March 11 (Bloomberg) -- Neal Shear, who ran Morgan Stanley's trading business before being demoted to commodities chairman at the end of November, is leaving after more than 25 years at the company.

Shear, 53, ``has decided to leave the firm to pursue other activities,'' according to a Feb. 28 memo sent by John Shapiro, global head of commodities, to people in the division. The memo's contents were confirmed today by Mark Lake, a spokesman for Morgan Stanley in New York.

Chief Executive Officer John Mack moved Shear out of his role overseeing trading and ousted Co-President Zoe Cruz on Nov. 29, just before the firm reported a record trading loss. Shear, whose $35 million in 2006 compensation made him the second- highest-paid executive after Mack, was given the new title of commodities chairman. He had overseen that unit before being named co-head of all securities sales and trading.

``Moving down can undermine how someone's seen in the firm and sometimes it just makes sense to go and make another start,'' said Ben Wallace, who helps manage $800 million at Grimes & Co. in Westborough, Massachusetts. ``He didn't get escorted out like other people did.''

Grimes & Co. sold its shares in Morgan Stanley earlier this year and invested in Merrill Lynch & Co. instead, Wallace said.

Fourth-Quarter Loss

Morgan Stanley reported a fourth-quarter loss of $3.56 billion in the fourth quarter, the first in the firm's history, after it wrote down securities related to subprime mortgages by $9.4 billion. Mack, who had encouraged the firm to boost trading risks since returning to Morgan Stanley in 2005, said on Dec. 19 that the loss was ``embarrassing'' and that he would forgo his bonus for the year.

Mack, 63, now may himself become a target of shareholders who want him to give up his role as chairman, the New York Times reported today. The CtW Investment Group is considering a campaign that would urge investors to withhold their vote for Mack as chairman, the paper reported, citing CtW's executive director, William Patterson.

Shear, who left the firm at the end of last month, declined to comment. He joined Morgan Stanley from J. Aron & Co. in 1982 and specialized in commodities until March 2005, when he succeeded Cruz as head of fixed-income. In August 2005, Shear was named co-head of institutional sales and trading with Jerker Johansson, who has since left the firm to join UBS AG.

The Wall Street Journal reported Shear's departure on its Web site earlier today.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: March 11, 2008 18:05 EDT