“The knives are out, but who's next for the chop?”
Merrill Lynch, one of the world’s most powerful banks, is preparing to announce the resignation of its chief executive after Stan O’Neal finally succumbed to pressure from the group’s board to leave. The bank’s board has yet to decide on Mr O’Neal’s successor despite being locked in talks over the weekend about the management of the group.
Source: Times October 29, 2007.
Mr O’Neal’s departure comes after the bank announced its worst quarterly loss last week and after his secret merger approach towards Wachovia, a bank almost double its size, without telling the rest of the board.
It is thought that one of Mr O’Neal’s main assassins was Armando Codina, the Cuban billionaire, close ally of President Bush and chairman of Merrill Lynch’s nominating and corporate governance committee.
Mr O’Neal is said to have spent yesterday afternoon negotiating departure terms. Although he is not contractually entitled to a severance package, he is expected to walk away with at least $159 million (£77 million). Merrill Lynch’s compensation committee also has discretion to offer severance pay.
Mr O’Neal, who is 56, is entitled to a retirement benefits fund of $30 million and $120 million in shares and share options. It is estimated that in his five years as chief executive Mr O’Neal has received about $160 million.
It is thought that the Merrill Lynch board will seek a replacement for Mr O’Neal within and outside the bank. Laurence Fink, head of BlackRock, the fund manager part-owned by Merrill, has been named as a favoured candidate but he is not thought to have had many formal conversations with the board as yet about his candidacy.
Gregory Fleming, the Merrill Lynch co-president, has also been named, as has Bob McCann, head of the bank’s brokerage arm.
Externally, John Thain, chief executive of the New York Stock Exchange, is seen as an attractive candidate because of his past experience as co-president of Goldman Sachs.
Mr O’Neal was reported on Friday to have been expecting to be out of a job this weekend. Merrill executives were thought to have been livid that Mr O’Neal had telephoned Ken Thompson, the head of Wachovia, about a possible merger that would have valued the combined group at about $140 billion, with Wachovia by far the bigger partner. The rest of Merrill’s board were not informed of Mr O’Neal’s intention to approach Wachovia. Although a number of the executives on the board were appointed by Mr O’Neal, there is believed to be a sense of frustration about the bank’s losses and Mr O’Neal’s role.
Merrill Lynch shares have lost about a third of their value since the beginning of the year. Last week the bank admitted that bad investment decisions – primarily in bonds backed by sub-prime mortgages – had forced it to write off $7.9 billion, plunging it into its biggest quarterly loss. Wall Street analysts reckon that losses will deepen as the market for the mortgage-backed debt deteriotates.
Daniel Tully, a retired chief executive of Merrill, yesterday described its predicament as sickening. He said: “I’ve been in touch with many, many of our fellow employees and ex-employees and they’re sick, everyone is sick about it, as I am too. It’s awful.”
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