When news broke in August that Alasdair Morrison was going to be the new chairman of Morgan Stanley Dean Witter in Asia, eyebrows were raised. Morrison was one of the most prominent corporate chieftains in Asia having been head or taipan of Jardine Matheson for the previous five years. In February 2000 he left the group after a boardroom spat with the controlling shareholder, the Keswick family. Morrison was known for his strong views on balance sheet efficiency, shareholder value and corporate restructuring. He was also known to actively favour re-listing the Jardine Group in Hong Kong arguments about which led to his eventual departure from the firm.
When it was announced that he was joining Morgan Stanley, the market reacted with typical cynicism. Many thought he was hired purely for figurehead reasons. And given the strained relations between Jardine and China, this figurehead would be somewhat compromised. Secondly he was British and very British at that and there were concerns he would not fit into the brash American style of a US investment bank.
In Morgan Stanley itself, the troops were at first a touch bemused by this hire. After all, who was this guy and how could he step into the legendary Jack Wadsworth's exquisitely tailored shoes? Wadsworth is the consummate career banker with 37 years experience. He has been 22 years in Morgan Stanley and 13 years at the helm in Asia. He is able to open doors that the best locksmith would find tricky and he knows investment banking as well as anyone. How could Morrison compare with a banker of Jack 'the Wad' Wadsworth's standing?
Yet in the few months that Morrison has had his equally well-shod feet under the desk, he has impressed the cadres. One such Morgan Stanley banker who shall remain nameless said that at first he was skeptical about the hire. But on meeting Morrison a few times he has not only been impressed by his intellect but also by his innate ability to deal with difficult people a skill that should be useful for clients and employees alike.
It is still uncertain how good an investment banker Morrison will become, but presumably he can hire people to look after the rocket science. The firm attests that he has been hired for his management skills more than his ability to construct synthetic currency options.
Furthermore, Morrison was in charge of a business at Jardine with fingers in nearly every sector in Asia. He has contacts and knows the companies in the Asian property, hotel, retail, automobile, insurance and many other sectors. That knowledge is perhaps more valuable than knowing who is the right person to flatter in New York.
In this interview the first interview Morrison has given with any media since joining Morgan Stanley he is joined by Mario Francescotti, the President of Morgan Stanley in Asia. Francescotti rose through the ranks of the firm through the trading side. He was one of the youngest Managing Directors in Morgan Stanley's history and is highly regarded within the firm. He has been in his present position since 1997.
The interview is divided into two parts. Today they talk about Morrison's decision to join Morgan Stanley, what it means for the firm in Asia and what Morrison brings to the show. In part two which will come out tomorrow they talk about China, CICC, PCCW, cross-listings in Bermuda and much, much more.
Lord: Alasdair, why did you decide to join Morgan Stanley?
Morrison: I have worked in Asia for 30 years and the last 10 years I have been the chief executive of some major businesses. So when I left the Jardine group I wanted to find an opportunity to use the experience I had gained as a chief executive. Investment banking really provides this opportunity. It operates across a range of industries and an investment bank such as Morgan Stanley operates a similar sort of Asian network as I had been used to. So the investment banking field was very attractive. So having made that decision, what better investment bank to join than Morgan Stanley?
Lord: So you had decided to become an investment banker before you decided to join Morgan Stanley?
Morrison: Well, I was talking to a number of people in different businesses but this was the one that really seemed to provide the best opportunity to use the experience that I had built up. It was an easy decision.
Lord: Mario, why did Morgan Stanley pursue Alasdair?
Francescotti: Alasdair was interesting to us at a number of different levels. It was an opportunity for us to move to a local management structure. Alasdair has been in Asia for 30 years, which is longer than some of our bankers have been alive. He knows the region well, is committed to being here full term. He is also a man of high integrity and has a strong work ethic. He has been client centric in lots of the things he has done in Jardines and Hong Kong Land. Coming out of the Asian crisis, there has been quite a shift in the way advisers and their clients work. One of the key issues is that prior to the crisis relationships were very transactional. And it was based on price whoever gave the best price or gave the most money got the deal.
Two things have changed since the crisis. The nature of the transactional part of the business has changed. Deals are bigger; execution requires industry, product and global distribution skills. It requires more capital and more of a global orientation than it did before. The relationships are now more strategic, not just transactional. The best companies are those that are seeking advice, listening to advice and paying for advice which did not happen before and then following that advice. The companies that are doing that, are the global winners. Hutchison in Hong Kong has been doing that for a long time. DBS in Singapore is doing it as well and proving that it too is a winner.
Clients are looking for powerful strategic partners in the investment bank. Alasdair has been a CEO. He knows what it is like being a CEO in Asia. He can deal with other CEOs in Asia with the same mindset. He has had to deal with the issues that other Asian companies are facing now restructuring and building shareholder value. So for us, having a CEO mindset and being able to deal with other CEOs on a strategic basis, as well as his character and experience made Alasdair very attractive for us.
Morrison: And that is a two way street. The attraction for me was that I am able to deal with Morgan Stanley's major clients on a long term strategic relationship, helping them evolve their strategies. Now is a very exciting time to be working with Morgan Stanley in Asia as investment banking moves from the transactional basis to the long-term strategic basis.
Lord: So is your joining Morgan Stanley an explicit approval of this new relationship between investment banks and their clients? Is your presence here a sign to Asian companies that they should be using the capital markets more?
Morrison: As Mario said, Asian companies are faced with a choice. Are they going to be consolidators in their industry or are they going to face consolidation themselves? This is the choice that many of them now face. This was partly triggered by the economic downturn but it is also a global trend. There is a trend to scale through globalization. Companies need to be bigger, they need to restructure and they probably need to raise capital to do this. So they need to pay much more attention to shareholder value to justify investors putting capital with them. These are the issues I thought about as a CEO and they are the issues that more and more businesses will have to think about in Asia. It is something that I can assist in because of my experience of the same issues.
Lord: Is your contact book the most valuable asset you bring to Morgan Stanley?
Francescotti: After 30 years in the region, Alasdair obviously knows a lot of people.
Morrison: One of the most enjoyable things about this role is that many of the companies and individuals that are existing, or potential clients of Morgan Stanley are old friends of mine. It is nice to feel that I can build on strong and friendly relationships that I have had in the past.
Lord: I hear that Morgan Stanley is planning to roll out some of its consumer products in Asia credit cards, retail brokerage and so forth. Can you tell me about these plans?
Francescotti: This ties in with why we took on Alasdair. We think there will be a consolidating trend over the next few years in our industry. In the near term we are bringing the businesses we already have the consumer products to Asia as part of our strategy. The interesting thing about Alasdair is that he did sit on a business at Jardine Matheson that was quite multi centric, a conglomerate of different businesses. Therefore while clearly we want him to spend quite a bit of time on our key relationships with clients in the region, we are also looking for him to deal with an aggregation of our businesses.
Morrison: Including in financial services with Jardine Fleming, which also had a very strong retail orientation on the asset management side.
Lord: What lessons did you learn from your Jardine Fleming experiences?
Morrison: From my experience at Jardine Fleming you see the strength of the individual savings in all countries throughout Asia and the attractiveness in general terms of tapping into that retail savings market.
Francescotti: Jardines was good at establishing a local presence. They also had a retail focus. But the lesson was that they needed to have global capabilities. The lesson there was that they could not survive as a regional firm. That is not a lesson we need to bring Alasdair on board for.
Morrison: Yes that's a lesson we learnt a long time ago. It's all part of that restructuring of companies we were talking about earlier. It is not relevant just to Morgan Stanley's clients but it is also relevant to the industry in which Morgan Stanley operates. This trend to globalization and the need for scale is equally important for Morgan Stanley as it is for our clients.
Lord: There seem to be two conflicting themes coming out here. Firstly there is this need for global scale, but secondly you said that you have to localize much more. Is this not difficult to achieve?
Morrison: It sounds paradoxical, yes. But it is at the heart of what the successful firms in Asia are going to have to do. Globalization is more effective if you can complement it with the ability to think locally. The ability to match the global strength with the local sensitivity is the key to being a successful international business. Hopefully this is something I can add a bit of value to at Morgan Stanley. I want to help bring Morgan Stanley to the heart of Asia and bring Asia to the heart of Morgan Stanley.
Lord: There is a bit of a British mafia at the top of Morgan Stanley in Asia these days, with both of you running the show.
Morrison: It is a very multicultural organization. Very international. It's one of the attractive aspects of the firm. There are many people from Asia working here, as well as many Australians, Americans and Europeans. It is a very diverse organization.
Lord: You don't foresee there being any challenges for you coming from the rather staid culture of Jardines into the more dynamic Morgan Stanley culture?
Morrison: No, I don't. I think both organizations have strong cultures of integrity and a belief in quality. Operationally, both have a very strong sense of professionalism. We had a very strong Scottish work ethic at Jardines, which is akin to the American work ethic at Morgan Stanley. Jardines was a very multicultural organization as well. I hired an American to run Dairy Farm and a Frenchman to run Mandarin Oriental. So I am completely comfortable with the culture here.
Lord: So the message I get is that nothing is really going to change at Morgan Stanley with you at the top.
Morrison: Well that is a sign of the greatness of Morgan Stanley. It is a terrific firm. It has already established a very strong platform here in Asia. I hope I can add a new dimension in terms of putting down deeper Asian roots to helping the development of the business. But it is a long-term strategy that the firm has had for a long time already. I will just participate in pushing that strategy forward.
Lord: Does your hire mean that there will be more independence in the way Morgan Stanley is run in Asia? I hear that things are still very much decided over midnight conference calls with New York.
Morrison: That is the nature of this business. While it is still very important to keep that local feeling, products have to be run on a global basis. That is the trend of all major industries in the world.
Francescotti: We are very respectful of ideas that come from New York. We certainly would not want to go down a path without making sure we had built a consensus with New York. But if you asked our people in New York they would say the same thing. They respect the views coming out of Asia and need to build a consensus with us.
Morrison: As an outsider coming in, one of the very appealing things about the Morgan Stanley culture is that there is a common sense of purpose, a shared vision of what the team was trying to do. It is very collegiate, with strong cooperation across the divisions and across the geographies. As the new man on the block I don't sense that there is any real conflict between geographies or functions. I have seen it at other companies but I haven't seen it here.
For Part 2, click here