Merrill Lynch (MER): A Dirge For Stan O'Neal

After taking Merrill Lynch’s (MER) stock from $35 in early 2003 to $98 earlier this year, the company’s board sacked CEO Stan O’Neal for one bad quarter.

O’Neal came across as a brutal executive. He would fire people in areas of the business where he thought the company only had a modest future. He would back-stab his closest lieutenants if they got in his way. In other words, he was a classic Wall St CEO. He cared about himself and money. If he wanted to be loved, he could buy a dog.

So, O’Neal had his one bad quarter, and the Merrill shares fell to $60. By the end of last week, they had still doubled in under five years. The members of the Merrill board’s finance committee, which was charged with helping oversee risk management for the company, were no where to be seen. In their eyes, none of its was their fault no matter what their charter said.

All O’Neal really did was position Merrill to compete in underwriting and investment banking. Taking on risk and assets that had risk were part of that. Other firms like Citigroup (C) and Bear Stearns (BSC) did the same thing. O’Neal would have been fired long ago if he had missed the big profit wave that Wall St. has been riding from early 2006 until this summer.

O’Neal is gone even tough Merrill’s five year share performance is just as good as BSC and much better than Citi, Bank of America (BAC), or Wachovia (WB). He is an unsympathetic character, easy to fire, who did a better job for his shareholders than many of his peers.

Douglas A. McIntyre