October 29, 2007
Stan O’Neal jumps from third to first (and out)
Now seems a good time to revisit my post earlier this month on which bank chief executive was most likely to lose his job: Chuck Prince of Citigroup, Jimmy Cayne of Bear Stearns or Stan O’Neal of Merrill Lynch.
At the time, Mr O’Neal was in a fairly distant third place, but that was before Merrill bumped up its already enormous debt write-down and gave the impression of not knowing what it was doing.
As I argued then, one of Mr O’Neal’s vulnerabilities was that he had been so ruthless with the old guard at Merrill that he had a slim base of support within the organisation. Nobody liking you much does not matter as long as things go well but it is dangerous when they do not.
And so it proved. Mr O’Neal’s final mistake, to broach a possible merger with Wachovia before consulting his board, does not seem too egregious. But it was the last straw for a board that had plainly lost faith in him. At this point, his internal critics seem to have piled in and finished off the job.
The whole affair has peculiar overtones of the putsch at Morgan Stanley in which Phil Purcell was ejected from the helm. He too was an aloof figure who aroused plenty of internal opposition and had eliminated many of the old guard.
Oddly enough, Mr Purcell too proposed a merger with Wachovia shortly before being bumped.
Outrageous and unethical. This is the only phrase I can think of to describe Mr O’Neal’s package upon his ‘retirement’. According to media reports he was paid $48m last year, retains deferred compensation in the form of unvested stock worth $90m, giving him a total exit package of about $160m, including other compensation, shares and benefits. He was in charge of Merrill Lynch and its lose of the massive $8.4bn announced on Wednesday.
Posted by: Peter Fossick | October 30th, 2007 at 7:58 pm | Report this commentGreat! Let’s reward spectacular failure!