“Memo to Merrill employees: Remember who’s the boss,” writes Ann Davis in today’s Wall Street Journal.

“After a brutal public bout of corporate knife-fighting, Merrill Lynch & Co. Chairman and Chief Executive Stan O’Neal moved quickly Wednesday to squelch dissent, announcing that his investment-banking and global-markets chief, Arshad Zakaria, would ‘retire’ from the firm at age 41.”

“The latest management shake-up occurred after an unsuccessful power play last week to anoint Mr. Zakaria president of the securities firm.”

“The naming of two equally young executives, Dow Kim and Greg Fleming, both 40, to succeed Mr. Zakaria as co-heads further cemented Mr. O’Neal’s grip on the rapidly changing firm.”

“Seats at Merrill have been hot since the ouster July 29 of Mr. Zakaria’s chief promoter and mentor, executive vice chairman Thomas H. Patrick. In a dramatic end to a close alliance among the three of them, Mr. O’Neal asked Mr. Patrick to leave after the No. 2 executive persistently advocated that Mr. Zakaria be installed as president and heir-apparent to Mr. O’Neal. Mr. O’Neal rejected the campaign as premature.”

“Mr. O’Neal himself had stated at a broadcast to Merrill employees less than two weeks earlier that it was too soon to designate a successor since he had become chief executive only last December and chairman only in April. Mr. Zakaria had been co-head of the investment-bank and markets group only since October 2001, and had assumed sole leadership just this spring. Questions immediately began swirling over Mr. Zakaria’s level of involvement in the succession struggle.”

“Mr. Zakaria’s swift rise and fall, and Mr. Patrick’s loss of power, laid bare political maneuvering and infighting at a time when Merrill executives had hoped to focus instead on the recently announced record second-quarter results at the 48,300-employee firm, which earned $1.02 billion on net revenue of $5.3 billion.”

” ‘Any time you have such significant management change in such a short period of time at such a big and complicated company, it will create a level of anxiety’ among investors, said Glenn Schorr, who follows stocks of securities firms at UBS AG.”

“It was Mr. Zakaria’s unit that drove Merrill’s profits in the quarter just ended. He and Mr. Patrick had also helped lead Mr. O’Neal’s cost-cutting and restructuring drive that helped boost profit margins. Mr. O’Neal acknowledged as much in the firm’s announcement Wednesday, citing Mr. Zakaria’s ‘leadership’ in strengthening the investment bank’s franchise ‘as reflected in its exceptional first-half performance.’ “