O'Neal's Last Big
Deal as Chief Executive:
Determining the Terms
of His Exit Package
By JOANN S. LUBLIN
and MARK MAREMONT, waj.com Online, October 30, 2007
The departure of Stan O'Neal, the
chief executive of Merrill Lynch & Co., is a foregone conclusion -- but not the
terms of his exit.
Despite expectations that Mr. O'Neal
would step down from the Wall Street firm yesterday morning, the 56-year-old
Merrill chief stayed in command as lawyers for the board and Mr. O'Neal tried to
work out terms of an exit package that could exceed $160 million.
The $160 million estimate includes accumulated equity, retirement benefits and
deferred compensation, according to an analysis done for The Wall Street
Journal. Mr. O'Neal began negotiating the terms of his forced departure
over the weekend in the wake of an $8.4 billion write-down announced last week.
Mr. O'Neal, also the company's chairman, could cash in exercisable stock options
valued at $36.8 million based on yesterday's 4 p.m. price for Merrill shares of
$67.42. The $160 million estimate also reflects the eventual vesting of
1.27 million restricted shares currently worth about $86 million plus $9.6
million from long-term performance awards. Merrill Lynch staffers may
retain unvested stock grants "upon retirement" if their combined age and length
of service equals at least 60 and they don't join a rival during the vesting
period, its latest proxy statement says. In addition, the projected
package includes retirement benefits that the proxy says were worth $24.8
million and $4.8 million in deferred compensation, both as of late last year.
Mr. O'Neal lacks an employment contract and isn't entitled to cash severance
unless he lost his job following a takeover of Merrill Lynch. But the
board's compensation committee has the "discretion" to give him severance
benefits, the proxy says. In the event of a takeover-related job loss, Mr.
O'Neal would have been eligible for severance benefits of $29.5 million, as of
late last year.
Informed individuals said Mr. O'Neal has retained Joseph Bachelder, a New York
attorney who specializes in representing top executives on employment matters.
Mr. Bachelder is known for hard-nosed advocacy on behalf of his clients.
He bolsters his assertions with detailed analyses, based on extensive
number-crunching by a team of aides,
Mr. Bachelder, through an aide, declined to comment. A Merrill Lynch
spokeswoman declined to comment on negotiations with Mr. O'Neal or the projected
size of his possible exit package. The spokeswoman pointed out that the
package would reflect Mr. O'Neal's accumulated stake at Merrill, based on a
21-year career, including five years as CEO.
"I'd be surprised if they go beyond" what the CEO already is entitled to, said
Russell Miller, managing director of Executive Compensation Advisors, a unit of
executive recruiters Korn/Ferry International.
As of the end of 2006, Mr. O'Neal had earned $47.1 million in profits by
exercising options since 1999, according to regulatory filings and Standard &
Poor's ExecuComp. Earlier this year, he made at least $10 million more by
exercising close to 200,000 more options when the stock was close to its yearly
high point, regulatory filings show.
The most-valuable option grant held by Mr. O'Neal, of 753,770 options, was dated
Sept. 24, 2001, when markets were reeling after Sept. 11. Mr. O'Neal, then
Merrill's president, won plaudits for working nonstop to shore up the firm's
operations. Three Merrill employees died in the attacks, and thousands
more were dispersed after the company's headquarters were damaged.
The September 2001 option award gave Mr. O'Neal the right to buy Merrill's
shares for $39.80 apiece, about 15% below the closing price of the stock just
before the attacks. The award has proved profitable for Mr. O'Neal.
The September 2001 award -- all of which is exercisable -- could be cashed in
for a gain of about $20.8 million, based on yesterday's closing share price.
--Randall Smith and George Anders contributed to this article.
Write to Joann S. Lublin at joann.lublin@wsj.com
and Mark Maremont at
mark.maremont@wsj.com
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