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It was not that long ago that it seemed Morgan Stanley was in meltdown mode. It had recently paid out $54 million in a sex discrimination suit, it was bleeding money in SEC fines and a Florida court had leveled a $1.450 billion judgment against the bank. The stock was underperforming, and shareholders were in rebellion, calling for the head of CEO Phil Purcell and a break-up of the company. Top bankers were clearing out of Morgan Stanley faster than day workers from a Home Depot parking lot when the INS shows up.
The man brought in to fix Morgan Stanley is today’s candidate for DealBreaker of the Year, John Mack. And there is little doubt that he has fixed his firm. The exodus of senior bankers has stopped. Morgan Stanley has been acquiring hedge funds in order to remain competitive with its rivals. The stock is up over 40% this year. Profits are up. And very few people are looking to breakup Morgan Stanley.
Mack, the son of a Lebanese immigrant,was born in the last years of the Second World War in North Carolina, and went to Duke University. After college he went to Smith Barney, where he worked on the muni-bond desk. A few years later he landed at Morgan Stanley, where he rose through the ranks of the fixed-income division. In 1993, Mack succeeded Robert Greenhill as president of Morgan Stanley. He gained the nickname “Mack the Knife,” although stories very about exactly why he had this name. One colorful tale from this period has him screaming over the trading floor, “There’s blood in the water. Let’s go kill!”
When Morgan Stanley merged with Dean Witter in 1997, the top job at the combined firm went to Phil Purcell. Mack spent close to four years working under Purcell, leaving his beloved Morgan Stanley only when it became clear that Purcell was not planning to step down or anoint a successor any time soon. For the next few years he served as CEO of Credit Suisse First Boston. When Purcell was eventually forced out at Morgan Stanley, Mack made a triumphant return to the bank where he had made is reputation.
Value Added: There was a time when nearly everyone who wanted to be a bond trader wanted to be a bond trader working for Mack. That was where the action was. And in the last few years, he’s remade Morgan Stanley into a place that was clearly a Wall Street loser into one of the Street’s top firms.
Risk Factors: Mack was known as a ferocious competitor and an intimidating guy to work for. Not for nothing is he called Mack the Knife. (An alternative, even less complimentary name we’ve heard used is “Lady Mackbeth”—for Shakespeare’s lethal woman who always had blood on her hands.) A cloud was cast over him earlier this year when a former SEC investigator claimed that he was fired by SEC officials intimidated by Mack’s political connections. The former investigator had been looking into the possibility that Mack had tipped friends at Pequot Capital about a transaction involving Heller Financial while he was running CSFB, which played a role in the deal. Mack has since been cleared.
Should Mack be the DealBreaker of the Year? So far, Mack is up against challenges from Hank Paulson, Patricia Dunn, Brian Hunter, backdating and Phil Goldstein. He is our final nominee. Tomorrow we will unveil which one of our nominees will win the title of DealBreaker of the year. We invite you to let loose with your inner-most feelings in the comments section below. The best comment to this post will win a copy of Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today.