John Thain

On Second Thought, Merrill CEO Will Forgo Yearly Bonus

Zachary Roth | December 9, 2008, 9:11AM

That didn't take long.

Yesterday, as we noted, the Wall Street Journal reported that Merrill Lynch CEO John Thain was seeking an annual bonus of as much as $10 million -- after seeing his company lose over $11 billion this year.

New York Attorney General Andrew Cuomo and Senate Majority Leader Harry Reid were both quick to express their outrage, noting that Bank of America, which has completed a deal to buy Merrill, received $15 billion from the bailout fund this fall. And Merrill's board appeared reluctant to go along.

And sure enough, at the company's board meeting yesterday afternoon, Thain announced that he, along with other senior execs, would forgo bonuses this year, "given current economic and market conditions."

Given the level of outrage that Thain's request had provoked so quickly, the board's apparent opposition, and the broader public mood against excessive CEO pay, Thain may have seen the writing on the wall.

And given that he got a $15 million bonus when he joined the firm last fall, we think he should be fine.

Bailout

Reid, Cuomo, Blast Merrill CEO's Request for $10-Million Bonus

Zachary Roth | December 8, 2008, 2:47PM

The news that John Thain, the CEO of Merrill Lynch, has requested a $10 million bonus isn't sitting well with some prominent political figures.

A statement from Senate Majority Leader Harry Reid notes that in October, Merrill received $10 billion in bailout money. Reid then declares:

The TARP program, from which Merrill Lynch has taken billions of taxpayer dollars, was designed explicitly to limit executive compensation, bonuses and golden parachutes. While American families struggle to keep their jobs and their homes, I question the chutzpah of asking for a $10 million taxpayer-subsidized bonus. Americans deciding which bills to pay this month just to make ends meet do not want their hard-earned money even indirectly spent rewarding executives from banks that are largely responsible for the economic crisis. I sincerely hope that Merrill Lynch rejects this request.

Meanwhile, New York Attorney General Andrew Cuomo, who is conducting an investigation of executive pay on Wall Street, has written a letter to Merrill board members that makes similar points. Cuomo writes:

Paying executives at Merrill millions each in "performance" bonuses in this context [of a taxpayer-funded bailout of Wall street firms] would be oxymoronic to say the least and certainly a thumb in the eye to taxpayers. Enough is enough.

Bailout

Merrill Chief Wants $10-Million Bonus For Presiding Over $11-Billion Loss

Zachary Roth | December 8, 2008, 1:06PM

Talk about tone deaf!

Merrill Lynch chief John Thain wants a bonus of as much as $10 million, reports (sub. req.) the Wall Street Journal.

Merrill's compensation committee is, not surprisingly, said to be objecting, pointing out among other things that, due to the dire economic situation, other firms like Goldman Sachs -- which did better than Merrill -- are forgoing bonuses this year.

Merrill has lost almost $12 billion this year, and is about to be taken over by Bank of America. Its shares have fallen fom $50 when Thain took over late last year to $13.04 at close of trading Friday.

It looks like Thain -- who was a major fundraiser for John McCain's campaign and was described by USA Today as a member of McCain's "team" -- is a practitioner of the bargaining strategy in which you begin with a maximalist offer as a starting point for negotiation:

A few months ago, when the board began seriously considering 2008 bonuses, a proposal was presented to the compensation committee by Merrill that Mr. Thain should be paid in excess of $30 million, according to people familiar with the matter. That number has since come down in recent talks with various board members and Mr. Thain has recently indicated to committee members that $5 million to $10 million is more reasonable.

The Journal notes some evidence in Thain's favor:

Mr. Thain's decision to sell Merrill likely salvaged billions of dollars for shareholders and saved a huge number of jobs at the firm, even though thousands of positions will be eliminated following the takeover.

Mr. Thain's quick moves won him respect on Wall Street, especially in contrast to top executives at Lehman Brothers Holdings Inc. and Bear Stearns.

Still, to Americans hit by the mortgage crisis that Merrill and other Wall Street firms helped set the stage for, those points may not carry much weight.