The 2005 honoree of the America Ireland Funds is Phil Purcell (right), CEO of Morgan Stanley, at a Funds' dinner last February.

Last week, the directors of America's top securities firm Morgan Stanley, wrote to the eight former directors who are involved in a public campaign to oust CEO Phil Purcell and install one of their number, Robert G. Scott.

The directors wrote: "It is clear to us that your ill-considered and professionally directed attacks on Morgan Stanley and our people are damaging the firm and our shareholders." 

During his 34-year career at Morgan Stanley, Scott had held virtually every major post in the company, including head of investment banking, director of corporate finance, and chief financial officer, before becoming president and chief operating officer. Most significantly, he was part of the senior management team that structured the 1997 merger with Dean Witter Discover, as well as head of the Morgan Stanley transition team for the merger. He was named CFO of Morgan Stanley Dean Witter at the time of the merger and became president in 2001.

Last year, at the Stanford Graduate School of Business, Scott reflected on leadership, decision-making, and values. "Start by knowing yourself and what you believe in. Learn to listen, to connect to people, and if you get lost-reflect back on your values. They will help you stay the course," he told MBA students. "Throughout every stage of your career you're going to shape your character by how you handle yourself … by your actions and inactions. Are you going to stick by your principles or rationalize away little deviations?" he asked, urging students to develop strong values and integrity. "Are you going to let your faithfulness to principle waiver in the face of your ambition? Will you put your firm at risk to benefit personally?"

The dissidents who were involved in the merger of the august securities firm Morgan Stanley, which was co-founded in 1935 by a grandson of famed American financier J.P. Morgan, were responsible for the rise of their nemesis Phil Purcell who launched the Discover credit card while at Sears Roebuck and rose to the top of the retail brokerage Dean Witter Discover.

Merging investment banking with a retail brokerage turned into an incendiary mix and with ten senior investment bankers having jumped ship at Morgan Stanley in recent weeks, the jury is out on how long Purcell can survive.

Investment banking- hedge funds' commissions, securities trading, IPO fees, takeovers - provide Morgan Stanley with the bulk of it profit. The directors have stuck to their guns in their support of Purcell but if talent like Joseph R. Perella continue to head for the exit, the war of attrition will come to an inevitable end.

Two weeks ago Joseph R. Perella and his colleague Tarek F. Abdel-Meguid, agreed to stay after Purcell named new co-presidents in response to a call for his resignation. Perella was given a new title of vice chairman.

That the two executives chose to leave soon afterward suggests that Purcell has yet to win over his fractious investment bankers, who contribute 60 percent of the firm's profits and who constitute the core of the Morgan Stanley that merged with Dean Witter in 1997.

"Morgan Stanley is a premier firm with a great brand," said Richard Barrett, a former senior banker at Credit Suisse First Boston told the New York Times. "Now it has joined the ranks of the mortals. With people leaving, you create a vicious circle, ultimately losing control of your clients. The revenue stream is downgraded, there is pressure on margins and tensions increase internally."

Perella (63), is viewed as a charismatic mergers and acquisitions specialist who achieved renown during the 1980's while at Wasserstein Perella. While no longer quite the revenue producer he was in his prime, Mr. Perella was regarded as a rainmaker, usually brought in at the end to secure a deal for the firm. He worked on a number of recent high-profile mergers, including Federated Department Stores' $11 billion acquisition of May Department Stores in February.

Related:

'White shoe' dissidents fail to knockout Morgan Stanley's Phil Purcell