By Michael Lewis
It brightens everyone’s day just a little when reporters catch Morgan Stanley’s Phil Purcell saying something stupid in a speech.
When Citigroup’s Sandy Weill is compelled to agree that he will never again speak to his firm’s equity analysts without a lawyer on hand — well, that adds a little skip to your step, doesn’t it?
There really is no limit to the pleasure to be had from the humiliation of Wall Street’s chief executive officers. If some machine could be built to generate it, the thing would be worth a fortune. So it is a shame that the inner workings of securities firms are not laid bare to the public more frequently.
As the documents recently released by New York Attorney General Eliot Spitzer suggest, the inner workings of Wall Street firms are the very depths of humiliation for the Wall Street CEO.
The various Wall Street investigations searched hard for evidence that Internet stock analysts were coerced or cajoled into their views by their bosses. That approach completely misses the point of what actually happened during the boom — and misses the underlying reality inside a big Wall Street firm. The bosses aren’t bosses. They are figureheads, puppets whose strings are pulled by their most profitable employees.
Mary Meeker, for instance. At the end of each year, just before bonus time, Meeker wrote for her bosses at Morgan Stanley what she described as “my own version of an annual report.” This document — now available on Eliot Spitzer’s web site — would have failed to inform her superiors of anything they didn’t already know about their firm.
The main purpose of Meeker’s “annual report” was to remind her bosses just how much banking revenue she generated, and to explain to them what they needed to do to keep her happy.
At the end of her most glorious year, 1999, Meeker writes that “it is critical for (Morgan Stanley) to compensate its Internet research/IBD (investment banking division) team appropriately and provide them with appropriate resources.”
When people quit Morgan Stanley, Meeker writes, “there are typically four reasons: 1) I was burned out and saw no end in sight; 2) I resented the fact that I was working at a significant compensation discount relative to competing offers and I had no clarity on the drivers of my compensation; 3) I was sick of asking for resources I couldn’t get (my own office, a first class seat, a second assistant, my own fax machine, a faster printer, more storage space, or more space in general); or 4) management just `doesn’t get tech.”’