U.S. Business: Wall Street: A Long Look Upward

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The Goliath. By any standard, Merrill Lynch is the Goliath of stockbrokers. The company maintains 165 offices: 15 in New York City, 134 elsewhere in the U.S., and the rest in such foreign trade centers as London, Paris, Madrid, Tokyo, Geneva, Hong Kong and Beirut. The international string of offices is hooked together by some 285,000 miles of private wire. Merrill Lynch belongs to 41 stock exchanges, from New York to The Netherlands, averages 4,900 sales or purchases during every market hour. On the biggest bourse of them all—the New York Stock Exchange—Merrill Lynch has a hand in 12% of the round-lot (100 shares or more) and 20% of the odd-lot (less than 100 shares) transactions. Its capital totals $148.2 million, almost three times that of its nearest competitor, Bache & Co. The vaults in Merrill Lynch's headquarters on Pine Street (two blocks from Wall) contain $13 billion in negotiable securities. In all its transactions last year, the big brokerage house grossed $228 million for a net profit of $30.8 million. More than ever, it fits the name that Wall Streeters in awe and envy bestowed long ago: "The Thundering Herd."

The head of the herd obviously holds huge responsibility—to his company, its clients, the nation, and for that matter, the world. It was therefore all the more remarkable that Merrill Lynch almost routinely underwent a major leadership change just last month. Michael McCarthy, 63, who had been chairman since 1961, moved up to executive committee chairman. President George J. Leness, 63, became chairman. With only two years left before mandatory retirement, McCarthy and Leness are really beginning to phase themselves out; they plan to spend most of their time pondering about Goliath's long-range future.

In as president and operating head stepped James Edward Thomson, 61, a taciturn type who has never sold a share of stock. It made sense that Thomson is an administrator instead of a salesman. Beamed Edward A. Pierce, 92, last survivor of the firm's founding fathers: "I don't know anybody I would pick over that boy as head of our firm."

Thomson takes charge of an organization that markets stocks with the same detail and cost consciousness that the A. & P. applies to tuna fish and canned peas. Among Merrill Lynch's major divisions:

>The "Front Office," comprised of 2,800 registered representatives, or "customers' men," who retail stocks and account for 65% of Merrill Lynch's business. The firm selects one of every 15 sales applicants, trains him for seven months in a program that includes McCarthy, Leness and Thomson as schoolroom lecturers. It pays salesmen a salary that is now at a median of $18,000 but ranges upwards of $200,000 for real stars. To discourage "churning"—the unnecessary turnover of stocks in a customer's account as a way of earning fees—Merrill Lynch, unlike most brokerage houses, does not pay its salesmen commissions. Instead, it gives "adjusted compensation," or extra pay, for good performance, together with year-end bonuses that can amount to an additional 17 weeks' pay. Registered representatives are also fined, in amounts ranging from $10 to $50, for mistakes in their paper work.