Stephen R. Hardis, nonexecutive chairman of the board, said: “MMC's financial performance in 2007 has fallen far short of our expectations. The board has taken this performance into account and listened to concerns raised by some of the company's largest shareholders in recent quarters in making this change.”

“The board believes that the full recovery of Marsh is essential to maximizing shareholder value in the most prudent and sustainable manner,” he added.

Mr. Cherkasky replaced Jeffery W. Greenberg after MMC was sued by then New York Attorney General Eliot Spitzer. In the suit the company was accused of steering insurance contracts to certain insurers in exchange for kickbacks in the form of contingent commissions.

Mr. Cherkasky, who had a personal relationship with Mr. Spitzer dating back to the days when the two were prosecutors in the Manhattan District Attorneys Office, was the CEO of Kroll, the risk management subsidiary of MMC, at the time of his appointment.

After his appointment, Mr. Cherkasky settled the suit with Mr. Spitzer with a payment to aggrieved clients of more than $800 million. The company was also forced to give up taking contingent commissions, which amounted to more than $800 million at the time. MMC has yet to recover those revenues and Marsh has performed poorly since as it restructures.

As part of that restructuring, MMC hired Dan Glaser as chairman and CEO of Marsh, replacing Brian Storms. During a recent analysts conference call Mr. Cherkasky took responsibility for appointing Mr. Storms to the CEO position of Marsh, which Mr. Cherkasky indicated Mr. Storms was not suited for.

In his comments Mr. Hardis commended Mr. Cherkasky for his role in bringing MMC through a difficult period and said the company owed Mr. Cherkasky an “enormous debt of gratitude.”

In a statement Mr. Cherkasky said, “It has been an honor and a privilege for me to lead MMC through difficult times and position it for a successful future. This company has as fine a collection of people as I have ever worked with, and I am proud of what we have achieved in many areas.”

In reaction to the news Alan Karaoglan, with Bank of America, called it “a positive step forward” in an analyst's note.

With the announcement he said a “potential sale of the company is now possible” to unlock shareholder value either by a sale of MMC, or sale or spin-off of its operating units.

David Small of Bear Stearns said in a note that “Christmas comes early for MMC shareholders” and that investors have called for Mr. Cherkasky's removal for months.

He said the news may be an indication the company will report a poor fourth quarter and that it will be at least two more quarters before any improvement is seen.