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Pressure rises on Morgan Stanley board

Morgan Stanley’s board has come under renewed pressure to take accountability for the group’s latest lapses in risk control after two shareholder advisory firms called for a vote against several directors at next month’s annual meeting.

Nevertheless, both Glass Lewis and Proxy Governance, which advise investors on how to vote at company meetings, backed John Mack, Morgan Stanley’s chairman and chief executive, saying shareholders should vote for his re-election.

Mr Mack and two directors, Robert Kidder and Howard Davies, have been under fire from CtW, a union of union-backed investment funds, for “risk management failures” that led to $9.4bn in mortgage-related write-downs.

This month, CtW said Mr Mack should not act as chairman and chief executive and called for the election of a separate chairman – a request that has been rejected by Morgan Stanley.

Mr Mack’s position has been improved by first-quarter results released last week, which showed a smaller than expected drop in profits and which beat those of arch rival Goldman Sachs.

Glass Lewis yesterday recommended shareholders to vote against six of the 11 Morgan Stanley directors at the company’s annual meeting on April 8.

Glass Lewis opposed the return of Roy Bostock, Mr Davies, Mr Kidder, Donald Nicolaisen, Charles Noski and Charles Phillips, saying they had been “derelict” in their duties to shareholders and failed to adequately oversee the company’s risk controls.

More than 11 per cent of shareholders’ votes were withheld from Mr Bostock, a former advertising executive, at the annual meeting last year, when Glass Lewis recommended a vote against him and other directors.

Proxy Governance recommended a vote against Mr Kidder, Morgan Stanley’s lead director and former chairman of its audit committee. However, both firms supported the re-election of Mr Mack, saying it would not be in shareholders’ best interests to have a new chief executive at present.

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