April 18 (Bloomberg) -- Morgan Stanley's Philip Purcell is almost in a class of his own among U.S. chief executive officers when it comes to job security: Of the nation's 1,800 largest companies, Morgan Stanley is one of only two requiring a 75 percent vote for the board to oust its CEO.

Comcast Corp., the largest cable-television operator, has a similar bylaw, though its 75 percent provision expires in 2010. While a dozen other companies use bylaws to protect directors or make changing rules tougher, only Morgan Stanley and Comcast use them to shield the CEO, according to a study by the Corporate Library, a Portland, Maine-based consulting firm.

``It's odd to have a written rule of any kind,'' Robert Joss, dean of the Stanford University Graduate School of Business in Palo Alto, California, said in an April 14 interview. ``You'd think you're in a pretty awkward spot if 50 percent of the people don't support you. You'd have a real leadership issue, forget about governance.''

Morgan Stanley's 13-member board, headed by 61-year-old Purcell, has backed his leadership in a two-month battle against eight retired executives who want him fired. The group blames Purcell for at least five senior-level departures, including last week's exit of top investment bankers Joseph Perella, 63, and Terry Meguid, 49, following a March 28 management shakeup.

``We have full confidence in Phil Purcell and the strategy that management is pursuing,'' Morgan Stanley's 10 non-executive board members wrote to the group on April 13. Their one-paragraph letter called the group's tactics ``ill-considered'' and asked it to ``desist.''

Accountability

The 75 percent rule was introduced in 1997, when the bylaws were rewritten after Purcell's Dean Witter, Discover & Co. bought Morgan Stanley for about $11 billion. Originally, it covered Purcell, who became chairman and CEO of the combined company, and former President John Mack, who left in 2001.

``The removal of the current Chairman and Chief Executive Officer as of May 31, 1997, or any modification to his role, duties or authority shall require a three-quarters vote of the entire Board of Directors,'' Morgan Stanley's bylaws now state.

The restriction is ``very problematic,'' said Charles Elson, director of the University of Delaware's corporate-governance center in Newark, Delaware. ``It removes accountability from the board. Who is the CEO accountable to?''

Mark Lake, a Morgan Stanley spokesman, declined to comment on the bylaw. In December, the company took steps to improve its corporate governance by implementing annual elections for all directors, disclosing corporate political contributions and abolishing executive stock-option awards, Lake said.

Super-Majority Votes

Comcast's bylaw was negotiated as part of the $76 billion acquisition of AT&T Broadband, spokesman Tim Fitzpatrick said, declining to comment further. It requires a 75 percent vote to unseat CEO Brian Roberts, 45, and once applied to Michael Armstrong, the former AT&T Corp. CEO who served as Philadelphia- based Comcast's chairman from November 2002 to May 2004.

M&T Bank Corp., a Buffalo, New York-based bank, and Houston- based Baker Hughes Inc. the world's third-largest oilfield contractor, are among the dozen others with rules requiring super- majority votes, ranging from two-thirds to 80 percent, on matters such as removing board members, said Beth Young, a Corporate Library analyst.

Morgan Stanley's bylaw makes it ``virtually impossible to remove Purcell and it limits everyone's flexibility,'' Young said. If pressure to oust Purcell grows, the bylaw ``becomes a bargaining chip for getting the best possible severance package.''

Job Security

While top executives often seek written promises of job security during mergers, such commitments aren't typically written into corporate bylaws, said Patrick McGurn, vice president of Rockville, Maryland-based Institutional Shareholder Services, the largest U.S. proxy adviser to fund managers.

After Viacom, the No. 3 U.S. media company, acquired broadcaster CBS Corp. in 2002, its bylaws required a vote of 14 of 18 directors, or 78 percent, to fire Mel Karmazin, 61, who became chief operating officer. That provision ended last June when Karmazin, who had been CBS's CEO before the sale to New York- based Viacom, quit.

A similar bylaw has been proposed as part of Overland Park, Kansas-based Sprint Corp.'s pending purchase of Nextel Communication Inc. for $35 billion.

That rules would require a two-thirds board vote to remove either Sprint CEO Gary Forsee, 55, or Tim Donahue, 56, the CEO of Reston, Virgin-based Nextel who will become chairman of the merged phone company when the deal closes in June. The provision would expire in four years for Forsee and two for Donahue.

Comcast's protects Roberts until 2010.

No Sunset Clause

Morgan Stanley doesn't have a time limit, or so-called sunset clause. The firm's board can change its bylaws with a majority vote. A shareholder-sponsored proposal, by contrast, requires 80 percent backing from all Morgan Stanley investors.

The changes Morgan Stanley made in December led the Corporate Library to raise its corporate-governance rating on Morgan Stanley to ``D'' from ``F.'' The securities firm now ranks in the bottom third of companies in the Standard & Poor's 500 Index in terms of governance, according to Institutional Shareholder Services. It places higher than 74 percent of financial companies.

The Morgan Stanley alums, led by former President Robert Scott, 59, asked the board in an April 11 letter whether it was ``appropriate'' in light of the bylaw for Purcell to have named three more directors, one in December and two this month, without a shareholder vote.

New Directors

The two newest directors are Stephen Crawford, 40, and Zoe Cruz, 50, whose promotion to co-presidents three weeks ago prompted President Stephan Newhouse, 58, to quit. The third is Edward A. Brennan, 71, who was chairman and CEO of Sears, Roebuck & Co., when Purcell ran its Dean Witter unit.

Brennan also was a Dean Witter director before the Morgan Stanley purchase, as were current board members Robert Kidder, former CEO of Duracell International Inc.; former Fort James Corp. CEO Miles Marsh, 57; and Forstman Little & Co. partner Michael Miles, 65.

Marsh, as well as Morgan Stanley directors Harold Davies, 54, director of the London School of Economics, and Deutsche Post AG Chairman Klaus Zumwinkel, 61, held positions at McKinsey & Co., where Purcell was a managing director prior to joining Sears in 1978.

Board Members

Rounding out the Morgan Stanley board are Anheuser-Busch Cos. Executive Vice President John Jacob, 70, former Tribune Co. Chairman John Madigan, 67, former Emerson Electric Co. CEO Charles Knight, 69, London Business School Dean Laura D'Andrea Tyson, 57. Tyson and Davies, contacted via e-mail, declined to comment. None of the other board members returned phone calls seeking comment. A number could not be found for Marsh. Purcell declined to comment through Lake, the Morgan Stanley spokesman.

``There is a tipping point for the board,'' said Stanford's Joss. ``You are either backing the CEO or you're not. If you reach a point where you've lost confidence, you've got to make a change.''

To contact the reporters on this story: Mark Jaffe in New York at mjaffe3@Bloomberg.net

Last Updated: April 18, 2005 01:19 EDT