Morgan Stanley’s board elected CEO Ted Pick as its chair, effective Jan. 1, the bank announced Thursday.
That shouldn’t come as a surprise. Longtime CEO James Gorman telegraphed in May that he would step down as the bank’s board chair at the end of this year. And Pick just guided Morgan Stanley to a third quarter in which the bank saw a 32% year-over-year jump in profit. The bank’s share price also is up 28% since Pick started as CEO, capped by its biggest single-day increase in four years, when third-quarter earnings were announced.
Gorman, for his part, has plenty on his plate. Disney on Monday named Gorman its incoming board chair, starting Jan. 2 – an extension of his role leading the entertainment juggernaut’s succession planning committee.
Disney, of course, would hope to capture some of the succession lightning that transfixed the business world last year, when Morgan Stanley named Pick to replace Gorman as CEO – yet still managed to hold onto the two executives, Andy Saperstein and Dan Simkowitz, who lost out on the chief executive role. (There’s no magic formula. The bank offered them each $20 million in equity awards to stay, and gave Pick the same deal.)
To the casual observer, it may seem that Morgan Stanley had its cake and ate it, too.
With Thursday’s developments, analysts may be inclined to think the bank is making a habit of its cake-and-eating dichotomy.
Gorman will retire from Morgan Stanley and leave the board when Pick takes over as chair, the bank said in a filing Thursday, but he’ll retain a title of chairman emeritus. Perhaps more critically, Gorman will serve as a non-employee adviser to the bank through the end of 2026, “working with respect to matters in which the Company desires to benefit from the experience, expertise and relationships he developed” over his time as CEO “to enhance Morgan Stanley’s business and impact globally.”
For that, the bank agreed to pay Gorman $400,000 a year, give him access to a car and driver, an office and administrative support, and certain controls over expenses. Mind you, this is concurrent with his upcoming term as Disney chair. The Morgan Stanley board may terminate or extend the contract, it said.
Morgan Stanley is hardly the first bank to offer a board chair an “emeritus” title. Goldman Sachs in 2018 made outgoing CEO Lloyd Blankfein its senior chair and gave him access to a company car and security driver for a year. There was no salary or bonus attached to the agreement, however.
With his pending ascent on the board, Pick will become the fourth current CEO among the six largest U.S. banks to also serve as chair. Jamie Dimon serves in both capacities at JPMorgan Chase. Brian Moynihan pulls double duty at Bank of America. And David Solomon holds both roles at Goldman. (Citi and Wells Fargo maintain separate chairs.)
Supporters of the consolidated CEO-chair role point to one less hurdle in decision making. Opponents, however, argue it concentrates too much power on one individual.
Proxy advisers recommended this year that shareholders of JPMorgan, BofA and Goldman separate the CEO and chair roles, but none of those proposals gained traction. Bank of America shareholders rejected the proposal with 31% support. Goldman turned it away with 33% support. The measure fell short at JPMorgan, too – with 42.7% support – and the bank issued a statement that the proposal “fails to match the empirical evidence of the last 18 years of leadership by the current chairman and CEO that has seen the firm become the largest U.S. bank.”
Morgan Stanley’s actions Thursday might show it’s great to be an incoming board chair. But given the perks, it may well be better to be emeritus-in-waiting.
