Master of the universe
Morgan Stanley Dean Witter, formed by the 1997 merger between blue-blooded investment bank Morgan Stanley and retail brokerage Dean Witter, Discover, is one of the world's premier financial services firms. Among financial services firms, according to the 1999 Fortune 500 rankings, MSDW is the 10th-largest in terms of revenues. Perhaps more importantly, the firm posted a 32.6 percent return on equity (a commonly-used indicator of a bank's performance). In 1999, the firm posted record net income of $4.8 billion.
The firm's major revenue streams are several. With the Discover card, MSDW is currently ranked as the third-largest credit card company (behind Visa and MasterCard) in terms of charge volume and outstanding credit-card balances. Morgan Stanley Dean Witter also has $425 billion in assets under management as of summer 1999. And then of course there is the world-class securities (investment banking and retail brokerage) business. All in all, the firm has more than 50,000 employees in over 550 offices worldwide, including more than 12,000 financial advisors (retail brokers).
Leader in I-banking
Morgan Stanley the investment bank opened for business in 1935 after the Post-Depression Glass-Steagall Act forced financial services firms to choose between commercial and investment banking. J.P. Morgan, one of the most important financial institutions in American history, decided to operate as a commercial bank, while several J.P. Morgan employees, including Harold Stanley and Henry Morgan, split off to form an investment bank.
In investment banking, Morgan Stanley Dean Witter is generally considered one of the top two banks in the world (along with Goldman Sachs), with strong franchises in high-margin businesses such as mergers and acquisitions advisory and equity underwriting. In 1999, the firm ranked as the top underwriter of IPOs and common stock for U.S. companies. It also ranked No. 2 in worldwide M&A advisory. MSDW was chosen as the "Best Investment Bank" by Euromoney in 1999, and received four (out of a total 16) Deal of the Year Awards by Investment Dealer's Digest.
The firm has been strong in the booming tech sector, with 134 completed or announced transactions. MSDW's technology group announced or completed 73 transactions worth more than $98.1 billion in 1999. Driven by Internet stock analysis guru Mary Meeker, the firm's advisement assignments included advising Healtheon in its $7.9 billion acquisition of WebMD, advising @Home in its $6.7 billion acquisition of Excite, and advising Broadcast.com in its $5.7 billion sale to Yahoo!. Recent MSDW-managed technology IPOs include the $2.16 billion offering by Agilent, the $234 million IPO of Akamai, and the highly-publicized $149 million offering of Martha Stewart Living Omnimedia.
Morgan Stanley has been busy in other sectors as well, of course. In the health care sector, for example, the firm advised Monsanto on its $27 billion merger of equals with Pharmacia Upjohn. It has also made a significant impact in the European M&A surge, taking the lead among American banks advising on deals on the continent. In 1999, the firm advised Hoechst of Germany on its $50 billion uber-merger with France's Rhone-Poulenc.
SCurrying to pick up the pieces
Morgan Stanley Dean Witter suffered from terrible publicity because of its handling of a discrimination suit filed by a former employee. The condensed version: Former junior analyst Christian Curry is fired in April 1998 after nude photographs of him appear in Playguy, a gay men's magazine. Curry filed a discrimination suit against the firm, claiming that he was fired because he is black, and because he was perceived to be gay. MSDW asserted that it fired Curry for abusing expense accounts. In August 1998, Curry was arrested for allegedly conspiring to plant racist e-mail messages in Morgan Stanley's computer system.
Then, in May 1999, the Manhattan DA dropped the charges against Curry and commenced an investigation of Morgan Stanley Dean Witter, after learning that MSDW paid Curry's friend Charles Luethke $10,000 to help set up a sting to catch Curry. In June, the firm's general counsel, Christine Edwards, resigned after an internal investigation. The firm asserted that Curry's claims were without merit. The DA agreed with that assessment, declining to file criminal charges against Morgan Stanley Dean Witter and any employees involved in the matter.
In yet another PR black eye, in June 2000, The U.S. Equal Employment Opportunity Commission said it had "reasonable cause to believe" that Morgan Stanley had shown bias against broker Allison Schieffelin and other female workers on pay, promotions and other issues. The commission found that Morgan Stanley had retaliated against Schieffelin for her complaints of discrimination and sexual harassment. Schieffelin, a 14-year Morgan Stanley employee and principal in the company's institutional equity unit, had complained in 1998 that Morgan Stanley had repeatedly denied her promotion because she was a woman. Schieffelin said she and other women were repeatedly barred from male-only company events, such as golf trips and excursions to nightclubs that featured strippers. How the company will respond (or will be compelled to respond) is still up in the air.
Foray into online trading
In October 1999, the company announced that Discover Brokerage would be renamed Morgan Stanley Dean Witter Online Inc., and that its online services will be available to investors through an integrated Web site, www.msdw.com. Under the new system, investors have the choice of independent online investing or a traditional, full-service channel with online trading abilities. As part of the new service, per-trade transaction charges rose from $14.95 (the fee Discover Brokerage had charged) to $29.95.
Morgan Stanley Dean Witter's interviews are, according to current employees, "quite formal, even for the investment banking industry." Technical questions are common; one business school student interviewing for a trading job reports that for his final round he was asked to sit in a chair while a senior director peppered him with macroeconomic questions. "All he did was pace around and throw questions at me - if I was wrong he'd correct me, and then just go to the next one. I remember thinking, 'God, I'm glad I know some of this stuff.' It was a lot of macroeconomics: inflation, interest rates, currencies." Says that contact: "They had me interview with pretty senior people, the head of all treasury trading, and the second in charge of all fixed income." Some recent associate-level hires report undergoing more than one call-back round while going through the business school recruiting process. "I had three more rounds, all in New York (after the on-campus round)," reports one contact.
Other insiders tell different stories. One investment banking contact reports that at his business school, MSDW holds only two rounds (one on-campus and one at an office) for both summer and full-time associate hires. "They make very quick decisions," reports that contact. "That's the difference between Goldman and Morgan Stanley." That insider reports that there was one two-on-one interview ("good cop, bad cop"), though "other people had one-on-ones." The second round was all one-on-ones for this contact.
Education and attitude
As one of Wall Street's preeminent "white-shoe" firms, Morgan Stanley Dean Witter cultivates an "extremely professional environment" geared toward the "bright, motivated individuals that fill the halls." Insiders say that "everyone seems to have an MBA from a top business school" and state that "no other firm matches Morgan Stanley in terms of education and attitude." Not everyone appreciates this atmosphere, however. One former analyst calls "the people at Morgan Stanley" his "biggest disappointment." He explains: "They are boorish, aggressive, and elitist - even more so than the rest of Wall Street." Another who left the firm recalls that he found his supervisors to be "shallow, uninspiring and heartless."
One of the famed aspects of Morgan Stanley Dean Witter's culture is that bankers are required to wear beepers, which some other banks enjoy pointing out as a MSDW shortcoming during MBA recruiting season. "Depending on how you think about that, [omnipresent beepers are] a good thing or a bad thing," reveals one associate. "The bad thing is, everyone's got access to your number. But the good side is that if you ever want to take a two-hour lunch, you can, because they can page you. If anyone ever complains that you weren't in the office, you can just say 'Why didn't you page me?'" Continues that contact: "And at night, it becomes a terrific social resource. People start paging people, next thing you know, you've got 50 people together."
Morgan Stanley Dean Witter is also famed for its innovative evaluation system. The 360-degree review evaluation process takes place once a year, but most analysts are reviewed mid-year as well. "So everyone you work with you put on your list, and that list goes to the HR department," explains one insider. "The HR department sends an evaluation form to everyone you work with. [Morgan Stanley] takes this very seriously. Everyone you work with will give you a formal evaluation. All the evaluations are collected, and a VP or Principal who's in your group is assigned to collate all the information and pull together what the overall evaluation should be." Although the firm works on a three-tier evaluation system, "there's infinite room in all the tiers, it's not like a forced curve." Morgan Stanley Dean Witter awards its bonuses to analysts in July and its associates in December; each tier is awarded a bonus that represents a different portion of base salary.
Evaluations: Two way street
"You not only get feedback from people above you, but you give them evaluations. The downward evaluations are named, upward are anonymous," says one former analyst. "So if your associate is being a total pain in the ass, you slam them in the reviews. They take very seriously the opinions of the junior people when evaluating for bonuses - so associates go out of the way to be helpful." "I'd say that is a very unique thing about Morgan," says that contact, who points out that the Morgan Stanley evaluation model was actually a case study at his business school.
Rotations for I-banking associates
Investment banking associates at MSDW are offered a generalist program with three rotations through industry or product groups. These rotations last about three to four months each. Comparing Morgan Stanley Dean Witter with its chief competitor, Goldman Sachs, one insider says "there's an incredible amount of mobility when compared to Goldman. You spend your first year as a total generalist and then after two years, if you want, you can switch groups."
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