CEO on the hot seat: John Mack, Morgan Stanley
Mack still has culture clashes to address -- but will his plans to revive growth be too costly?
By Jon Birger and David Stires, FORTUNE

NEW YORK (FORTUNE Magazine) - With talent fleeing and conflict roiling the firm, Morgan Stanley's board brought back John Mack last summer to restore calm.

So his top priority must be to resolve the long-festering culture clash -- dating from the 1997 Morgan–Dean Witter merger -- that contributed to the downfall of predecessor Phil Purcell.

He also needs to revive several important operations, including a stagnant Discover card business, a disappointing brokerage arm, and a lagging asset-management unit.

Opportunities

Mack has plans to grow just about all aspects of the business: private equity, derivatives, emerging markets. A rumored deal to buy a controlling stake in $450 billion bond-fund manager BlackRock would be an important addition to Morgan's lineup, provided Mack doesn't overpay.

Stock outlook

Morgan Stanley (Research) shares are up almost 15 percent since Mack's return. They're not likely to rise fast from here. Mack's ambitious plans will be costly, requiring major restructuring charges and spending on acquisitions.

And it could take two or more years to see results. We'd avoid the stock for now. If you believe in that old Mack magic, wait for a dip, buy, and be prepared to hold on. Top of page

FORTUNE Investor's Guide: 10 CEOs

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.