Merrill Lynch ousted its chairman and chief executive Stan O'Neal on Tuesday, just days after the global investment bank and brokerage posted some of the biggest losses in its 93-year history.
O'Neal is the first Wall Street CEO to lose his job directly as a result of a US housing slump and a subsequent credit crunch that is raising recession fears.
Merrill Lynch said O'Neal "decided to retire" immediately and its board of directors had elected board member Alberto Cribiore as interim non-executive chairman.
The firm said Cribiore would chair a search committee to recruit a new chief executive from within or outside its ranks to oversee an estimated US$1.7 trillion in client assets.
Cribiore is a managing partner and founder of Brera Capital, a global private equity firm. He said that Ahmass Fakahany and Gregory Fleming will continue as Merrill Lynch copresidents and chief operating officers.
O'Neal's widely anticipated departure came after Merrill said last Wednesday it was writing off US$7.9 billion of mainly subprime mortgage-backed securities, resulting in a third-quarter operating loss of US$2.24 billion.
The earnings news startled investors after Merrill forecast on Oct. 5 it would take a much lower US$4.5 billion dollar writedown. O'Neal at the time admitted: "We can do a better job in managing this risk."
The Wall Street investment house revealed no details on O'Neal's exit package. A Merrill spokeswoman reportedly said O'Neal would not receive any severance pay but would be allowed to keep stock options and restricted stock. A spokesperson was not immediately available for comment.
The total value of the stock awards and benefits was approximately US$161.5 million as of Monday's close, according to a document Merrill filed with the Securities and Exchange Commission later on Tuesday.
"Mr. O'Neal and the board of directors both agreed that a change in leadership would best enable Merrill Lynch to move forward and focus on maintaining the strong operating performance of its businesses," Merrill Lynch said in a statement.
O'Neal, 56, had been CEO since December 2002. With his exit means Wall Street will loose the only African-American head of a major investment bank.
"I have been very fortunate to spend the past 21 years at Merrill Lynch," O'Neal said in the statement. "The company has provided me with opportunities that I never could have imagined growing up, culminating with my leadership of the company over the past five years."
John Challenger, chief executive of Challenger, Gray & Christmas, a global outplacement consultancy, said O'Neal's departure could herald further turmoil at the top.
"O'Neal is the first CEO to fall as a result of the turmoil ignited by the housing slump, but he may not be the last," Challenger said.
"Other companies that suffered major losses stemming from overexposure to risks in the housing market may start questioning their CEOs about his or her oversight and who is ultimately responsible for the damage," he said.
A research note by Goldman Sachs released last Thursday said Merrill may have to write off a further US$4.5 billion in the fourth quarter due to mortgage-backed investments.
Shares in Merrill Lynch close 2.7 percent lower on Tuesday at US$65.56.
"If anything, the stock is down today because it is unknown at this point who his successor will be. The market doesn't like uncertainty, and when it comes to Merrill Lynch these days, there is plenty of it," Briefing.com analyst Patrick O'Hare said.