There is a pair of St. Louis angles in the story of the forced resignation of E. Stanley O’Neal as Merrill Lynch CEO.
First, he is a friend and confidant of David Steward, founder and chair of World Wide Technology, the nation’s largest black-owned firm.
Second, the New York Times reported that O’Neal’s unapproved suggestion of a possible merger with Wachovia accelerated his departure. Earlier this year, Wachovia became the nation’s second-largest brokerage when it bought out St. Louis-based A.G. Edwards.
O’Neal reported last week that Merrill took a staggering third quarter financial hit of $2.24 billion, which included an $8.4 billion write-down related to subprime mortgages.
Some analysts believe the credit squeeze crisis under O’Neal’s leadership will lead to another major setback during the final quarter of 2007.
Last Friday, the company’s stock surged 8.5 percent after reports surfaced that O’Neal would be replaced.
According to the New York Times, O’Neal’s informal suggestion of a possible merger with Wachovia – without discussing it first with board members – might have been the last straw.
Summer of ‘06
On June 15, 2006, the St. Louis Minority Business Council Opportunity Fair featured a conversation between O’Neal and David Steward.
A statement he made during that conversation could be considered prophetic about his downfall.
He told Steward that “risk taking and speed” were issues he would have treated differently earlier in his career.
“It’s true that most people who’ve created businesses or been in positions of responsibility always wish they had done things faster,” O’Neal said.
“At least that’s the kind of conversation I’ve had with most CEOs and most successful people in business. And it’s true for me as well.”
This time, O’Neal might have moved too fast in the subprime world.
Steward was out of town and unavailable for comment by press time.
O’Neal’s departure leaves four black CEOs of Fortune 500 companies. They are Ronald Williams from Aetna, Richard Parsons from Time Warner, Clarence Otis Jr. of Darden Restaurants (Red Lobster and Olive Garden) and Aylwin Lewis of Kmart.
James Bell served as interim CEO of Boeing 2005-06 and Franklin Raines was CEO of Fannie Mae until he was replaced following a bookkeeping scandal.
His swan song
O’Neal had to deliver this gloomy message to stockholders and investors last week, his last at the helm of Merrill Lynch.
“Mortgage and leveraged finance-related write-downs in our FICC business depressed our financial performance for the quarter. In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions. The result is a larger write-down of these assets than initially anticipated,” said O’Neal.
“We expect market conditions for subprime mortgage-related assets to continue to be uncertain, and we are working to resolve the remaining impact from our positions,” O’Neal continued.
“Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year.”
O’Neal became chief executive of the company in December 2002 and was elected chairman in April 2003.
He was named president and chief operating officer in July 2001 and served as president of Merrill Lynch’s U.S. Private Client group from February 2000 until July 2001. He served as executive vice president and chief financial officer of Merrill Lynch from 1998 until 2000 and also held the position of executive vice president and co-head of the Corporate and Institutional Client Group (now Global Markets & Investment Banking) prior to that.
Previously, O’Neal had been in charge of Capital Markets and a managing director in investment banking, heading the financing services group, which included the high yield finance, restructuring, real estate, project and lease finance, and equity private placement groups.
