Wall St.'s Expanding Universe
By Eugene Robinson
Tuesday, October 30, 2007; A15
The real story on Wall Street isn't that E. Stanley O'Neal, whose grandfather was born a slave, is being shoved out of the top job at Merrill Lynch, the gargantuan investment bank. More important is the fact that . . . well, Tom Wolfe said it best in "The Bonfire of the Vanities," his romp through the world of hubris and high finance, with this description of the novel's protagonist:
"On Wall Street he and a few others -- how many? -- three hundred, four hundred, five hundred? -- had become precisely that . . . Masters of the Universe."
Actually, O'Neal rose to such heights that the number of his professional peers was nowhere near 300 -- more like three or four. That a black man who picked cotton as a child in Alabama could have spent the past five years as an Uber-Master of the Universe, running one of the world's leading financial institutions, is more significant than his downfall.
Granted, the downfall has been pretty spectacular. Merrill Lynch had to disclose last week that the company took a loss of $8.4 billion in the subprime mortgage meltdown -- much greater than the damage suffered by other huge investment firms such as Goldman Sachs.
Merrill's board of directors -- most of whose members were chosen by O'Neal -- has to share responsibility for that debacle; it's not as if the board was unaware of how O'Neal was investing the firm's money. Apparently, though, there was one thing that O'Neal failed to tell the board: that he had approached the chief executive of Wachovia Corp. about a possible merger of the two companies.
That's not the sort of thing you want your board to hear through the grapevine.
Yesterday, O'Neal was reportedly negotiating the terms of his departure. If you're worried he'll be destitute, dry your eyes. O'Neal has been one of the best-paid executives on Wall Street -- he took home around $48 million last year -- and the New York Times reports that he may get a severance package of at least $159 million.
That's crazy money, and most people don't get crazy money unless they're worth it. What I find striking about O'Neal's story is that it so thoroughly demolishes the racist assumption that some people will make: that the job was somehow handed to him because of some feel-good commitment to diversity.
Puh-leeze. Diversity is about leveling the playing field, opening doors and giving people a chance. By all accounts, O'Neal rose to the top the old-fashioned way -- fighting, scraping, biting, scratching.
He was hired as chief executive in 2002 to shake up what was seen as a complacent, slow-moving corporate culture. He did just that, cutting nearly 24,000 jobs, eliminating corporate perks and taking the company -- once known as "Mother Merrill" for its comfortable ambiance and its settled predictability -- into riskier and more lucrative arenas. Such as the subprime mortgage market.
O'Neal produced huge profits for the firm; last year, net income was a record $7.5 billion. On the job, at least, he made no attempt to be a nice guy. The Wall Street Journal reports that O'Neal would rake his executives over the coals if quarterly earnings reports showed that Goldman Sachs was outperforming Merrill in some area.
Now that O'Neal is on his way out, of course, people who worked for him are saying things to reporters -- he was aloof, he was brusque, he didn't tolerate strong-willed subordinates -- that they wouldn't have said to his face.
It's the classic high-flying modern Wall Street story -- you claw your way to the top, make a lot of money for your stockholders, make a lot of money for yourself, hold on as long as you can. O'Neal lasted five years in the top job at Merrill, which is about the average tenure of an American chief executive.
What's really significant is that there is a Stan O'Neal. And a Dick Parsons, the African American chief executive of Time Warner, rumored to be on his way out, too, after a long and profitable run. And a Ken Chenault, the African American CEO of American Express, who is staying put, far as I know. And a Bob Johnson, the founder of Black Entertainment Television, widely acknowledged as the first African American billionaire.
Just two or three generations removed from slavery, they rose to control big chunks of the American economy. They attained Master of the Universe status by being smarter and tougher than their peers -- and now a much bigger cohort of black corporate executives is coming up behind them.
It just goes to show what happens when you open a door.