Updated from 9:30 a.m. EDT
finally bid CEO Stan O'Neal adieu Tuesday, but it remains unclear who will next lead the firm.
Merrill said O'Neal "decided to retire from the company effective immediately." Merrill pledged to search for a full-time successor to O'Neal, who came under fire for a series of blunders at the brokerage house and for perhaps at times focusing a little too much on his
golf game at the expense of the firm.
Merrill named an outside director, Brera Capital managing partner Alberto Cribiore, as its interim nonexecutive chairman. It left in place its co-presidents, Ahmass Fakahany and Gregory Fleming.
"We would like to thank Stan for the contribution he has made leading a major transformation of Merrill Lynch into a global and diversified company with enormous potential ahead of it," said Cribiore. "His commitment to the company, its clients, shareholders and employees has never wavered and the company will reap tremendous benefits in the future from his work."
The announcement finally offered some resolution to last week's boardroom coup that finally cost O'Neal his job. O'Neal made significant changes at Merrill during his five years atop the firm, but a series of blunders this month led directors to agree the firm needs new leadership.
First, Merrill became the first firm on Wall Street to post a quarterly loss tied to the credit crunch that roiled markets this past summer. Merrill said Oct. 5 that it would lose as much as 50 cents a share, in large part because of a $4.5 billion writedown of bad subprime mortgage-related securities. The comment shocked analysts who had been looking for a profit of around $2 a share.
Then, just three weeks later, Merrill admitted that its losses on collateralized debt obligations and other shaky paper would be still greater -- to the tune of some $8 billion in writedowns. The firm announced a loss of $2.2 billion, or $2.85 a share, for the quarter -- nearly six times the size of the loss O'Neal had projected earlier in the month.
O'Neal and finance chief Jeff Edwards compounded their gaffes by claiming on a conference call that Merrill had reserved for the losses conservatively and appropriately -- while failing to offer any substantiation. Analysts have since projected that Merrill will have to take at least another $4 billion worth of asset writedowns tied to its troubled foray into the subprime lending and structured finance areas.
In the wake of last Wednesday's third-quarter loss report, which a former Merrill chief reportedly called "sickening," O'Neal is said to have called
chief Ken Thompson and proposed a merger. The Merrill board, which wasn't filled in on the move, responded by forcing O'Neal's resignation and discussing possible candidates to replace him. Adding to questions about O'Neal's judgment are reports that the exec would be due more than $200 million in bonuses in severance pay should he succeed in selling the firm.
Since news of O'Neal's likely ouster emerged late last week, Wall Street's focus has been on who will succeed him -- and how weakened the firm might be in the event of another big writedown. Some of the top names include Bob McCann, head of Merrill's wealth management group, Larry Fink, CEO of Merrill's 49%-owned affiliate
chief John Thain. Thain is a former top exec at
-- the firm O'Neal sought to emulate with his changes at Merrill.
Shares of Merrill rose more than 10% in the past two sessions as speculation grew about O'Neal's departure. Following the formal announcement, the stock fell 3.1% to $65.33.