( MER) on late Thursday said it was cutting its directors' terms to one year, in a move to address shareholder demands for accountability amid losses and writedowns tied to the credit crisis.
The investment bank said it will begin making all of the directors on its board stand for re-election every year for a one-year term starting in 2009. Previously, Merrill held staggered board elections in which only certain directors would stand for reelection to three-year terms in any given year.
Merrill said it made its latest decision in consultation with shareholders, including CtW Investment Group. The group, which represents pension funds sponsored by a federation of labor unions called Change to Win, has embarked on a campaign for governance reform at firms hit hard by the credit crisis.
"The board of directors regularly reviews its governance practices to ensure it is operating efficiently, effectively, and in the best interests of shareholders," Merrill's CEO John Thain said in a company statement.
In February, Merrill adopted a majority vote standard for uncontested director elections. That step requires directors to win approval from a majority of the votes cast rather than merely a plurality. It gives shareholders far more power to change the make-up of the board if they disapprove of a director's performance.
Thain's predecessor, Stanley O'Neal, was forced out in late 2007, a year when the bank wound up with $18 billion in writedowns related to subprime and other risky mortgage investments. The company's stock dropped 45% from its five-year peak in January of last year.
While O'Neal did lose his job, shareholders were outraged at the $161 million retirement package he was awarded on his way out the door.
CtW is also pressuring for governance reforms at other Wall Street firms caught up in the credit debacle, like
Shares of Merrill closed down $3.18, or 7.1%, to $48.09.