- The Washington Times - Wednesday, October 31, 2007

NEW YORK (AP) Stan O’Neal, who was ousted from Merrill Lynch & Co. Inc. yesterday, after the investment bank reported its largest-ever quarterly loss, will walk away with $161.5 million in stock, options and retirement benefits, the company said.

Mr. O’Neal, the second-highest paid Wall Street CEO in 2006, left the company almost a week after the investment bank reported a $2.24 billion loss that was precipitated by a $7.9 billion third-quarter write-down, as the company revalued assets backed by shaky mortgages.

Mr. O’Neal left with a $131.4 million equity package of stock, options and restricted stock. His restricted stock and restricted stock units will continue to vest on their original schedules, the company said.

He also has retirement benefits worth $24.7 million, while his deferred compensation stands at $5.4 million, according to the company. He will be entitled to an office and an executive assistant for up to three years.

Mr. O’Neal’s restricted stock and options holdings mean he could do even better if the stock rises under a new CEO, said James F. Reda, a compensation consultant. A $10 jump in the stock under new management could mean $30 million for Mr. O’Neal.

There is some precedent for such an ironic windfall. After Michael Eisner was ousted as CEO at the Walt Disney Co. in 2005, he made another $100 million when the company’s stock price improved under his replacement, Mr. Reda said.

“It’s a funny dynamic,” Mr. Reda said.

But Mr. Reda questioned both the size of Mr. O’Neal’s package and why Merrill made Mr. O’Neal, 56, eligible for retirement even as he ran the company. The policy guaranteed Mr. O’Neal so much money that “he was basically indifferent,” Mr. Reda said.

Mr. O’Neal’s parting wealth comes after he spent five years as Merrill’s CEO, earning nearly top dollar.

Mr. O’Neal’s 2006 pay was approximately $48 million, second on Wall Street only to the $54.3 million earned by Goldman Sachs CEO Lloyd C. Blankfein.

Only months ago, Mr. O’Neal was being lauded for leading the nation’s largest brokerage firm to its most profitable year ever, the result of broad cost-cutting and expansions in Merrill’s investment banking and trading operations.

Now, Merrill has added some unwelcome firsts to its list by reporting the biggest quarterly loss in the company’s 93-year history and by taking the largest quarterly write-down ever by a financial institution, due to the plunging value of its mortgage-related assets.

All this has stripped Mr. O’Neal, who grew up in rural Alabama and rose to become the highest-ranking black executive on Wall Street, of his star power. His good standing in corporate America is gone, and he is getting a quick lesson in how today’s financial world works — the focus is on “what have you done for me lately,” not what you’ve done previously.

First as Merrill’s president and chief operating officer, and then when he stepped into the CEO slot in late 2002, Mr. O’Neal was charged with reviving a company that was struggling to find its footing after the dot-com bubble burst and the financial fallout following the September 11, 2001 terrorist attacks.

Merrill’s brokerage trading activity fell sharply earlier this decade, just as it was experiencing weakness in its investment bank and asset management businesses.

The company’s costs had soared, while the nature of its business had been changing amid globalization of financial markets.

One of his primary focuses became cost control, and Merrill managed to pare expenses significantly. In 2000, it cost $21 billion to run Merrill Lynch. By 2003, that was slashed to $14.9 billion, in part from major layoffs, according to analyst Richard Bove of Punk Zeigel & Co.

Mr. O’Neal also moved aggressively to expand the company’s product base by increasing its appetite for risk. The business was pushed farther into potentially higher-returning avenues, such as the fast-growing emerging markets and complex debt instruments like derivatives and mortgage-backed securities.

In particular, Merrill became heavily involved in the underwriting and trading of volatile assets known as collateralized debt obligations, or CDOs, which are pools of mortgage securities that are sliced up based on risk levels. That business skyrocketed in recent years, as seen by the soaring gains in the Merrill’s fixed-income revenues that jumped 31 percent to $8.1 billion from 2005 to 2006.


Age: 56

Born: Wedowee, Ala.

Experience: Worked his way up from the assembly line at General Motors Corp. to become its assistant treasurer before joining Merrill Lynch & Co. in 1986. He started off at the brokerage in the leveraged finance division as an investment banker. He headed the high-yield bond division, was co-head of what is now known as the global markets and investment banking division, was chief financial officer, and was head of Merrill’s global private client practice. He became chief executive in 2002 and added the chairman title one year later.

Education: Mr. O’Neal attended the General Motors Institute (now called Kettering University), and worked for GM to pay for his education. He then obtained a master’s degree in business administration from Harvard Business School in 1978.

Family: Wife Nancy, two children.

Source: Associated Press

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