Ex-Merrill chair has role in keeping BlackRock CEO
NEW YORK (Reuters) - A key figure in keeping BlackRock Inc (BLK.N) Chief Executive Larry Fink from bolting for the top post at Merrill Lynch & Co Inc MER.N could be a former Merrill chairman.
David Komansky, who retired as Merrill Lynch's chairman in April 2003, currently serves as a BlackRock board member and chairman of the asset manager's compensation committee, which has key role in executive retention.
Experts say Komansky's roles raise a potential conflict-of-interest as Merrill tries to land Fink to replace ousted CEO Stan O'Neal.
If Fink left BlackRock for Merrill Lynch, it would be seen as a huge coup for the troubled brokerage, where Komansky spent 34 years before joining BlackRock's board. He had substantial holdings in Merrill when he retired.
As a result, corporate governance experts say Komansky could have split loyalties between BlackRock and Merrill.
"If Komansky still retains a significant holding in Merrill, he should immediately recuse himself from any deliberations surrounding the retention of Fink to avoid even the whiff of a conflict of interest," said Paul Hodgson, an analyst at The Corporate Library, a corporate governance watchdog.
Added to the mix is the fact that Merrill owns slightly less than half of BlackRock.
"This is a very cozy club," said Boston University professor James Post, a business ethics expert.
But BlackRock spokesman Bobbie Collins said Komansky is one of 10 people on BlackRock's board that is considered independent. She said the board has a fiduciary responsibility to BlackRock and its shareholders. And part of that includes a strong alignment between BlackRock and Merrill Lynch.
Collins added that by no means does Komansky have discretion over executive pay as chairman of the management development and compensation committee.
When it was first reported that Fink was a contender for the Merrill job, the brokerage's stock rose nearly 9 percent. BlackRock shares fell slightly.
But Merrill shares are in a tailspin, down 40 percent this year. The stock on Monday closed down 2.44 percent to $55.88.
One large Merrill investor, who declined to be named, said he would be disappointed if Fink didn't become CEO.
Komansky did not return telephone calls seeking comment. He no longer has to disclose his Merrill-related holdings, if any, because he is not a Merrill executive or board member. But in early 2003, his Merrill holdings included 844,965 shares of common stock, 4.6 million stock options and about 1.8 million restricted shares, according Merrill's proxy statement from that time.
"I think that there are very sophisticated people involved in all of these companies and where's there is a conflict the people who have them will recuse themselves," said James Dunne, CEO at Sandler O'Neill & Partners, a small investment bank. Continued...
