We’re batting 1000 so far in the prediction department regarding recent developments at Merrill Lynch. Now that the board has shown former CEO E. Stanley O’Neal the door, it needs to do some retooling itself, especially when it comes to its oversight culture, which was pretty limp in supervising Mr. O’Neal.
Directors are not like some kind of 1950s housewife who was always the last to learn about the misadventures of her husband. Their job is to oversee the CEO and to be aware of key events in strategy and risk at every stage along the way. The risk part is especially important in the post-Enron era of Sarbanes-Oxley supercharged boards. And somebody needs to explain why Merrill’s board, and its finance committee which oversees market and credit risk issues along the audit committee, did not grasp the level of exposure the company was facing. The board’s freshly appointed interim chair, Alberto Cribiore, was one of four independent directors who sat on the finance committee when the missteps that led to the elephantine losses were taking place. He also chaired the board’s compensation committee which was responsible for the huge payouts to Mr. O’Neal and will be finalizing his retirement package. We will have more to say about that soon.
Merrill Lynch board needs to show investors and clients it really understands it’s living in the 21st century and that it will never again permit itself to be found slumbering when a multi-billion dollar disaster comes pounding at the boardroom door.