Merrill Lynch (MER) is looking for a new CEO after incumbent Stanley O'Neal chose Sunday to depart, according to news reports.
The Wall Street Journal
reported Sunday afternoon that O'Neal's departure would be announced either Sunday night or Monday morning. The paper, citing a person familiar with the matter, said the board hasn't named a successor. Earlier,
The New York Times
reported that the board was united on a decision to replace O'Neal as CEO.
O'Neal's departure comes at the end of a tumultuous month for the Wall Street firm. Merrill announced Oct. 5 that it would report a third-quarter loss after taking $5 billion in writedowns on subprime loans and related securities known as collateralized debt obligations. Merrill was the only Wall Street firm to lose money during the quarter, even as rivals also took big hits tied to bad loans.
Then the firm doubled investors' displeasure this past Wednesday by saying its loss would be nearly six times as large as expected, as the subprime writedown turned out to be a staggering $8 billion. Former Merrill chief Daniel Tully called the loss "sickening,"
O'Neal and finance chief Jeff Edwards compounded their failures by bungling their conference call with investors this past week. Wall Street analysts asked the executives to explain how they arrived at the larger writedown figure, but O'Neal and Edwards failed to offer any details, preferring to claim their valuations were conservative and appropriate. Some analysts concluded that more asset writedowns are probably on the way.
If the writedown mess weren't enough, O'Neal reportedly angered Merrill's board by calling
Ken Thompson and proposing a merger without first getting clearance from directors. The decision reportedly galvanized the board against O'Neal, who has been Merrill's CEO for five years but has never been popular at the firm because he lacks a brokerage or investment banking background. O'Neal stood to rake in more than $200 million in bonuses and severance pay in a merger.
O'Neal's ouster has led to speculation that Merrill would look to an internal candidate such as Bob McCann or a CEO from elsewhere, such as Larry Fink of Merrill's 49%-owned affiliate
. Ironically, the O'Neal saga has also taken the spotlight off some execs at other struggling financial firms, such as Chuck Prince of
CEO Jimmy Cayne.
O'Neal also becomes the first CEO to take the fall for Wall Street's troubled foray into the subprime mortage market, which led to this summer's credit crunch. The highest-profile exec to be forced out before O'Neal was Bear Stearns co-president Warren Spector, who departed in August after two internal hedge funds collapsed under the weight of bad subprime bets.