chief executive officer; chief financial officer
Personal Information
Born Earnest Stanley O'Neal on October 7, 1951, in Roanoke, AL; married to Nancy Garvey; children: twin son and daughter
Education: General Motors Institute, BS, industrial administration, 1974; Harvard Business School, MBA, finance, 1978.
Memberships: Executive Leadership Council and Foundation; board member, General Motors Corporation, Lower Manhattan Development Corporation, NASDAQ Stock Exchange, National Urban League, Ronald McDonald House; advisory board, American Cancer Society, Bronx Preparatory School; trustee, Buckley School, Catalyst, Center for Strategic and International Studies.
Career
General Motors Corporation, New York treasurer's office, analyst, 1978-80, director, 1980-82, Spanish subsidiary, treasurer, 1982-84, general assistant treasurer, New York City, 1984-87; Merrill Lynch & Co., Inc., investment banker, high-yield finance group, director, investment banking, managing director, financial services group, head, client strategies group, 1987-96, head, capital markets group, 1996-97, executive vice president, co-head, corporate and institutional client group, 1997-98, member, executive management committee, 1997-, chief financial officer, 1998-00, president, U.S. private client group, 2000-01, president and chief operating officer, 2001-02, chief executive officer, 2002-.
Life's Work
On December 2, 2002, Stanley O'Neal became chief executive officer (CEO) of Merrill Lynch & Company, Inc. He is the first African American to head a major Wall Street brokerage firm. Merrill Lynch is one of the world's largest and most influential financial advisory and management companies, with offices in 37 nations. O'Neal was already one of the highest-paid African Americans on Wall Street and, in July of 2002, Fortune magazine named him the most powerful African-American executive. Known as a tough but exceedingly private individual, O'Neal kept a surprisingly low profile throughout his rise to power.
The grandson of a former slave, Earnest Stanley O'Neal, born in 1951, was the oldest of four siblings, three boys and a girl. The O'Neal family lived in Wedowee, Alabama, a town of less than 1000 people, 85 miles from Birmingham. However, Stanley was born in Roanoke, Alabama, since hospitals nearer to his home did not admit African Americans. He grew up surrounded by a large, close-knit, extended family, in a home that had neither an automobile nor indoor plumbing. His father was a farmer and his mother cleaned houses to help support the family. O'Neal attended a one-room school that was heated with a wood stove. He and his siblings worked the corn and cotton fields of his grandfather's subsistence farm and O'Neal delivered and sold newspapers.
General Motors Provided Opportunities
When O'Neal was 12, his father gave up farming to take a job at a General Motors assembly plant in Doraville, Georgia. The family moved into a federal housing project in Atlanta. There O'Neal became one of the first African Americans at the newly integrated West Fulton High School. "My father told me I wasn't cut out for farm work," O'Neal told the Harvard Business School Bulletin. "I really didn't have an understanding of the world or any role models, but I had a strong desire to learn." As a top student, O'Neal dreamed of becoming a writer. However, following his father's advice, he entered college determined to pursue a successful career.
O'Neal attended the General Motors Institute, which later became Kettering University. In a cooperative program, he alternated studies in engineering and industrial administration with the night shift in the body shop at the Doraville assembly plant. Graduating in the top 20% of his class with a B.S. degree in industrial administration in 1974, O'Neal was the first in his family to finish college. For the next two years he worked as a supervisor at the Doraville plant. A scholarship from GM then enabled him to attend Harvard Business School as one of the few African Americans in his class. He earned his M.B.A. in finance with distinction from Harvard in 1978. After graduation O'Neal began his career as an analyst in the GM treasurer's office in New York City. There he met his future wife, economist Nancy Garvey. The couple eventually had twins, a son and a daughter.
Within two years, O'Neal had become a director in the New York office, working in cash management, profit analysis, budgeting, and international funding. In 1982 he was appointed treasurer of GM's Spanish subsidiary in Madrid. Returning in 1984 as general assistant treasurer, the second highest financial position in the New York office, O'Neal was responsible for GM's acquisitions and mergers.
Joined Merrill Lynch
After eight years with GM, O'Neal made an important career move--with a large jump in salary--when he joined the high-yield finance group of Merrill Lynch's investment banking division. This division was one of the world's leading underwriters of debt and equity securities, as well as a strategic economic advisor to corporations, governments, institutions, and individuals across the globe. O'Neal soon rose to the position of managing director of the financial services group during one of its most successful periods in history, when it held first place in the high-yield bond field. In this position he was in charge of the high-yield finance and restructuring group, as well as the real estate, project and lease finance, and equity private placement groups.
Over the next few years, O'Neal worked in nearly every branch of Merrill Lynch's multiple businesses. However, he first drew the attention of the financial world in the early 1990s, when he successfully turned around the company's junk bond business. As head of the client strategies group, O'Neal took over responsibility for specialized portfolio consulting and investment advisory services to institutional clients worldwide. In 1996, as head of the capital markets group, O'Neal worked with clients throughout the world on debt and equity new issue activity.
In 1997 O'Neal was named executive vice president and co-head of the corporate and institutional client group (now the global markets and investment banking group) of Merrill Lynch. This core business group provides investment banking, securities trading, and other financial services to corporations, governments, and institutions worldwide. O'Neal also became a member of the executive management committee.
A year later, in 1998, O'Neal was named chief financial officer of Merrill Lynch. His responsibilities included operations, finance, accounting, budgeting, credit, taxes, real estate, purchasing, risk management, corporate services and reporting, and investor relations for the entire company. Almost immediately upon assuming this position, O'Neal was faced with handling Merrill's investment in Long Term Capital Management, a hedge fund that was near collapse.
Overhauled Merrill's Brokerage Business
Although he had never worked as a stockbroker, in 2000 O'Neal stepped into the presidency of Merrill Lynch's flagship business, its retail brokerage unit, called the U.S. private client group. O'Neal became the first non-broker to ever hold this position. He assumed responsibility for approximately 16,000 financial advisors or brokers working out of nearly 800 branch offices, $1.3 trillion in client assets, and financial services for almost six million benefit plans.
One of O'Neal's first actions, in February of 2000, was to fire 2,000 U.S. brokers and support staff and close 166 field offices. He also replaced competing individual brokers with teams of financial advisors. Initially O'Neal sought to match the low trading fees of the discount brokerages; however he soon switched gears and decided instead to target large clients with assets of over one million dollars.
With his overhaul of Merrill's brokerage business, O'Neal shed his low profile completely. Some called him the axman and critics questioned his management style and its effects on employee morale. However his decisions enabled the company to reduce operating costs while increasing revenue per client. His cost-cutting measures, including the consolidation of operations, increased the retail brokerage unit's pretax margins by 2%. O'Neal had become one of the highest-paid executives on Wall Street, with reported earnings in 1999 of $7.5 million, in addition to $11.5 million worth of stock options. In September of 2000 Black Enterprise magazine named him "Corporate Executive of the Year."
Led Corporation Through Crises
In July of 2001 O'Neal became president and chief operating officer of Merrill Lynch and joined the board of directors. On September 11, 2001, Merrill Lynch employees were forced out of the company headquarters in the World Financial Center, across the street from the World Trade Center. For the next three months most of these employees worked out of temporary or makeshift quarters. However in October of 2001, O'Neal became the first Wall Street executive to move back into his office. In May of 2002 New York Mayor Michael Bloomberg appointed O'Neal to the board overseeing the redevelopment of downtown Manhattan.
After reporting record quarterly earnings of $1.04 billion in April of 2000, Merrill Lynch suffered a $1.3 billion loss in the fourth quarter of 2001. Although total revenues for 2001 were $38 billion, between 2000 and 2001 Merrill Lynch's net earnings dropped by 85%. Turbulent markets resulted in a dearth of the corporate financings, mergers, and acquisitions that had been major sources of the firm's revenue and the company's performance and stock price continued to fall. In the face of a slumping stock market, global recession, and more profitable competitors, O'Neal immediately began the largest restructuring in Merrill Lynch's 117-year history. Concentrating on the bottom line and fighting off bids to take over the company, O'Neal laid off 15,000 employees--21% of the total work force--over a 12-month period ending in April of 2002. Another 1,800 jobs or 3% of the staff were cut in the second quarter of 2002. He also reorganized the company's top management, making 13 changes among the 22 members of the executive committee. Finally he dramatically scaled back the company's global operations, selling off or closing brokerages in South Africa, Canada, and Australia, as well as most of the company's recently acquired Japanese business.
Although Merrill Lynch remained 36th of the Fortune 500 companies in 2002, O'Neal continued to restructure, cutting expenses by a total of $1.7 billion. David Rynecki wrote of O'Neal in the September 30th issue of Fortune magazine: "He's ripping apart the securities firm, piece by piece. He's making enemies. He's not apologizing. It might just work." In October of 2002, O'Neal received the Achievement Award of the Executive Leadership Council, an organization of African-American senior executives from Fortune 500 companies, for his lifetime career achievements as a pioneer in corporate business.
However, competition from discount brokerages and a troubled stock market were not the only crises facing Merrill Lynch when O'Neal took the helm. The company found itself embroiled in a major stock recommendation scandal. In May of 2002, Merrill Lynch agreed to pay $100 million to settle charges brought against it by the New York State Attorney General, as well as other lawsuits. The company was accused of having misled investors with biased research aimed at pleasing its investment banking clients. There also were accusations that Merrill Lynch helped the bankrupt energy trader Enron to construct complicated transactions for artificially inflating profits, although the company claims they were duped by Enron. In addition there were charges of pension fund mismanagement by Merrill's London-based subsidiary and allegations of insider trading by Merrill's celebrity client Martha Stewart. O'Neal instituted reforms to address some of these issues, including a new method for compensating financial analysts.
Fought His Way to the Top
On December 2, 2002, following a bitter power struggle, O'Neal became CEO of Merrill Lynch, well before his planned succession date in 2004. O'Neal is only the third African American to head a major U.S. financial services company. The others are Franklin Raines, CEO of Fannie Mae, the mortgage financing company, and Kenneth Chenault, chairman and CEO of American Express.
Carl Brooks, president of the Executive Leadership Council and Foundation, told Black Enterprise magazine that O'Neal's promotion was "another indication that a very talented African American has been able to move through the management ranks of the largest financial corporation in the United States. It continues the movement of African Americans to the top." As guest speaker at the 2002 National Urban League Conference in Los Angeles, O'Neal spoke of how businesses such as Merrill Lynch must play an important role in providing educational opportunities for financial empowerment, to fulfill the promise of the Civil Rights movement in America.
In his first days as CEO, O'Neal reorganized the top management of Merrill Lynch and within a week a number of executives had left the firm. In addition, O'Neal reorganized the company's global economics team and ordered further job cuts in poor performing sectors.
O'Neal maintains his relationship with GM as a member of its board. His influence is pervasive in New York and across the nation, as a board member of the NASDAQ Stock Exchange, the National Urban League, and the Ronald McDonald House of New York, and as a trustee of the Center for Strategic and International Studies. He is a former vice chairman of the Securities Industry Association and a former member of the Capital Markets Advisory Committee of the New York Stock Exchange.
Although the economy continued to falter as O'Neal faced his first year as Merrill Lynch CEO, he remained optimistic. As he told the audience at the Merrill Lynch Banking and Financial Services Conference: "I've never been more confident in the long-term growth prospects for our economy, or more bullish on the financial services industry."
Awards
Corporate Executive of the Year, Black Enterprise, 2000; Achievement Award, Executive Leadership Council, 2002.
Further Reading
Periodicals
- Black Enterprise, September, 2000, p. 82; October, 2002 p. 35.
- Fortune, July 22, 2002, pp. 60-80; September 30, 2002, p. 76.
- Money, March 1, 2002, p. 82.
- CNN Money, money.cnn.com/2002/02/14/investing/mag_sheriff/index.htm.
- Harvard Business School Bulletin, www.alumni.hbs.edu/bulletin/2001/june/profile.html.
- Merrill Lynch, www.merrilllynch.com/about/org_structure_ml/oneal.htm.
— Margaret Alic
