Stepping Up - Black Enterprise

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Black Enterprise Magazine July/August 2018 Issue

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The Merrill Lynch board of directors elected E. Stanley O’Neal, currently the firm’s president and COO, to serve as chief executive, effective Dec. 2, 2002. The appointment makes him the first African American to head a major Wall Street firm.

O’Neal, who replaces David Komansky, joined Merrill Lynch in 1986 as an investment banker and has been in his current position since July 2001. He formerly served as president of Merrill Lynch’s U.S. Private Client Group from February 2000 to July 2001, and as chief financial officer from March 1998 to February 2000.

Like his brethren — CEOs Kenneth Chenault at American Express and AOL Time Warner’s Richard Parsons — O’Neal, 50, rose to the top during a difficult period at his firm. Cost-cutting measures, a turbulent stock market, a stock recommendation scandal, and a slowly rebounding economy have all affected Merrill Lynch’s performance — and stock price.

In the company’s second quarter, it cut 1,800 jobs, or 3% of its staff. This was in addition to some 15,000 cuts made since 2001. In May, Merrill Lynch agreed to pay $100 million to settle charges brought by New York State Attorney General Eliot Spitzer, who claimed the company misled investors by tailoring its research to please investment banking clients.

This, along with overall negative market sentiment, a dearth of initial public offerings, and unfavorable economic conditions has weighed down Merrill Lynch stock. Shares began the year at $51.40 and closed July 29 at $36.25, a decline of 29.47%. All in all, it has been a difficult year.
The elevation of O’Neal is a big step for African American executives, according to Carl Brooks, president of the Executive Leadership Council and Foundation, of which O’Neal is a member. “It’s another indication that a very talented African American has been able to move through the management ranks of the largest financial corporation in the United States,” he says. “It continues the movement of African Americans to the top — the Parsons move, the Chenault move. Stan’s move is equally important.”

For Merrill Lynch, it’s a case of the good, the bad, and the ugly. The good, according to Robert McMillan, a research analyst at Standard & Poor’s, is that the largest retail brokerage firm in the U.S. has not lost many customers as a result of the scandal. The bad news is that more cost-cutting measures are likely. “They closed offices in Japan, and I wouldn’t be surprised if they start closing offices in the U.S.,” says McMillan.

As for the ugly, there’s not only the turbulent stock market that led to a drying up of corporate financings and mergers and acquisitions activity — two revenue streams for Merrill Lynch — but also recent allegations that the firm helped Enron construct a series of complicated transactions in 1999 to artificially inflate profits for the now bankrupt energy trading giant. The New York Times reported that Merrill Lynch received $8 million in return for the energy trades that increased Enron’s fourth-quarter profits by $60 million in order to meet analysts’ estimates. Without the transactions Enron

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