Mack Out at Morgan Stanley, Gorman Takes Total Control (MS, GS)

Morgan Stanley (NYSE: MS) has just released a “leadership transition” at the company.  John Mack, known formerly as ‘Mack the Knife,” is stepping down as Morgan Stanley’s Chairman and is retiring at year-end.  He will also leave his position on the board of directors as expected at the end of 2011.  While he is retiring, the release notes that Mack will become a senior advisor to Morgan Stanley upon retirement.

James Gorman, who took over as President and CEO, was elected to take on the role of Chairman as well.  This transition will become effective January 1, 2012.

Mack was credited for having kept the firm independent in the too-big-to-fail crisis of 2008 to 2009.  The results and outcome are sometimes highly debated.  This looks to be living up to a promise, as Mack noted here, “I made clear back in 2009 that I would serve in the Chairman role for two years and then move on. Now that time has come. I leave knowing that the people of Morgan Stanley have accomplished a great deal these last few years…”  Mack has more than thirty years of culture building at the firm.

As far as the surprise factor, Gorman is the one that most expected would step up to the plate.  Some may represent this as a forced-out move.  Some will say this is an orderly retirement.

Now the question begs… Will Lloyd Blankfein of Goldman Sachs Group Inc. (NYSE: GS) follow the same path soon?

Morgan Stanley (NYSE: MS) shares were already up with the banks and with Europe today before the news hit, but shares are up nearly 5% at $16.23 today versus a 52-week range of $14.71 to $31.04.

If you look at the most recent press release on earnings this is the June 30, 2011 book value: book value and tangible book value per common share were $30.17 and $26.61, respectively; Book value and tangible book value per common share were reduced by approximately $2.29 and $1.41, respectively.  That is based upon 1.9 billion shares outstanding.  This is a substantial discount to book value, even if that figure is likely to pare down a bit further.

JON C. OGG