People

At Merrill, the Running of the Bull

Merrill Lynch boss passes torch to former CFO E. Stanley O'Neal. Also: Former Kellogg CFO named finance chief at embattled CMS.
Lisa YoonJuly 24, 2002

>> If it’s July, it must be bull-running season… This week, that’s as true on Wall Street as it is in Pamplona, Spain, as Merrill Lynch & Co. answers questions about firm’s future leader… On Monday, the financial-services firm announced chairman and chief executive David H. Komansky passing on reins to president and COO E. Stanley O’Neal a year ahead of schedule… Former CFO O’Neal taking over as CEO December 2, then as chairman April 28 when Komansky retires…

Announcement ends months of speculation as to when succession would take place… When O’Neal, who had been heading up Merrill’s brokerage business, was appointed president and COO last year, many Merrill watchers saw Komansky as grooming him for top spot… But rumors of friction between the two men ensued when O’Neal took over management of firm and started replacing senior executives reportedly loyal to Komansky, including three who had competed with O’Neal for the president’s job… Both Komansky and O’Neal dismiss talk of any rift between them…

True to his CFO past, O’Neal known as numbers man who managed Merrill with bottom-line approach… Under his watch, firm shed less-profitable businesses, including some types of bond underwriting… Late last year, O’Neal let loose with massive cost-cutting program that included 15,000 job cuts, one of first such cost-saving efforts on Wall Street…

Apparently, fiscal makeover paid off: in last week’s earnings report, Merrill said second-quarter earnings were actually up for first time in six quarters—17 percent from year earlier… This, after recession left Street’s stock brokerage and underwriting environment in tatters, not to mention $111 million settlement with New York attorney general over apparent conflicts of interest among some of firm’s sell-side analysts… Where did all that extra money come from? See above on “massive-cost-cutting program”…

O’Neal joined Merrill Lynch’s investment-banking division in 1986… Throughout college he worked at General Motors, which financed his Harvard Business School program… He stayed with GM until joining Merrill…

>> CMS Energy Corp. named Thomas J. Webb EVP and CFO, effective August 5… Webb succeeds Alan M. Wright, who is leaving to work outside energy industry… Most recently, Webb, 49, had been EVP and CFO of Kellogg Co., and was VP and CFO of auto-parts maker Visteon from 1996 to 1999… He began his career at Ford Motor Co. in 1977, and held increasingly responsible finance, management, and supervisory positions at Ford Motor Co. and Ford of Europe…

Webb is second new exec at CMS since May, when Kenneth Whipple was appointed chairman and CEO after sudden resignation of William T. McCormick Jr…. McCormick is a retired Ford EVP… .

Things decidedly not rosy at Webb’s new employer… Like many energy companies, CMS is in midst of fending off criticism for alleged round-trip trading… Practice of boosting revenue by simultaneously selling and buying back electricity at same price has become target of investigations by Securities and Exchange Commission, Federal Energy Regulatory Commission, and Commodity Futures Trading Commission…

Things heated up last month when federal grand jury in Houston issued subpoenas to companies including CMS, Dynegy, Reliant Resources, Duke Energy Corp., and El Paso Corp…. Some of these companies maintain round-trip trading served legitimate business purposes, such as verifying current market prices… CMS, like its rivals, saying it is cooperating with authorities… All have denied wrongdoing, although several have restated revenue and expense figures related to trades reported to SEC…

Quote of the Day

“That will give him the opportunity to get the last ulcer. The size of people’s ulcers graduates with the title.”

—Merrill Lynch chairman and CEO David Komansky in FT.com, on current president—and former CFO—E. Stanley O’Neal’s promotion to top post come December