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Call it punishment, Wall Street style. Just a week after he stunned investors with a record $2.2-billion (U.S.) quarterly loss, hard-nosed Merrill Lynch & Co. boss Stanley O'Neal was pushed out of his corner office yesterday, without so much as a partial bonus or golden handshake. Instead, he left with a tarnished legacy, a sheaf of unflattering press clippings, and - oh, yeah - $161.5-million worth of accumulated stock, options and retirement benefits.

This is the sort of feathered nest that would typically have compensation critics frothing about the mouth, especially given Merrill's brutal third quarter. But quite the opposite: Some consultants in this area are actually praising the firm for taking a tough stance (in relative terms, anyway) and setting a precedent that could cut down on future outsized compensation packages to turfed CEOs.

"They have done something that's quite unusual, and in my opinion, the wave of the future," said Frank Glassner, CEO of Compensation Design Group Inc. in San Francisco. "It's getting harder and harder to say 'You sunk the Titanic, but we're going to pay you severance anyway.' It was the right thing to do."

As big as Mr. O'Neal's nest egg may appear, it is largely composed of stock options and awards that he received throughout his two-decade tenure at the company. While critics can genuinely grouse about the largesse of such pay packages - Mr. O'Neal pocketed $48.5-million in total compensation last year, good enough for second place in the banking industry - investors were at least spared from watching Mr. O'Neal receive an "egregious multiple" of salary as an additional parting gift, Mr. Glassner said.

This has become an all too common practice in corporate boardrooms, according to compensation watchers, as evidenced by the $210-million package delivered to outgoing Home Depot boss Robert Nardelli or the roughly $200-million handed to former Pfizer chief Henry McKinnell. Both payouts incited torrents of controversy, given the poor performance of the companies in the market.

Merrill Lynch, however, had no employment contracts with its top executives, shielding the firm against a costly severance top-up. Mr. Glassner predicts that such a payment for Mr. O'Neal might have totalled more than $40-million, meaning he would have vacated his post with more than $200-million. "Companies now have a basis to hang their hats on," he said, predicting that the Merrill Lynch model could prompt other blue-chip companies to follow suit with similar arrangements.

Mr. O'Neal has already amassed $131.4-million in equity, including stock and options, along with $24.7-million in pension benefits - another bête noire of compensation critics. He also has $5.4-million in deferred compensation, according to the company, and will be able to have an office and an executive assistant for three years.

Because some of Mr. O'Neal's equity has not vested yet, there is the possibility that this cache will rise in value under the direction of his replacement, who has yet to be named. Director Alberto Cribiore has been named interim chairman, and will direct the search for a successor.

Whoever takes the job will have to restore faith in the firm's risk management abilities - no easy feat considering Mr. O'Neal's last few months. The firm absorbed a staggering $8.4-billion in charges this quarter to cover its exposure to subprime mortgages and bad debt, a figure that was almost double what Mr. O'Neal predicted it would be just weeks before the results were published.

"The risk management systems simply don't work," said Richard Bove, an analyst with Punk Ziegel & Co. "There was no other option but to go in the direction that O'Neal took Merrill in. Where he screwed up is clear - he didn't have controls or restraints on the businesses he moved into."


Close: $65.56; down $1.86


The dearly departed

CEO: Henry "Hank" McKinnell, Pfizer Inc.

Tenure: 5 years, ended Dec., 2006

Package: Estimated $200-million

Reaction: Hostile. Pfizer's stock dropped almost 40 per cent on his watch; before he left, a plane circled the company's annual meeting with a banner that read "Give it back, Hank!"

CEO: Dick Grasso, New York Stock Exchange

Tenure: 8 years, ended 2003

Package: $187.5-million ($140-million in deferred compensation, and $47.5-million that was withheld).

Reaction: A lightning rod. Mr. Grasso was forced out when details of his pay became public, and was then sued by New York's Attorney-General to repay the money. Mr. Grasso has countersued.

CEO: Robert Nardelli,

Home Depot

Tenure: 6 years, ended Jan., 2007

Package: Estimated at


Reaction: Hostile, given that the retailer's market value declined significantly under Mr. Nardelli.

CEO: Lee Raymond,

Exxon Mobil Corp.

Tenure: 7 years, ended 2006

Package: Estimated


Reaction: Incredulous. Critics - both environmental and governance - thought the package was obscene, but Exxon could at least claim a strong market performance during his time at the helm.

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