Merrill mum on CEO's fate

NEW YORK (CNNMoney.com) -- Stanley O'Neal was widely expected to step down from his positions of chairman and chief executive of Merrill Lynch & Co., even as the company remained silent Monday about his status within the firm.

The Merrill board voted in favor of O'Neal's exit over the weekend, according to reports in the Wall Street Journal and the New York Times. The Journal reported on its Web site Monday night that representatives for O'Neal and the board were trying to work out the terms of a severance agreement.

The Journal also said Merrill's board is considering naming an interim nonexecutive chairman.

Less than a week ago, the nation's largest brokerage firm stunned Wall Street by announcing that it was taking an $8 billion hit in the third quarter from bets on subprime mortgages.

No announcement about O'Neal's departure had been made by Monday night. Merrill declined to comment on the matter earlier in the day.

O'Neal could collect as much as $250 million in severance pay if he were let go, said Paul Hodgson, a senior research associate at the Corporate Library, which tracks executive compensation.

Such a payout would surpass the widely-criticized $210 million severance package given to Robert Nardelli, who stepped down as chief executive of Home Depot (Charts, Fortune 500) earlier this year.

The firm could also draw criticism for giving O'Neal an outsized final payday because of its association with the subprime mortgage disaster. Foreclosures are on the rise and millions more could follow as home owners' variable-rate mortgages reset to higher levels.

"More people will take notice of this than would normally be the case," said Hodgson of Corporate Library.

O'Neal took center stage last week when Merrill said that it took a $7.9 billion writedown on the value of its investments, due primarily to problems in subprime mortgage holdings.

That announcement came only three weeks after the company had estimated that the hit would be about $4.5 billion. The larger-than-expected writedown prompted a $2.3 billion loss in the quarter and a downgrade of the firm's credit rating.

O'Neal reportedly had also been in trouble with his board for approaching the CEO of Wachovia (Charts, Fortune 500), the nation's No. 4 bank, about a possible merger of the two financial services giants without getting the approval of Merrill's board, according to a report in Friday's New York Times. Those talks raised questions on Wall Street whether Merrill will be able to remain independent.

Among those rumored to be under consideration to replace O'Neal are Laurence Fink, chairman and CEO of investment firm BlackRock (Charts), in which Merrill owns a 45 percent stake, and NYSE Euronext (Charts) CEO John Thain, who had previously served as president of Goldman Sachs (Charts, Fortune 500). There has also been speculation that Bob McCann, the head of Merrill's brokerage division, or Gregory Fleming, Merrill's co-president, could be tapped to lead the firm or that there would be some sort of power sharing arrangement.

According to a profile from Harvard Business School, where he got his MBA in 1978, O'Neal was born into poverty in Wedowee, Ala., working as a young boy picking cotton on a family farm, joining his, siblings and father and grandfather, who worked as farmers, while his mother worked as a cleaning lady.

When O'Neal was 12, his family moved to Atlanta and his father went to work at a General Motors (Charts, Fortune 500) plant there. O'Neal also worked there as a teenager, but GM tapped him to attend General Motors Institute and paid for him to get his MBA. He worked for eight years in the automaker's New York finance office and in Madrid before moving to Merrill in 1986.

He rose through the ranks at Merrill, becoming president and chief operating officer in July 2001, then being tapped as CEO in December 2002, and adding the title of chairman in April 2003. The posts made him one of the most powerful African-American executives on Wall Street, along with Kenneth Chenault, who holds those two titles at American Express (Charts, Fortune 500).

O'Neal quickly earned a reputation as an aggressive cost cutter when he took over as chief executive. By slashing jobs and shutting down operations around the globe, O'Neal helped turn around Merrill and revive the company's stock, which reached an all-time high in January. Merrill shares have lost 33 percent of their value since this summer's market meltdown.

Including salary and annual bonuses, O'Neal took home a total of $46 million in compensation in 2006.

Merrill (Charts, Fortune 500) shares gained 2 percent in afternoon trade Monday on the New York Stock Exchange, after finishing 8.5 percent higher a session earlier.

-CNNMoney.com staff writer Chris Isidore also contributed to this report