Stanley O'Neal Leaves Mixed Legacy in Leadership

After announcing the retirement of Stanley O'Neal from investment bank Merrill Lynch, some wonder if his downfall was due to his own mistakes or the color of his skin. Derek Dingle, executive editor of Black Enterprise magazine discusses Stanley O'Neal's retirement, his management style and what his retirement means to the larger investment banking industry.

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MICHEL MARTIN, host:

I'm Michel Martin. And this is TELL ME MORE from NPR News.

In a few minutes, we're going to follow up on a conversation we had earlier this week with Martin Luther King III. We asked him whether the marches and boycotts of the civil rights era are still effective in this day and age. We're going to hear from a man who's leading the charge for Friday's so-called National Blackout.

But first, we want to talk about the resignation of Merrill Lynch chief, Chief Executive Officer E. Stanley O'Neal and the wake of that company's losses. Until yesterday, O'Neal was one of three African-American CEOs running Fortune 500 companies. Today, Merrill Lynch is looking for a new chief executive.

Derek Dingle is executive editor of Black Enterprise Magazine and author of the book, "Titans of the B.E. 100: Black CEOs Who Redefined and Conquered American Business." Welcome. Thanks so much for speaking with us.

Mr. DEREK DINGLE (Executive Editor, Black Enterprise Magazine; Author, "Titans of the B.E. 100s: Black CEOs Who Redefined and Conquered American Business"): Nice to be here, Michel.

MARTIN: So, Derek, did you see this coming?

Mr. DINGLE: Once we saw - and we've done a lot of reporting on this. Once we saw that there was a report of ride downs of $8.2 billion, which was a greater ride down than the $5-billion ride down on Morgan - Merrill Lynch's debt, we saw that there was a possibility that there would be a call for firings.

But in terms of Stanley O'Neal being the one who would be on the chopping block, that wasn't discovered until all the other - you know, it's almost like a perfect storm developed in terms of the down riding of the - the riding down at the bonds as well as his talks with Wachovia for merger. And then the…

MARTIN: His talks, which apparently weren't disclosed to the board or appropriate members or enough members of the board.

Mr. DINGLE: Correct. Correct. And then what was really, you know, the blow was the drop in the stock price, which had dropped from October 5th to October 26th. There was a 21 percent drop in the Merrill Lynch stock price.

MARTIN: So there really was no chance that he was going to survive this.

Mr. DINGLE: No, there wasn't a chance.

MARTIN: And, you know, forgive me for asking. It may seem like an unsophisticated question, but do you think that his ethnicity had anything to do with this?

Mr. DINGLE: I think in this case, no. I think in Wall Street, you know, it's - one day, you're a hero, the next day, you're damaged goods. As early as July, the stock price for - of Merrill Lynch was at $95 a share. By October, it had dropped down to $59 a share. In the second quarter of this year, he was lauded for the profits that he was bringing into Merrill Lynch.

Stanley O'Neal, from 2003 to 2006, had annual profits of $5 billion - each year, annual profits of $5 billion. And that's after turning the company around, after it had suffered losses of $3 billion in light of the meltdown - the stock meltdown in the early '90 - the late '90s and the early part of this century.

MARTIN: Okay. Well talk to me, if you would, about Stanley O'Neal. Tell me the Stanley O'Neal story. He has quite a remarkable background, doesn't he?

Mr. DINGLE: Very remarkable. We - actually we first identified Stanley O'Neal as a comer in 2000. That was before he became CEO in 2001. He has rose up - risen up through the ranks in terms of finance. He worked at General Motors and became CFO there.

MARTIN: But he was even an assembly line worker there at one point, wasn't he?

Mr. DINGLE: Assembly line worker, his father had worked at General Motors as well. He came to Wall Street and he used the same focus and, you know, the same exactness in terms of his work style and in terms of his attitude to right the Merrill Lynch ship.

He was a no-nonsense player. He - I think what had happened, and this had been another part of his undoing, is that he didn't make a lot of allies and friends. When he came into Merrill Lynch and became the president and CEO, he saw that there needed to be some changes. He cut 23,000 employees and changed the Merrill Lynch culture.

Before he was CEO, Merrill Lynch had been known to be called Mother Merrill, which meant that it was a company where you could stay. It was very clubby, there was no layoffs, and he changed the equation. And as a result, he made a lot of enemies and some of the people that he ousted in management and elsewhere, still had shares of Merrill Lynch. They were still shareholders, they still had the air of other influential people within the firm. So that presented a challenge for him.

MARTIN: Do you think that any executive who came in and tried to achieve that kind of radical paradigm shift would have been vulnerable? Or do you think that his demographics perhaps enhanced the distance that his - others failed to make it harder for him to achieve allies?

Mr. DINGLE: Well…

MARTIN: Or maybe just his personality?

Mr. DINGLE: Yeah, he just had a - he really had a real direct personality. He was one that - he did have - he did handpicked people on the board, but he was really business-like in terms of his approach. He had a very - he had an inner circle, a very small inner circle and he wasn't clubby.

I think one thing that was interesting about Stanley O'Neal that is different than some of the other CEOs - when you look at a Ken Chenault of American Express or a Dick Parsons of Time Warner, they have gone out of their way to reach out to different divisions to develop a consensus to make sure that other voices are heard. In terms of Stanley O'Neal, he was pretty insular, you know. He listened to his own voice and he moved according to his own strategy.

MARTIN: Do you think that it meant anything to him to be one of only three CEOs of - African-American CEOs of Fortune 500 companies?

Mr. DINGLE: Oh, I think it meant a great deal, especially from his rise from, you know, Alabama to what he has achieved. But I also think he was someone who saw his duty as increasing the value of Merrill Lynch and that he wasn't going to take a long time, you know, resting on his laurels.

MARTIN: He has also Republican ego and he was a big fundraiser for the Republican Party.

Mr. DINGLE: Yeah.

MARTIN: You've written about a number of African-American business leaders. That is, after all, what you do. I mean, black in the presence of - I would argue the preeminent business magazine that focuses on these issues. And what does his rise and subsequent fall do you think mean for future business leaders? What lesson do you think people will draw from his career?

Mr. DINGLE: I think the lesson that people will draw from his fall is that regardless of whether you're the CEO or you're rising to the upper edge lands(ph), you have to develop a base within the corporation of support. You cannot overlook the, you know, the culture - past cultures of the company. When you're making changes, you have to listen to employees. And conversely, you have to spend time reaching out to the press especially when you're in a high-profile position such as the CEO of, you know, one of the world's largest financial institution.

I think he was very close to the press. Unlike someone like - and I go back to Dick Parson, and I think he's a perfect example - he's someone that was able to - Dick Parsons is someone who was able to communicate with Wall Street, communicate with the press, he's open, he listens to his employees. And with all the turbulence in Time Warner, he's managed to maintain a great deal of respect and popularity actually.

MARTIN: And you're saying O'Neal didn't do that? He largely kept his own council.

Mr. DINGLE: He largely kept his own council. He had a focus. He wanted to, first, right the ship were out of control at Merrill Lynch. He wanted to break up the clubby environment. He was extremely competitive. He saw that Merrill Lynch was losing some business particularly in the bond area to Goldman Sachs. And that's why he became much more aggressive in mortgage-backed securities.

MARTIN: Okay.

Mr. DINGLE: And that became his undoing. And then…

MARTIN: All right, Derek Dingle, we're going to have to leave it there. Thank you for your insights.

Mr. DINGLE: Thank you for having me.

MARTIN: Derek Dingle is executive editor of Black Enterprise Magazine. He joined us from his office in New York. Thanks again, Derek.

Mr. DINGLE: Thank you very much.

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