2. If you were advising a firm on how to proceed in this area, what steps and priorities would you recommend?

Merrill Lynch, like many other financial companies, was caught in a bad situation. Subprime lending woes and a downwardly spiraling housing market resulted in enormous financial losses. Merrill Lynch benefitted from high returns for years, and showed little restraint in taking on enormous risks. Once the markets collapsed, Board members felt they had little recourse but to dismiss the CEO, Stan O’Neal, in order to placate angry investors. In addition, O’Neal reportedly had terminated any up-and-coming executives in an effort to protect his job from any hostile moves by the board. As a result, there was no talent capable of replacing the CEO. The board did not complain about O’Neal’s practice, because O’Neal had appointed all of the Board members. Had there been any form of leadership-succession planning in place, a knowledgeable replacement would have been available. Instead, the company risked going without a real leader for several months, at a time when tough decisions would likely determine how quickly it might recover from the credit crisis.