Corporate Governance at Merril Lynch

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Case Details:

Case Code : CGOX007
Case Length : 12 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Merrill Lynch
Industry : Investment banking
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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More than reacting to a changing world, we are committed to leading change – setting new standards for the industry, creating a more disciplined, agile and accountable culture, and generating sustained, meaningful value for clients, shareholders and employees, now and in the future.¹

-E. Stanley O'Neal, Chief Executive Officer, Merrill Lynch and Co., Inc.

Introduction

In December 2002, Merrill Lynch (Merrill), one of the leading investment banks in the world, reported net revenues of $18.6, billion², 15% lower than that of 2001, and post-tax earnings of $2.5 billion³, (76% higher than that of 2001), the third best in Merrill's history.

The stock prices jumped 47%⁴ during the same period. In 2003, Merrill was ranked #24 in Forbes 500⁵. In 1914, Charles E. Merrill and Edmund C. Lynch (room partners in a boardinghouse of New York) founded Merrill⁶.

The company had gradually strengthened its position over the years to emerge as one of the leading investment banks in the world.

Corporate Governance | Case Study in Management, Operations, Strategies, Corporate Governance, Case Studies

It offered a wide range of products and services to its clients in Europe, Middle-East, Africa, Japan, Asia Pacific, Canada and Latin America. Merrill had organized its operations into three business groups, namely Private Client Group (PCG), Global Markets and Investment Banking Group (GMI) and Merrill Lynch Investment Managers (MLIM).

PCG provided retail brokerage, trust services, mutual funds, and life insurance and annuities. GMI offered investment banking, brokerage, and clearing services to corporate and government clients.

MLIM provided asset management services. With a network of 670 offices worldwide, Merrill was the market leader in multiple lines of business. The company was the world's largest underwriter⁷. In the early 2000s, Merrill had started restructuring itself to enhance operational efficiency and cut costs. The company had retrenched 22,000⁸ employees (31% of workforce) and replaced 6,600 brokers with 460 call centre agents to cut costs...

Excerpts >>

1] Merrill Lynch, Annual Report 2002.

2] Merrill Lynch, Annual Report 2002.

3] Merrill Lynch, Annual Report 2002.

4] "The New Merrill Lynch," Business Week, May 2003.

5] Forbes, July 2003.

6] Merrill had the distinction of being the first company in the New York Stock Exchange to publish the annual report in 1940.

7] Underwriters are those who guaranteed or committed to be answerable for the payment of a debt or the performance of a duty on behalf of another individual(s) or group(s), in case of default.

8] "The New Merrill Lynch," Business Week, May 2003.