Dissident Morgan Stanley (MWD) shareholders ratcheted up the pressure on Chief Executive Philip Purcell (search) Thursday, calling for the company's securities businesses to be spun off as a separate firm led by executives driven off during a recent upheaval.

In an open letter to shareholders, eight retired executives campaigning for Purcell's ouster released a detailed proposal that would essentially reverse the 1997 merger of Morgan Stanley (search) with Dean Witter, Discover & Co.

The dissidents said Purcell, whom they blame for the firm's mediocre financial and stock performance, should no longer manage the mainstay investment banking and trading businesses. If Purcell will not step down, the company should split its institutional securities division from the brokerage, money management and credit card businesses.

"If Morgan Stanley's optimum strategy is to build a fully integrated securities business — an outcome that Mr. Purcell has failed to accomplish in the eight years since the merger with Dean Witter Discover — the strategy requires the immediate replacement of the current leadership team," the group said.

Under a plan posted on the Web site www.futureofms.com, a stand-alone securities firm would be led by five former executives who resigned as a result of a recent shake-up and a sixth former executive who now leads the dissident group.

The former executives: global equities head John Havens, investment banking head Terry Meguid, institutional securities head Vikram Pandit (search) would comprise the office of the president.

Former President Stephan Newhouse and former investment banking chairman Joseph Perella would serve as vice chairmen. Dissident leader Robert Scott, Morgan Stanley's president when he was pushed out by Purcell in 2003, would be interim CEO.

The former executives have not necessarily accepted these jobs, nor is it clear they are cooperating with the dissidents. In a footnote to a new management chart, the dissidents added: "We are highly confident that, under this leadership structure, these former senior executives would return."

A spokesman for Perella declined to comment. The other executives named could not be reached.

The dissidents have no control over the situation and can only try to persuade big investors to join their cause. Analysts expect the group will play a central role at next year's annual meeting, when they could potentially nominate a slate of directors.

Under the plan, Purcell would be left as CEO of Dean Witter/Discover, a retail-oriented company comprised of investment management, brokerage and the Discover credit card (search).

Morgan Stanley declined immediate comment and the so-called Group of Eight was not available to comment.

Six weeks ago Purcell shook up senior management as part of plans to reorganize Morgan Stanley's securities businesses under one leadership team. The group of eight, frustrated by the stock's laggard performance, responded by going public with a campaign to oust Purcell.

The attacks on Purcell and his strategy of combining retail and institutional businesses heightened internal tensions and gave rise to speculation the company would be broken up, or even sold to a big, global bank.

Several times this speculation sent Morgan Stanley shares soaring, only to sink when the board reiterated its support for Purcell. On April 4, the firm said it would spin off Discover, an about-face that Purcell had opposed for years.

"If these people are really serious about doing something to change Morgan Stanley, they will not do it by writing letters and throwing sticks and stones at the company," said Punk, Ziegel & Co. brokerage analyst Richard Bove, who has been critical both of the dissidents and Purcell.

The stock has come under pressure amid fears that internal tensions and dissatisfaction with Purcell's leadership would spark more defections. About two dozen executives, bankers and traders have quit in recent weeks, including five of 14 management committee members.

Morgan Stanley shares were up 17 cents at $50.02 in midday trading on the New York Stock Exchange. They shares are down about 10 percent since late March.