[Reader-list] Merrill Lynch top brass to share $200 million for less than a year's worth of work

[Mohit Thatte]

>From the website of Merrill Lynch: "Merrill Lynch is one of the world's
leading wealth management, capital markets and advisory companies, with
offices in 40 countries and territories and total client assets of
approximately $1.6 trillion."

In my opinion, there is nothing amazing about this piece of news. The free
market applies to labor markets as well (assuming a CEO is still classified
as labor) and determines a fair price for services delivered. The CEO
entered into a contract with a corporation and the contract was honored.

The only people who can feel a tad aggrieved are the small investors who
sank money into shares of Merrill trusting the corporation to deliver
profits which it failed to do.

Moreover, why should the general public have an opinion on CEO salaries? If
you genuinely feel that this CEO is paid too much, then you are free to go
short on Merrill, or not invest at all and remain unaffected.





On Thu, Sep 18, 2008 at 8:30 PM, Vivek Narayanan <vivek at sarai.net> wrote:

> Amazing, isn't it?
>
> This might also be a good time to revive the classic song by The Coup,
> "Five Million Ways to Kill a CEO":
> http://www.youtube.com/watch?v=RQthFDpYCys
> Lyrics here:
> http://www.ohhla.com/anonymous/coup_the/p_music/5million.cou.txt ("We
> could let him change that tire / or we could all at once retire.")
>
>
> Banking crisis: Merrill Lynch top brass set to share $200m
> Even by Wall Street standards, the sums are unusually high for such a
> short period of employment
>
> * Andrew Clark in New York
> * guardian.co.uk,
> * Wednesday September 17 2008 18:27 BST
>
>
> Merrill Lynch's newly recruited chief executive, John Thain, stands to
> share a $200m (£111.4m) payout with two senior lieutenants for less than
> a year's work which culminated this week in the bank surrendering its
> 94-year-old independence.
>
> The Wall Street bank known as the "thundering herd" agreed to a $50bn
> takeover by Bank of America on Monday after a hasty 48 hours of
> negotiation. The talks were prompted by fears over banking stability
> arising from the collapse of Lehman Brothers.
>
> Thain, who was previously the head of the New York Stock Exchange,
> joined Merrill in December with a mandate to steer the bank out of
> financial trouble. When he arrived, he was given a $15m signing on
> bonus. If he leaves in Bank of America's takeover, he stands to get a
> further $11m in accelerated stock payouts.
>
> Two former Goldman Sachs executives hired by Thain are likely to do even
> better. Merrill's head of global trading, Thomas Montag, who joined in
> August, has already received a $39m bonus. Together with stock options
> accelerated by a buyout, he could end the year with $76m. The bank's
> head of strategy, Peter Kraus, was given a $95m package including
> bonuses and stock awards to replace his generous compensation at Goldman
> when he joined in May, according to figures obtained by Bloomberg News.
>
> It is yet to be determined whether any of the trio will have a role at
> Bank of America. Even by the standards of Wall Street payouts, the sums
> are unusually high for such a short period of employment.
>
> Steven Hall, a New York-based executive remuneration expert, told the
> Guardian that Merrill had little choice but to honour the contracts: "At
> the time they were recruiting [Thain], a negotiation took place and he
> would have told them this is what his price was. You can't go back and
> change things now — it's almost a kind of buyer's remorse we may be
> seeing."
>
> Thain, 53, is a leading fundraiser for the Republican presidential
> candidate John McCain. A doctor's son, he is an amateur beekeeper who
> used to keep hives in his back garden. He bought a two-bedroom apartment
> on New York's Park Avenue two years ago which had an asking price of
> $27.5m. He was hired by Merrill to steady the ship after huge losses on
> the credit markets which were run up under the leadership of ousted
> chief executive Stan O'Neal.
>
> At a press conference this week to announce the buyout by Bank of
> America, Thain admitted that selling Merrill was not the original plan:
> "This isn't necessarily the outcome I would have expected when I took
> the job."
>
> He insisted that he had made progress in tidying up Merrill: "We've been
> consistently cleaning up the balance sheet, repairing the damage that
> had been done over the last two or three years."
>
> Thain reportedly fought back tears at a meeting to brief staff on
> Merrill's buyout this week. Analysts say that Merrill's liabilities were
> greater than he could have anticipated when he joined — and some have
> praised his decision to sell.
>
> Defenders of Wall Street's controversial pay packages generally argue
> that although bankers do well during good times, they hold insecure jobs
> which are vulnerable during downturns.
>
> "What we do see is that when times get tough, people lose their jobs —
> and that's the ultimate in pay cuts," said Hall.
>
> A Merrill Lynch spokesman said the bank would not comment on executive
> compensation beyond the statutory disclosures required in filings with
> regulators.
>
>
> * guardian.co.uk (c) Guardian News and Media Limited 2008
>
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-- 
-Mohit Thatte
"*Smart one-liner goes here*"