NEW YORK — Merrill Lynch & Co. has lost billions of dollars in the subprime-mortgage crisis, but the company’s deposed chief executive is walking away with more than $160 million.
Capping a boardroom drama that began last week, Stan O’Neal stepped down as Merrill’s chairman and chief executive Tuesday, becoming the first head of a major investment bank to be ousted because of mortgage-related losses.
O’Neal’s departure follows Merrill’s disclosure last week of a $7.9 billion mortgage-induced write-down, the largest such hit taken by any Wall Street company and $3.4 billion more than Merrill had predicted less than three weeks earlier.
Known as one of the most ruthless men on Wall Street – clawing his way up from an impoverished upbringing in Alabama to run the world’s largest brokerage – O’Neal’s tough, take-no-prisoners drive at Merrill was celebrated when he delivered record profits during his five-year tenure as CEO.
But six days after delivering investors a $2.24 billion quarterly loss – Merrill’s biggest since being founded 93 years ago – O’Neal was forced to retire by a board of directors whom he mostly picked.
“What did him in so quickly is that O’Neal failed to develop supporters who would defend him and fight hard at the board or executive level,” said Richard Bove, an analyst with Punk, Ziegel & Co. “One of the reasons is that he fired 26,000 people, some of which were his supporters, and that made him vulnerable.”
Some experts criticized the payout as excessive.
The bulk of the package is in so-called restricted stock, which could appreciate significantly in coming years if Merrill’s share price under O’Neal’s successor rebounds from its steep drop this year.
Under his agreement with Merrill, O’Neal, 56, will gain full rights to the shares on the same schedule that would have applied if he were still working at Merrill. The restricted stock is being treated that way because the company is characterizing O’Neal’s departure as a retirement.
In addition to the restricted shares, O’Neal’s package includes stock options, accrued pension benefits and deferred compensation. The company also agreed to provide him with an office and an executive assistant for up to three years.
“He’s walking away with the generous compensation that he’s mostly already earned,” said Ed Durkin, director of corporate affairs for the United Brotherhood of Carpenters, whose affiliated union pension funds own 875,000 Merrill shares. “At least they didn’t give him more. Although, given what’s transpired, it would be a stretch to justify anything else.”
A Merrill spokeswoman declined to comment Tuesday.
O’Neal’s 21-year career at the brokerage giant ended with a six-paragraph news release announcing that board member Alberto Cribiore would become interim chairman until a permanent successor could be found.
Stan O’Neal’s golden parachute
$131.4 million
Stock and options
$24.7 million
Retirement benefits
$5.4 million
Deferred compensation
$30 million
Earnings if Merrill Lynch stock jumps $10 under new management
Who’s next?
Possible candidates to replace Stan O’Neal as Merrill Lynch’s chief executive:
