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Merrill Lynch CEO Stan O'Neal is on the verge of losing his job. O'Neal's fate was sealed last week, when the company announced unexpectedly steep losses in the subprime mortgage collapse. And he reportedly angered some board members by initiating merger talks with Wachovia Bank without clearing it first.
If O'Neal does leave the company, he won't have to worry about putting food on the table. He's expected to walk away with a severance package that could top $200 million.
Here's NPR's Jim Zarolli.
JIM ZAROLLI: Merrill's board reportedly decided to fire O'Neal at the end of last week. That was two days after his disastrous conference call with stock analysts in which he revealed that Merrill's third quarter losses were $3 billion higher than earlier estimates. But over the weekend, board members held off on announcing his departure and had little to say publicly about what was happening.
Securities law expert John Coffee of Columbia Law School says the board needed time to answer some questions about Merrill's future, such as who would lead the company once O'Neal was gone.
Professor JOHN COFFEE (Law, Columbia University): You hate to have a vacuum at the top. The world gets nervous if there's uncertainty. So when you announce the king is dead, you want to also say, and long live the king.
ZAROLLI: Much of the speculation about O'Neal's successor focused on Laurence Fink, the CEO of BlackRock, and Robert McCann, who heads Merrill's large brokerage division. Merrill's board also had other questions to resolve, such as how much money O'Neal will walk away with.
Paul Hodgson is the senior researcher at the Corporate Library and an expert on CEO pay. He says if a CEO like O'Neal is fired for cause - if he or she does something unethical, for instance - the board can sharply limit the size of that person's severance package. But Hodgson says O'Neal is being fired for performance reasons, and that may not be enough to avoid paying him severance.
Mr. PAUL HODGSON (Senior Researcher, The Corporate Library): The situation that the computation committee finds themselves in is that their board may potentially have decided to terminate Mr. O'Neal without good reason. And therefore, they are going to have to make a decision about what price they need to put on that decision to terminate him.
ZAROLLI: Hodgson says O'Neal's position is strengthened by the fact that he has several key allies on the board's compensation committee. Even if the board doesn't give O'Neal much severance pay, he is still entitled to millions of dollars in stock, stock options, incentive pay, pension and deferred compensation. Hodgson says all told, O'Neal could easily walk away with a nine-figure pay package.
Mr. HODGSON: The most accurate analysis I've seen so far has been around $160 million, cash and stock, yes. The majority of it is still in stock.
ZAROLLI: That would be almost as large as the controversial severance packages given to Home Depot's Bob Nardelli and Pfizer's Henry McKinnell. Columbia Law School's John Coffee says giving so much money to O'Neal, who pushed his firm into risky mortgage investments, would no doubt be controversial as well.
Prof. COFFEE: But understand, this is a contractual right he has. And if you're going to criticize anyone, I think you have to criticize the board of directors for giving him that munificent a severance package because once you have those kind of contract rights, I see no reason why he should surrender them.
ZAROLLI: Coffee says that may anger a lot of Merrill's shareholders who've seen the firm's share price fall sharply in recent months. But that may be the price for saying goodbye to O'Neal and ushering in a new era at the firm.
Jim Zarolli, NPR News, New York.
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