Experience on Merrill Lynch Board Suggests Quick Rebound

Will Merrill Lynch be able to bounce back from its estimated $4 billion loss in the third quarter? If the wealth of management experience on the Board of Directors is any indicator, the answer seems to be “yes”. Merrill Lynch recently let go of Global Head of Fixed Income Osman Semerci, Co-Head of Fixed Income for the Americas Dale Lattanzio, and Co-Head of Institutional Securities Dow Kim. Merrill has also cut 3,400 jobs recently (see article from Bloggingstocks.com). We created an IntellectSpace Knowledge Map to determine if the Directors at Merrill were experienced enough to turn the bank around. After reviewing the Knowledge Map we were surprised at the management experience held by the Directors in a variety of companies and industries. Examples range from 3M to Xerox to the UK government to the Pentagon.

Some of the more notable examples include Joseph Prueher, Ann Reese, and Armando Codina. Prueher is a former Admiral in the United States Navy and also serves as a Director at defense firm DynCorp International and Emerson Electric Company. Reese is a Director at Jafra Cosmetics Inc, Sears Holdings Corporation, and Xerox. Codina is a Director at several companies, including AMR Corp, Bellsouth Corp, General Motors Corp, and Home Depot Inc.

With this wealth of experience the Board of Directors should have little trouble in helping Merrill Lynch bounce back from this difficult third quarter.

Click here for an interactive version of this IntellectSpace Knowledge Map (Internet Explorer browsers only): http://nv.intellectspace.com/ispace/GuestMonitor.aspx?id=0e2524bd-7687-4202-a0b7-060e6c9055bd

Comments

[Train Man]

I have worked at Merrill and can tell you that you are giving the Management too much credit in the talent department. Outsourcing with large layoffs along with a cream puff market is not the work of genius. My mom could improve a balance sheet by laying off thousands and doubling the workload of those left behind. The “Live Strong” bracelet has been replaced with a “More for Stan” version on Vessey st.

Who will takes responsibility for this round of huge loses Merrill? Stan (the man) O'Neil?

When the going gets tough in Merrill’s business structure and all the lay ups have been made. Stan with his pal Ahmass L. Fakahany (NY Post page six star) will be lighting cigars with 100 bills in the tropics. His current 48 million a year pay day coupled with uncountable stock options, should have rolled the newly laid egg of 4 billion into his penthouse office. But in 2007 it does not work that way.

O’Neil pulled Ahmass L. Fakahany out of the line of fire by promoting him to Co-President just before the public disclosure of losses in the increased risk profile that was created by top Management. Fakahany should have taken full responsibility for Merrill’s exposure and billions of losses but O’Neil reached down and pulled him out of the fire in May of this year, just in time.

Does O’Neil think that no one was watching?

Your list of corporate “superstars” that sit on Merrill’s BOD might be impressive to the untrained eye. But even they cannot help Merrill with what lies ahead. Merrill has been suffering an exodus of talent in the last 4 years. O’Neil has been proud of his resizing of the firm all in the name of efficiency and cost savings. Yet his current young replacements have been costing Merrill billions of dollars and that is sure to continue.

I am still waiting for shareholders to discover the millions of wasted dollars that Merrill spends on Black car service each year. Yellow taxis are so pedestrian.

[Neil Choudhury]

While I understand your position, I still feel that in the end experience matters and the Board at Merrill has quite impressive experience. If the company is currently going through the trouble as you describe above, then I'm sure somewhere down the line experience will take over and solve most problems.

[Train Man]

Oct. 24 (Bloomberg) -- Merrill Lynch & Co. reported the biggest quarterly loss in its 93-year history on $8.4 billion of writedowns, the most by any securities firm, just 19 days after telling investors that they would be 40 percent lower."

O'Neal said the firm increased the writedown after conducting a more ``conservative'' analysis of its holdings.

O'Neal, on a conference call with analysts, said he was ``continuing the resize'' the firm's balance sheet. He also said he's weighing potential divestitures of ``non-core'' businesses. He declined to be more specific.

The size of the writedown increased from $5 billion after Merrill conducted ``additional analysis'' since the firm's Oct. 5 announcement, O'Neal said on the conference call. ``We expect market conditions for subprime mortgage-related assets to continue to be uncertain,'' he said.

I really do not want to dust my broom with this sad display of executive discourse by Mr. O'Neil, but you have to admit that there is such a large amount incompetence in the rank and file at Merrill. When your top management's biggest talent is to get paid huge sums of money, a speed bump like this (cough) can occur. The question is now who will take the fall for this historical loss?

I wounder if O'Neil currently is outsourcing the task of "Resizing the Balance Sheet"

He expects market conditions for subprime mortgage-related assets to "continue to be uncertain"

This is what 30 million + a year gets you in 2007. Captain Obvious.

Looks as though O'Neil didn't get out in time. He can now forget the speaking tours, the book deals and a Cabinet position. He now owns the caption of overseeing the the largest writedown'' by a U.S. securities firm in history.

Who will take the fall?

[TreeMan]

Funny the comment about the black cars.....so true. Meanwhile after 22 years in the business I have to beg to be reimbursed for a business lunch that was 30.00USD.

This is by far the saddest display of management. Someone was asleep at the wheel. No one knew about the subprime and CDO fallout months ago? Please. If I can't account for every dime in my department I have major problems. Stan ....you dropped the ball big time.

The guys in the trenches are asked to do so much more with less staff...we continue to lose good talent (comp is NOT competitive...until you walk out the door). Everyone in middle management continues to blown sunshine up out wahoos.

We need real management. The kind that can get us through the down cycles. That does not exist here. Like the 90's anyone can make money in that type of market. Everyone was an OTC trader or "day trader".

Stan ....perhaps you can join them. You have plenty of disposable cash!

[czxqa]

This man ruined the firm; absolutely ruined it. Who will take the fall, TrainMan? I'll tell you who- five to ten thousand rank and filers trying to feed their families that had nothing to do with Stan's decisions. Just like the twenty thousand he riffed when he took charge. Stan made his bones by firing a third of the firm, and cutting the paychecks of those of us who remained. I cannot tell you how many Merrill Lynch employees work second jobs just to make ends meet. It is all too common in operations, disgracefully so. This would never have happened under Komansky or Tully. If Stan's not fired by Tuesday, I'm selling all my shares. Conservative end of the range? Who are they kidding? How is there even a "range" to price securities? Even their own numbers don't add up, there's still eleven billion unaccounted for. I for one am sick of Stan and his "diversity and inclusion" rather than real plans for growth. This is your biggest initiative at the firm, diversity and inclusion. Only now do we find out you've been betting the farm on junk bonds with fake AAA ratings. Good job Stan, and hats off to Ahmass. I really thought he was going to be a great CFO after the way he screwed his own child out of child support. As if the rest of us could expect to be treated any better by the deadbeat dad? Makes 25 million a year and screws his own kid out of a thousand bucks a week.

[P. Fakahany]

Re: the czxqa comment above. You are wrong about AF not giving child support to his child from his first marriage - he does and happens to be a very good father and keeps abreast and in touch with her on almost a daily basis and also gives his wife alimony. So before you start blogging and saying things about people that aren't true - get the facts right! He is also a very very hard worker and a kind and generous man!

[P. Fakahany]

Re: the czxqa comment above. You are wrong about AF not giving child support to his child from his first marriage - he does and happens to be a very good father and keeps abreast and in touch with her on almost a daily basis and also gives his wife alimony. So before you start blogging and saying things about people that aren't true - get the facts right! He is also a very very hard worker and a kind and generous man!