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Business

Morgan Stanley CEO: Not laying people off was one of the easiest decisions ever made

By
Thornton McEnery
Published April 16, 2020, 10:55 a.m. ET

Morgan Stanley boss James Gorman said he’s “been fortunate” despite getting sick with the coronavirus last month, and that his recent decision not to lay off employees amid a looming recession was a no-brainer.

The crisis took a personal turn at Morgan Stanley last week when Gorman, the bank’s 61-year-old chief executive, disclosed to employees in a video that he’d tested positive for COVID-19 and had recovered after battling symptoms.

“I’ve been fortunate … there are millions who haven’t had the same outcome and my heart goes out to them,” Gorman told one analyst about his own COVID struggle, before adding that he hoped the government response in the US would include more widespread testing.

On March 26, Gorman had told workers in a companywide memo that their jobs were secure through the end of 2020. On Thursday, he told an emotional story about an employee whose husband had been laid off and had been worried about her own status.

The worried employee emailed Gorman the morning after the memo to tell him she was “overwhelmed” by the announcement.

The decision not to impose layoffs was “one of the easiest decisions I’ve ever made,” Gorman told analysts.

Other than being the only one who actually contracted it, James Gorman appears to be the Wall Street CEO least affected by the coronavirus.

The Wall Street megabank on Thursday said its first-quarter profit plunged 30 percent as the pandemic crushed results in March, with earnings per share of $1.01 missing analysts’ expectations of $1.14.

Nevertheless, that was better than a 46-percent drop reported a day earlier by archrival Goldman Sachs, as well as a 70-percent drop disclosed by JPMorgan Chase earlier this week as it took out a $6.8 billion reserve in anticipation of loan defaults by struggling businesses nationwide.

The comparatively lower losses reflect Morgan Stanley’s unique structure among the big banks. Gorman and his team are not exposed to the kind of consumer lending that so deeply impacted banks like JPMorgan Chase and Wells Fargo. Most of Morgan Stanley’s $895 billion in assets are spread across investment banking, trading and asset management.

“We’re in the middle of a public health crisis,” Gorman said on a call with analysts. ”This environment is anything but normal.”

One non-viral negative narrative on Morgan Stanley’s quarter came from the bank’s $13 billion acquisition of E*Trade that was announced in Feb. 20, one day after the markets peaked. Many estimates now peg E*Trade’s value at closer to $9 billion.

According to Thursday’s call, that deal is still on track for completion this year. Still, Gorman struck a more sanguine tone than has been heard this week from his fellow banking bosses, including JPMorgan Chase’s Jamie Dimon and Goldman Sach’s David Solomon.

After telling analysts that he believes times of crisis are the true test of a corporate culture, Gorman praised his employees’ ability to shift into a new work-from-home environment, concluding “I could not be prouder of this firm.”