John Mack on his plans for Morgan
By Patricia Sellers

(FORTUNE Magazine) – Hardly anyone expected John Mack to return to Morgan Stanley. Least of all John Mack. Rising from bond salesman to president, he helped build the firm into a Wall Street powerhouse. In 2001 he quit--and became CEO of CSFB. He returned that investment bank to profitability but clashed with the board of parent Credit Suisse Group, which ousted him last summer. Recently Mack has watched the turmoil at Morgan Stanley from the chairman's office of Pequot Capital. Now that he has replaced his old nemesis Phil Purcell, he is dealing with profit shortfalls and executive departures. He sat down with FORTUNE's Patricia Sellers on his first full day at Morgan's Midtown Manhattan headquarters.

Is this your first time here since 2001?

No, I've come to this building to get a haircut every three or four weeks. Sal's shop is in the lobby. Once the search started, I didn't want to be spotted, so I met Sal at my son's apartment.

How did you decide to come back?

I had to get comfortable that the board was 100% behind me. Then I had to decide if I was ready to go back to a public company. Sometimes when I went to bed, I thought, "I don't want to do this."And when I woke up, I thought, "I do want to do this." [My wife] Christy said, "If you're going to do this, you need to be smarter about the way you work."

How so?

At CSFB I took on all of it. This time, I need to delegate more. I must not get sucked into the little things.

How different will this job be?

Very different. CSFB needed a cultural change. I don't think we need cultural change. CSFB had major regulatory and profitability issues. The issues here are more strategic.

Like whether Morgan Stanley and Dean Witter belong together?

In 1997 we did the merger, and that strategy still makes sense. I believe there's tremendous value in the combined network. It's all about execution. Look at Merrill Lynch, where Stan O'Neal has done a wonderful job. Their retail business is No. 1 or No. 2 in productivity. Why aren't we? Dean Witter wasn't at the top when we did the merger and has slipped since.

Purcell decided to spin off Discover Card. Might that strategy change?

Everything can change. I need to understand it. I need to hear what the managers think.

Five top-level executives recently left. Do you want them back?

Ideally, I'd like all five to come back. [Banker] Joe Perella epitomizes the client focus, the client care that any great investment bank needs.

Perella and Vikram Pandit [Morgan's departed securities chief] have indicated they won't work under co-president Zoe Cruz. Can you see these three people living together?

They used to. Somehow it worked. I need to understand the dynamics.

What's your biggest weakness?

I trust people very quickly, and that gets me into trouble.

You manage down well, but you have trouble managing up.

Without question. But I think this time the board is on my side.