Merrill deliberates CEO's fate, but slowly
NEW YORK, Oct 29 (Reuters) - Merrill Lynch & Co Inc's MER.N slow deliberation on whether to oust Chief Executive Stan O'Neal has prompted some corporate governance experts to question whether the company's board has a well-thought succession plan.
Boston University School of Management Professor James Post, an expert on corporate governance and business ethics, said Merrill Lynch is a case study in "corporate mis-governance."
"Stan O'Neal's expected ouster as CEO will be a landmark in modern corporate governance," Post said. "He finally antagonized the board of directors to a degree that left them anxious for his scalp."
Newspapers on Friday said O'Neal's ouster was imminent, but Merrill Lynch has not said anything publicly. The company shocked investors last week when it took an $8.4 billion write-down, mostly because of bad bets on mortgage-related securities.
Mike Kelly, managing partner of board services at CTPartners, an executive search firm, said Merrill's board is probably trying to come up with a severance package that O'Neal will accept and one that won't rankle investors.
Merrill's board, which includes a scholar on Victorian literature, a retired U.S. Navy admiral and a retired beer executive, was largely hand-picked by O'Neal.
The board's management development and compensation committee reviews succession programs and policies, according to the company's proxy statement. The company declined to comment on its succession planning.
Meanwhile, Post said Merrill Lynch's corporate culture is taking a bashing as the O'Neal saga plays out.
"It's distracting and shocking," he said. "But the board now seems committed to making a change. Too bad it happened after so much damage has been done."
Still, the stock market has reacted favorably to the suggestion that Merrill would have a new leader. The stock is up 10 percent over the past two trading sessions. For the year, though, it is down 28 percent.
Bruce Ellig, author of "The Complete Guide to Executive Compensation," said boards sometimes make succession planning a part of a CEO's performance evaluation. But until just five months ago, O'Neal held the three most important positions in the company: chairman, CEO and president.
O'Neal famously ousted many senior executives at Merrill for not toeing the line, including some potential successors. Among them were former allies like Thomas Patrick, the firm's onetime executive vice president.
"The basic point is to ensure they have an immediate candidate, Ellig said. "Or at least they have somebody who can step in while they search for a long-term (replacement)."
Kelly said the most important thing Merrill's board can do now is come out with a coherent plan that addresses all of the turmoil surrounding the company.
((Editing by Gary Hill; Reuters messaging: tim.mclaughlin.reuters.com@reuters.net; +1 646 223 6033)) Keywords: MERRILLLYNCH SUCCESSION/
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