Merrill Lynch on Tuesday boosted Stan O’Neal’s departure package by almost $90m – taking it to $160m – by letting him retire as chairman and chief executive rather than sacking him.
The company said that Mr O’Neal and the board had “both agreed that a change of leadership would best enable Merrill Lynch to move forward”. Mr O’Neal’s departure follows the company’s admission last week that it had lost almost $8bn on mortgage-backed securities.
But by casting his departure as a retirement, the board allows Mr O’Neal, who was paid $48m last year, to retain deferred compensation in the form of unvested stock worth $90m, giving him a total exit package of about $160m, including other compensation, shares and benefits.
The move threatens to reignite the controversy over the link between pay packages for executives and their performance. But lawyers said Merrill would have found it legally difficult to fire Mr O’Neal “for cause”.
Although Mr O’Neal will not get any severance pay on top, Mike Mayo, analyst at Deutsche Bank, said there needed to be a better link between the interests of shareholders and the incentives of management. “Past compensation of top management was inflated by higher risk whose losses were not realised until this year.”
The bulk of Mr O’Neal’s exit package is linked to the stock price, which has fallen by a third this year.