Morgan Stanley's board on Sunday affirmed its support for Chief Executive Philip Purcell while making it easier to have him removed, but opponents demanding his ouster said they were not satisfied.
The board of the investment bank, which met on Saturday, also said it would not make any further restructuring changes beyond the already announced spin-off of its Discover Card business.
"We have said consistently that management enjoys the confidence of the board and we reiterate that commitment today," the directors said in a statement.
"We have thoroughly examined all of the issues surrounding leadership, structure and strategy and conclude that it is in the best interest of shareholders that we support management and not split up the company," the board added.
The board's changes follow weeks of pressure from eight former high-ranking Morgan Stanley executives and current shareholders on Chairman and Chief Executive Philip Purcell to step down and comes after the departure of several top executives and bankers at the investment bank.
A spokesman for the former executives called the actions "deficient" because Purcell remained the CEO and the changes do not allow shareholders to call a special meeting.
"The changes fail to address the fundamental cause of the crisis at Morgan Stanley, which is the failure in Philip Purcell's leadership," the spokesman said.
On April 22, three former Morgan Stanley executives met with members of the firm's board and pushed for the resignation of Purcell, people with knowledge of the meeting told Reuters on Friday.
The New York Times had reported that the former executives at the April 22 meeting proposed dividing Morgan Stanley into two companies. One would cater to institutional clients, such as pensions and mutual funds, with the other focused on individual investors.
At Saturday's meeting, the bank's board removed a provision in Morgan Stanley's corporate bylaws requiring a super-majority of 75 percent of the board of directors to remove the chief executive officer, replacing it with a simple majority.
Morgan Stanley's shares rose more than 4.3 percent to $52.62 on Friday after news that a pending board meeting would discuss concerns about Purcell.
The investment bank's board also said in its statement on Sunday that it would speed-up the planned "de-staggering" of the board of directors starting at the 2006 annual meeting, meaning the whole board will stand for election each year.
A lead director position would also be created on the board, to be filled shortly, that would help it ensure effective corporate governance and take a lead in looking after shareholder interests when the company's leadership comes into question.
Two additional outside directors would be named to the board as well, bringing the total number of directors to 15.
The board re-affirmed its policy that directors should not stand for election following their 72nd birthday.
As a result, 71-year-old Edward Brennan, the former Chairman of American Airlines parent AMR Corp. and Sears Roebuck & Co., will not be able to stand for re-election.
Brennan had been considered among the most loyal Purcell supporters on the board. His appointment in December 2004 came as investor criticism of the bank's performance had begun to build.
A month ago, Purcell shook up the investment bank's top management ranks when he named Zoe Cruz and Stephen Crawford as co-presidents. The moves prompted the departure of more than a dozen executives and led the eight retired Morgan Stanley executives to wage a bitter, public campaign for Purcell's ouster.
The biggest blows came when the bank's two top banking executives -- Vice-Chairman Joseph Perella, chairman of investment banking, and Terry Meguid, head of investment banking -- said they would resign after a brief transition period.
"The announced changes will not enhance shareholder value, nor will they bring back the departed talented employees, prevent future departures or stem the deterioration of the firm's reputation," the former executives' spokesman said.