[ohio_eric]

TheStar.com | Business | CEO O'Neal ousted from Merrill Lynch

The unfolding U.S. credit crisis has claimed its biggest corporate casualty so far: Merrill Lynch CEO Stan O'Neal.

Yesterday's announcement of his departure came after the world's largest brokerage posted a $2.24 billion (U.S.) quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, 56, whose ouster had been expected for days.

O'Neal departs with no severance package. However, as the second-highest paid investment bank CEO, he is expected to secure retirement benefits and stock awards worth about $160 million. O'Neal was paid roughly $48 million salary in 2006.

Analysts speculate that Merrill Lynch faces a $4 billion writedown in the fourth quarter, on top of last quarter's $7.9 billion charge.

Golden Parachutes are little more than golden showers all over everyone else at the company.

[The Dark Wolf]

Jesus. The company loses over 2 billion bucks, and the guy gets paid for his hassles.

I wonder if I can go be a (un)successful CEO, run a company into the ground, and then be set for life?

[Leon]

life? he's set for at least 40 lives :\

[Rick]

"Hey man, can I borrow some money?"

[Drew]

Actually, at the surface this looks like absolute bullshit, but it's worth a deeper look.

For one, this isn't a true "golden parachute" in that there's no severance package - he's simply retiring with the benefits he earned in his years of service with the company, with a net present value of about three years' salary. That's sort of like you or I retiring with a pension.

For another, he's been forced out because Merril was forced to write off about $4 billion worth of subprime loans in this quarter - that, to put it mildly, sucks. But again, it's not the full picture - under O'Neil's direction, Merril Lynch DID engage in a riskier-than-normal management style, but it's one over the last eight or so years has been quite profitable for the firm. The returns on this same heavy investment in subprime debt coupled with similar payoffs from other similarly risky investments are a big part in this period of high performance, and to fault O'Neil for the bad side effects of a risky portfolio without acknowledging the good isn't entirely fair.

Am I defending his $160m benefits package he's retiring with? Fuck no. However, I won't do so on the grounds that a few bad bets in the subprime mortgage industry went south - I'll do so on the grounds that I think executive compensation in the financial world is seriously out of whack with reality. Leaving with a benefits package worth only about 3 years' salary is actually unusually stingy, for a departing CEO - the problem is that each of those years is worth about fifty million.