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A group of eight dissident retired Morgan Stanley executives had their prayers answered Tuesday when the powerful Washington-based trade group, the Council of Institutional Investors, said it would seek a conference call with the G-8 and Morgan Stanley’s board. Sources familiar with the CII said the conference call would be exploratory, to ask Morgan Stanley’s 13-person board of directors to explain its strategy for growing the firm and restoring its lagging stock price. Richard Ferlauto, director of pension and benefit policy for the American Federation of State, County and Municipal Employees, pushed for an informal vote among the group at its annual meeting in Washington to determine if it would reach out to Morgan Stanley and the G-8 to request a conference call. The objective of the call would be to better understand the issues at stake, he said, adding that it would be arranged by CII’s employees and would include the Morgan Stanley board, its chairman and CEO, Philip Purcell and representatives from the G-8. “We are always willing to listen and be responsive to the concerns of our shareholders,” a Morgan Stanley spokesman said Tuesday. Though a victory for the G-8 — which has been publicly calling for Purcell’s resignation for three weeks now — CII’s action will do little to oust Purcell, which observers said remains a near-impossible task. But it does make the firm appear more vulnerable to a takeover, as the battle between the board and the dissidents grows more acrimonious. “Purcell — and this board, for that matter — will never in a million years give in to these dissidents, and nor can he run the company,” said Richard X. Bove, an analyst with Punk, Ziegel & Co. “The only solution is an acquisition by a third party.” Indeed, ousting Purcell still seems unlikely for the G-8, even if the CII gets involved. Morgan Stanley’s corporate bylaws offer airtight protection of Purcell’s position. They dictate that a special meeting can only be called by the chairman of the board — in this case, Purcell — or by a majority of the board. A vote to remove the chairman requires approval of 75 percent of the board, four of whom are former colleagues of Purcell’s, and two of whom are co-presidents Zoe Cruz and Stephen Crawford, who owe their new titles and board membership to Purcell. Pat McGurn, senior vice president of proxy firm Institutional Shareholder Services, was at the CII’s meeting on Tuesday and said that there is little outrage among the group. “People are curious and watching the situation,” he said. “But no one’s running to Dulles to catch a plane to LaGuardia to do something.” Ferlauto agreed. “A lot of questions have been raised about the nature of the disputes, and about the long-term visions of [the G-8] and of Purcell,” Ferlauto said. “It was important to have that information aired. We’re not necessarily taking a negative view.” The reason, according to McGurn, is that the time has essentially passed for action. “A shareholder vote is one of the least likely outcomes here,” McGurn said. “The more traditional forms of shareholder rebellion tend to revolve around a vote. There’s no vote on the horizon here, no right to call a special meeting, no ability to act in lieu of a meeting by written consent solicitations — so we’re talking about the dissidents trying to hold things together for another 12 months.” It could be even longer than that. Sources point out that Morgan Stanley can delay the next annual meeting for even longer. Morgan Stanley’s annual meeting was scheduled to be held in April this year, but the firm moved it to March 15th. In retrospect, says McGurn, the board may have wanted to delay the G-8′s attack on Purcell until after the annual meeting. The G-8 first registered their objections with the board in a letter dated March 3, but it went unacknowledged even past the annual meeting on March 15. The G-8 went public with their letter on March 31. Since then, the G-8 had been depending on an exodus of senior Morgan Stanley people to make their point, but only a handful have left the company, and most of those departed within the first week. Those include former president Stephan Newhouse, former president of institutional securities Vikram Pandit, Pandit deputy John P. Havens, and co-head of financial institutions investment banking Vikram Gandhi. “A civil war is more difficult to get going when all management has to do is sign a check with more digits to the left of the decimal point,” McGurn said. “Ultimately, money talks at the investment banks.” A takeover is more of a possibility than it used to be, if only because Morgan Stanley’s board dismantled the firm’s poison-pill provision recently in what McGurn called “a corporate governance extreme makeover.” The poison pill should be gone by the end of the month, sources said. Bove noted that Morgan Stanley’s stock price has risen whenever sale rumors or rumors of Purcell’s removal reign, but drops when Purcell looks safe. In other Morgan Stanley news, the firm pushed for the recusal of Palm Beach Circuit Court Judge Elizabeth Maass, who is overseeing the Sunbeam case in West Palm Beach, Fla. Maass reacted strongly to Morgan Stanley lawyer Mark Hansen’s arguments, in a way that Morgan Stanley deemed prejudicial. The judge refused to recuse herself, and Morgan Stanley is appealing. Morgan Stanley’s stock price rose slightly Tuesday, closing at $54.76, up from the open of $54.20. That is barely changed from Morgan Stanley’s close of $55.59 on March 24, before the current upheaval started, but down 7 percent from the $59 high the stock hit in the past three weeks on takeover speculation Copyright �2005 TDD, LLC. All rights reserved.

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