That Bad Leader Still Got Paid $46M a Year


Merrill Lynch ousts CEO O'Neal –

I don't pretend to know the first thing about investment banking other than it's a lucrative career. I might get accused of kicking a guy while he's down, but “retiring” investment CEO's get such a golden parachute ($161 Million in pension and stock), Stan O'Neal is hardly “down.”

I wonder if the articles about his leadership used to be glowing, when he was a successful CEO. Now that the firm has suffered a huge loss and O'Neal has been forced out, he's now being painted as a bad leader.

From this week's WSJ article on his departure:

Mr. O'Neal's talent and steely drive came with a tragic flaw: He didn't much engage in debate, kept his own counsel and had little use for the kind of strong-willed subordinates who might have helped him steer clear of the subprime troubles that brought him down. In the early years of his tenure, which began in 2002, Mr. O'Neal purged the firm of many of its longtime senior employees and later fired some of those considered his allies.

“He was uncomfortable around independent people [with] views which might be different than his, and whose loyalty was to the firm rather than to him personally,” said Barry Friedberg, Merrill's longtime head of investment banking in the 1980s and 1990s. Mr. Friedberg retired in 2003, after he tried unsuccessfully to offer Mr. O'Neal advice. (WSJ)

It's a shame, considering that O'Neal is a real American rags-to-riches success story, who started his career at General Motors, of all places.

“During his days in the auto business, an auto assembly-line foreman pointed out Mr. O'Neal's strong Southern drawl. Mr. O'Neal took speech lessons that gave him perfect diction, an associate recalls.” (WSJ)

It's just a shame, though, when you see a leader who isn't strong enough to stomach or stand up to those who disagree with him (or her).

There were signs that he was purging those who weren't allied with him, but the company looked the other way because the results were strong. In the Lean mindset (I guess there is a tie in here), we're not only focused on results, we're also focused on the process and the philosophy for how we get those results. It's safe to assume that the Merrill board consisted of typical management-by-objective types, who only cared about the results. Once the results turned dramatically bad… suddenly O'Neal was a bad leader. Same guy, different results, different judgment from the MBO crowd.

“Mr. O'Neal's aloof management style was on display at the firm's quarterly operations-committee meetings in the boardroom on the 33rd floor of Merrill's lower Manhattan headquarters. Instead of fostering freewheeling interchanges, the meetings were often staged and choreographed, with formal presentations to which Mr. O'Neal would ask questions but rarely entertain discussion, a former executive says.” (WSJ)

I guess the lesson is that we can aspire to be better leaders, through Lean or not. But, is it financially rewarding to be a good (or great) leader?

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  1. Sam Brown Belt says

    Leaders like this guy are everywhere. I have personal experience with this exact personality type–to the point where you could have substituted his name for Mr. O’Neal’s. I believe the reason “leaders” like this rise to the top is because so few boards understand the concepts of the lean enterprise, including the mandate of respect for people. It is also probably that good leaders are always in short supply, so people who can “make the numbers” are often substituted for truly good leaders.

  2. Anonymous says

    O’neal’s story is indeed amazing. He worked as an assembly line worker at GM, so between that experience and his MBA, can you blame him for having that sort of leadership style? Its not like he was exposed to lean or deming even.

    I’m sure he will have a comeback ala the former home depot guy.

    I also saw in the paper today that some Merrill board member had also been on the home depot board and some other corporate disaster. Are these boards not overseeing things until its too late?? I would dump stock in any company where tha guy (don’t have the name handy) is also on the board!

  3. Rick Foreman says

    Sad to say, but not all managers, regardless of successes, make good leaders. It takes a leader to implement and truly sustain a culture change. One of the key aspects of lean is the word “team.” True leaders develop and mentor others to exceed their abilities, without any notion of threatened security in a position. Yet, society and many of these boards are somewhat blind to establishing a solid leadership.

  4. […] Is this Toyota’s Katsuaki Watanabe? No, it’s Proctor & Gamble’s A.G. Lafley, who the NY Times (via Warren Bennis and Jeffrey Sonnenfeld) claims is the prototype for the new style CEO. If that’s really true, seems like a good trend. They say we’re moving away from the old CEO type – the empire builder with an “outsized ego” (they pointed at Jack Welch) who is too insecure to have strong people around or under them (they pointed at Stan O’Neal). […]

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