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Does Morgan Stanley's James "Don't Call Me Jim" Gorman Have What it Takes?

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Here's something you should know about Morgan Stanley's chief executive officer James Gorman: Never call him "Jim."

I've been covering Wall Street now for two decades and never before have I been corrected by a CEOs' handlers about a first name as much as I have when it comes to Gorman, who took the top job at Morgan about a year ago, and is now struggling to recreate that bank in the aftermath of the 2008 financial crisis, which it barely survived.

Of course, Gorman should go by whatever name makes him feel comfortable, but there is something unsettling about someone in charge of so much worrying about something so trivial (it wasn't like I called him "Jimbo").

And that's starting to become the general consensus on Wall Street, both among his fellow CEOs, analysts who cover the firm and even people inside Morgan Stanley. Most admit that Gorman is a nice enough fellow, very intelligent, and in person doesn't come across as the the type of stuck-up jerk who gets crazy when you call him Jim instead of James.

But there's also a worry from these quarters that Gorman and his PR handlers are spending way too much time convincing people he's a serious CEO to compensate for what some on Wall Street believe is a serious lack of the right kind of experience to run a major investment bank.

"The problem with not having a background in the markets is because Wall Street is still a business involving the markets, and Gorman doesn't have that experience," said one prominent analyst who spoke on the condition of anonymity because he was afraid of losing access to key executive at the firm.

Here's what this analyst means: Gorman didn't come to the CEO job the traditional route. He spent many years as a consultant for McKinsey & Co. before going to work for his biggest client, Merrill Lynch to run its brokerage unit, and then to Morgan Stanley to run its brokerage department. In other words, unlike his peers, Gorman has never really worked in a revenue producing job, only as a manager of revenue producers, and before that as a consultant to the managers of revenue producers.

Without the more typical banker-trader-broker experience, some analysts worry whether Gorman thinks too much like a micro-managing technocrat, and not enough like a salesman, thus lacking the personal touch needed to run a company that makes its money selling investments to small investors, and finance advice to major corporations.

To be sure, there's a good case to be made that the traditional Wall Street experience of rewarding the people who make the most money and take the most risk set the stage for the 2008 financial crisis in the first place. But Gorman hasn't really made the case he's the right guy to be CEO. For all the worry about his image, Gorman's obsession (and the obsession of his PR staff) with being called James doesn't help convince investors and analysts he's a serious executive.

"We all call him 'James don't call me Jim Gorman,'" said another analyst with a laugh.

Then there's his performance, which on paper is middling at best. Morgan's earnings jumped 60% during the fourth quarter of 2010, thanks in part to investment banking revenues, but only after other lackluster results. To be sure, the firm's banking business has had some notable successes, but a chunk of that can be attributed to winning deals from the government's various corporate bailouts, and the firm's ties to the Obama administration that was in charge of unwinding those bailouts through various stock sales. One of the firm's top political players was Tom Nides who recently resigned as chief operating officer to take a job with the administration as Deputy Secretary of State.

The stakes for Gorman -- and Morgan -- are of course huge. Morgan Stanley is one of Wall Street's most storied franchises (half of the venerable House of Morgan; the other half being JP Morgan). After Morgan Stanley survived the 2008 financial collapse, albeit with taxpayer help, it shifted its business model away from risk taking in the bond and stock markets to giving advice, and some analysts now worry that Morgan's business model of focusing on clients won't generate enough money to satisfy investors.

As part of its new business model, Morgan acquired Citigroup's brokerage unit known as Smith Barney. Gorman, first as brokerage chief and now Morgan's CEO is taking the lead role in the unit's integration to create the largest brokerage firm on Wall Street, with close to 20,000 salesman selling stocks, bonds and mutual funds to small investors across the country.

But that integration hasn't always gone smoothly; some people at Smith Barney worry about losing their jobs to less qualified people at Morgan, and there have been some layoffs and office closings in order for the firm to squeeze at least $1 billion from the move.

My sources tell me that Morgan's PR staff clearly understand the doubts surrounding Gorman faces and they have begun a carefully orchestrated "charm offensive" making Gorman available to some selective publications where he can explain his strategy in a controlled setting (a profile of him is expected in Fortune as soon as next week), while keeping him away from others. He's dodged numerous requests to be interviewed by me; indeed the last time I approached him for an interview while at a conference in New York City, I was quickly surrounded by his security detail, who whisked him away.

One problem with the PR campaign is that some of those doubts surrounding Gorman can be found inside Morgan Stanley as well, people close to the firm tell me. Before Mack became CEO, Morgan was run by Phil Purcell, another consultant who was widely despised inside the ranks for his sour disposition and because Morgan lost ground to rivals. Morgan executives openly worry that they're being led by "another Purcell." Indeed Gorman didn't make many friends inside Morgan's investment banking ranks when he publicly attacked Wall Street's "star system" -- or paying people based on how much money they bring into the firm -- and asserted he would make cuts compensation even for those who stars who perform.

Even worse for Gorman is the continued presence of John Mack, the firm's long time CEO. Mack relinquished the top job to Gorman in 2010, but remains as its chairman. Such splits between CEO and chairman rare on Wall Street and publicly Morgan says that it's Gorman's call on whether Mack stays or goes.

Maybe so, but people close to the firm say it's Morgan's board of directors who want Mack to stay around because they don't have the confidence in Gorman's ability to run the firm by himself. "They're keeping John Mack around for good reason," said another analyst.

How long does Gorman have to show he's the right guy to run the firm? Its hard to know. Among investors in bank stocks, patience runs thin. Of course, much depends on the stock price, which is trading at $30 a share -- about the same level as when Gorman took over a year ago reflecting an overall indifference with his performance.

"Morgan is good firm, but there's a question: Is Gorman up for the task," said on executive at a rival bank. "No one knows for sure, not even people inside Morgan Stanley."