, an organization that advises pensions for unions belonging to the Change to Win labor group, on March 12 had launched a "just vote no" campaign, calling on investors to vote against Morgan Stanley chief executive John Mack (pictured left) from his role as chairman of the brokerage firm. They also wanted to see investors vote against two other directors, Robert Kidder and Howard Davies, at the company's scheduled April 8 annual meeting.
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Glass Lewis gave the investors a split decision, recommending against the renomination of Kidder and Davies, but opting to support the company's decision to keep Mack in the position of board chairman. The advisory firm said Mack's removal would be too much for the company: "We believe shareholders should support Mr. Mack's continued tenure," Glass Lewis reported. "Simply put, we believe that additional turnover at the CEO position would not serve their best interest at this time."
CtW has a different perspective. This is what it had to say March 12: "We believe the circumstances surrounding these risk management failures demonstrate the need for stronger independent leadership at Morgan Stanley. Consistent with best governance practice, we believe John Mack should not serve simultaneously as Chairman and CEO, and are urging shareholders to vote 'Against' Mr. Mack to convey that message to the Board."
This is what they had to say about Davies and Kidder: "We believe that 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." - Ron Orol
See story from the Financial Times
See earlier stories about CtW from Dealscape
Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.
