It was 1985, and O'Neal, then a General Motors executive, was being recruited by Merrill and interviewed with John "Launny" Steffens, head of Merrill's brokerage operations. Steffens spoke, nonstop for nearly an hour, about Wall Street. O'Neal barely got a word in.

Now, O'Neal, 48 years old, has succeeded Steffens in what some consider the second-most important job at Merrill. O'Neal still marvels at Steffens's knowledge and leadership: "He knew exactly what he wanted to do."

So does O'Neal. Asked if he wants to succeed Merrill Chief Executive Officer David Komansky one day, O'Neal responds with an emphatic "yes." He's got a good shot at getting it. With his appointment in February, O'Neal, an investment banker by training, has emerged as the odds-on favorite to succeed Komansky in 2004, when the CEO is set to retire. That would be historic: Never has a nonbroker run Merrill, nor has an African American ever run a major Wall Street securities firm.

"He's the most thoughtful guy there and he has a great vision for the business," says a former senior Merrill executive who worked closely with O'Neal. "But what remains to be seen is if he has the presence to be CEO. At Merrill, being a CEO is a different job than at other firms. You have to be a little bit of a rock star."

It's clear O'Neal is looking to shake things up a bit. He's mum on his plans, but the betting on Wall Street is that he will cut costs, initially at the brokerage group's home office in Princeton, N.J., where Steffens built a large bureaucracy. O'Neal also is considering paring quotas on how many certain financial plans (known as "Financial Foundations") brokers must sell, and cutting back on upfront signing bonuses to woo broker recruits.The signing-bonus issue is a particularly touchy subject inside Merrill.

Securities and Exchange Commission Chairman Arthur Levitt has called such bonuses "a reputational stain on the image of the industry" because brokers who receive such payments are often under pressure to push investments that produce the highest fees for the firm. Under Steffens, Merrill has been at the forefront of offering such incentives to compete with other firms for the best brokers.

O'Neal doesn't look at the issue in moral terms, but he does question whether such big bonuses - which can total as much as $5 million for a single broker - ever pay off for the firm. "I don't look at it as a good or evil," he says. "It just doesn't make sense." ( O'Neal himself received a 1999 pay package valued at $19.1 million.)

Yet succeeding Steffens, who in February moved on to a senior advisory role with the company, won't be easy: During his own 37-year career, the past 15 as brokerage chief, Steffens, 58, triggered many innovations, including Merrill's drive to gather assets under management, not merely buy and sell stock for investors. He also was controversial; two years ago, he attacked online investing as a threat to America's financial health before eventually embracing it.

Don't expect any such rash statements from O'Neal. He isn't likely to take big risks, particularly now that the CEO job is on the line. That's part of O'Neal's nature, friends and associates say: While he isn't afraid to take business risks from time to time - the firm's bond inventory remained high while he was co-head of Merrill's institutional group and the firm eventually incurred huge losses when he was chief financial officer in 1998 - O'Neal is reluctant to take personal risks that could derail his rise to the top.

After all, it took prodding from senior Merrill executives before he agreed to take the finance chief job in March 1998 because O'Neal believed it wouldn't provide hi with enough exposure for the firm's highest office, say several associates.

"I was reluctant to take the job because I wanted to be a producer and run a business," he says. Others in the firm say O'Neal as chief financial officer took steps to eventually reduce the firm's risk profile even before disaster hit that autumn.

All of which leads to a pressing question: Can O'Neal, who has had no experience in the retail-brokerage business, effectively lead Merrill's army of 14,200 brokers, the nation's largest? Over the past year, many of Merrill's top brokers have left, partly because of Merrill's push into cheap, online stock trading, and partly because of growing dissatisfaction with Steffens's aggressive management style. O'Neal faces the task of generating loyalty among his troops when he has never been in a foxhole, some on Wall Street say. "Stan appears to be in the driver's seat to be CEO," says Amy Butte, an analyst at Bear Stearns. "Whether he can reach the CEO post largely depends on his ability to build support among the brokers."

-- The Wall Street Journal