An interesting book on the story of Merrill Lynch is the Crash of the Titans by Greg Farrell Crown Publishing NY 2010. This post focuses on management style. Every President and CEO has a slightly different management style depending on how they were picked for the job. As long as the company makes money, it does not really matter on the style. When the company does not make money, style is critical. If you own dividend shares and the shares continue to pay money, for the most part style does not matter. If the company loses money, management style is a very important consideration.

The management style of Merrill Lynch varied over the years – from someone who genuinely loved the investment advisers to someone who considered them less important in their Presidency and focused on other parts of the business.

One of the Presidents to ensure he had no rivals “fired” anyone who he thought was a threat. Three or four years into the his Presidency, the Board looking to the future found the internal pickings for the next leadership to be thin. No secession planning existed under his reign.

A President who decided to talk first to other partners about mergers, then to the Board was removed. He was removed because Board of Directors need process. The first step is explain to the Board where we are and what the financial situation is. Then you go through the strategic options, whether it makes sense to stay independent or sell. And if you wish to sell, who is the right partner? It is then you begin to talk about who you favour. It is very important to remember as a President you report to your Board, your Board can rubber stamp your decisions, but every once in a while, if the process is not followed, they will exercise their authority.

A different President felt anytime someone questioned his authority or decision making, the person was let go. In the end, he has surrounded himself with yes men with less talent than himself. When he went, so did the yes men.

Another great lesson is for any company to remain prosperous it has to have great internal controls and know the potential liabilities of all its assets. Companies buy and sell assets as part of their business, how much are the assets worth? The best company says when in doubt offer to  sell some of the asset into the marketplace. What is the bid or offer price? If the price is lower than what the asset was bought at, mark the asset as such. If it is higher, so much the better.

Books such as the history of Merrill Lynch is a good read, with lessons to be learnt – see what type of management exists in your dividend producing companies.

There are more questions than answers, till the next time – to raising questions.