Running With the Bulls

Merrill Lynch's E. Stanley O'Neal has taken a path less traveled to become one of the highest paid and most powerful blacks in corporate America

year, he was appointed executive vice president and co-head of Merrill’s Corporate and Institutional Client Group, sealing his status as one of the senior-ranking African Americans on Wall Street.

In 1998, Komansky approached O’Neal about taking on the highly complex position of chief financial officer with oversight of taxes, real estate, operations, risk management, credit, accounting, finance, and budgeting directives for the entire company.

“I told [CEO Komansky] I had never even looked at the balance sheet,” says O’Neal. (It was $350-$400 billion at the time.) “Komansky replied, ‘Well, maybe you should.'”

And he did. O’Neal accepted the position in February of 1998, just months before Merrill would suffer a huge financial blow. It came from Long Term Capital Management (LTCM), a hedge fund run by two Nobel Prize-winning economists and boasting more than $100 billion in assets. LTCM made highly leveraged bets on the interest rate spread between risky bonds and U.S. Treasuries. In the summer of 1998, when the Russian ruble collapsed and the Asian financial crisis caused investors to flee to the safety of U.S. Treasuries, LTCM’s investment strategy imploded. Losses for the hedge fund totaled more than $4 billion-rocking the financial markets.

Cool, calm O’Neal was charged with handling Merrill’s investment in the fund. To stave off LTCM’s near-collapse and the ensuing shock waves that could devastate world markets, O’Neal became part of the team that included officials from Merrill, Goldman Sachs, J.P. Morgan, and the Federal Reserve, who orchestrated the $3.5 billion emergency takeover of the fund. In the third quarter of 1998, Merrill posted a net loss of $164 million from that investment. O’Neal was also instrumental in putting measures in place that would ensure the firm was not financially crippled by the LTCM debacle.

It wouldn’t be the last time his resilience would be put to the test.

The Challenges of Change
Last Valentine’s Day, O’Neal became the first nonbroker to run Merrill’s domestic retail division.

“Stan O’Neal has excelled in every position he’s held at Merrill Lynch. He understands our business, has great strategic insight, and the ability to motivate and lead people,” says Komansky. “He is ideally suited to lead the premier retail brokerage in the world.”

His first daunting task was to win the trust of more than 14,000 brokers-or financial consultants-under his charge. “While Stan wasn’t a financial consultant, he was bringing substantial money into the firm through institutional sales,” says Deborah J. Frazier, vice president and senior financial consultant at Merrill Lynch. “It’s the same type of experience.”

For O’Neal, the balancing act has been to maintain a solid relationship with his team while containing costs and restructuring operations. For example, he recently cut almost 2,000 executive jobs in marketing, strategy, and technology from the division. This move, which shaved almost 5.4% of the 37,000-strong brokerage workforce-nearly 3% of the firm’s total staff-is expected to save as much as $150 million a year. The action is part of a company-wide effort to cut expenses at Merrill, which has the highest among Wall Street firms.

“We realigned our entire

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