In the end, Philip Purcell had to give in.

The Morgan Stanley chairman and CEO, who just months ago seemed to have a solid base of support at the venerable Wall Street firm, couldn’t hold on to his job amid a flood of defections by employees who, it turned out, had no faith in his management.

Yesterday, Mr. Purcell announced plans to retire. It happened only three days after nine stock traders joined an exodus of top Morgan Stanley staffers that began last March and that included one of Wall Street’s biggest stars, investment banker Joseph Perella. It also included five of Morgan Stanley’s 14-member management committee.

Mr. Purcell admitted that calls for his ouster and the series of high-profile departures hurt the firm. So, despite an April 30 vote of confidence from the board, Mr. Purcell said yesterday he’d retire as soon as a successor can be found, but no later than the company’s annual shareholder meeting next March.

The resignations had led a group of dissident shareholders and former executives to call for Mr. Purcell’s firing and a reorganization at Morgan Stanley. That, Mr. Purcell said, created a “sideshow” that distracted the company.

“This morning’s announcement was very, very simple but hard,” Mr. Purcell, 61, told analysts in a conference call. “There’s been way too much attention being paid to acrimony and criticism, most of it directed at me. It’s not good for Morgan Stanley, and the best thing for me to do is, in fact, to retire.”

Investors who had sold Morgan Stanley shares as the turmoil increased were clearly relieved and bid the stock higher.

Two sources close to the company, speaking on condition of anonymity, said Mr. Purcell’s departure was a joint decision by the CEO and the board. They said Friday’s resignations – from a division Mr. Purcell had highlighted as important to the firm’s future – were the deciding factor in his leaving.

The sources also said Morgan Stanley board member Charles Knight, who will head the search for Mr. Purcell’s successor, told an employee meeting yesterday that popular former Morgan Stanley executive John Mack would not be considered for the job.

In addition, Mr. Knight told employees that none of the dissidents would be candidates, the sources said, nor would five former managing directors whose departures earlier this year triggered the succeeding wave of defections.

Mr. Knight’s statement removes some of the foremost candidates to replace Mr. Purcell. Given his role as chairman of the board and the board’s loyalty to him through the years, it was considered unlikely that anyone aligned with his critics would get the top job.

Because of the issues still facing the company, Mr. Purcell’s successor is unlikely to come from Morgan Stanley’s top ranks, which have been populated by Mr. Purcell loyalists – a strategy that prompted the wave of departures.

In the meantime, Mr. Purcell will have his hands full. Simultaneously with his retirement announcement, the company also warned that earnings would fall sharply below Wall Street estimates.

While some speculated Mr. Purcell’s departure opens the door for a possible takeover, research notes issued by a number of analysts said few other companies would have the resources to buy a firm the size of Morgan Stanley.