As part of my plan to take only classes that really interest me this last semester, I am taking a seminar on corporate governance, co-taught by Jesse Fried. Along with Lucian Bebchuk, he has promoted the idea that boards currently tend to be bad agents for the shareholders when it comes to getting good value, particularly in getting good performance from executives proportional to their pay, and that shareholders should be able to alter governance more easily. There do seem to be few instances where boards really turn on execs. Even when the board is showing a CEO the door after she's been a failure, on the way out she can get a golden goodbye in the form of additional compensation beyond that which was negotiated in the employment contract.
However, Merrill Lynch chairman and chief executive, E. Stanley O'Neal, may have found the surefire way to piss off his board: "Mr. O'Neal broached the possibility of a merger with Wachovia, the bank based in Charlotte, N.C., without first getting the approval of Merrill’s board, a major breach of corporate protocol at a time when directors were already concerned about the company’s performance, these people said. Merrill's board was so upset with Mr. O’Neal that it even discussed the names of potential candidates to replace him, according to people with knowledge of the board's proceedings."
Any merger between Merrill, with 15,000 retail brokers, and Wachovia, with 10,137 brokers, would likely face antitrust questions, and a deal would not likely be received well by Merrill's brokers. In recent weeks, as the scope of the losses mounted, Mr. O’Neal has fired a number of executives, the latest round of firings he has made since taking the top job.
Merrill's stock has fallen almost 10 percent in the past two days as Mr. O’Neal has come under intense criticism for what analysts called a complete risk management failure. With billions of dollars shaved off of its market capitalization and analysts convinced that an additional write-downs might be coming, Merrill is an attractive target.