Give Thain A Break But Not A Ten Million Bonus!
January 22, 2009 by Tisa Silver
Filed under Finance
John Thain submitted his resignation this morning after a brief meeting with Bank of America (Ticker: BAC) CEO Ken Lewis.
Just one month ago, Thain requested a ten million dollar bonus! Yes, you read it right.
In the past week, news emerged that Bank of America needed an additional $20 BILLION in bailout money. Even if this figure is inaccurate it is painfully clear that BofA is in serious trouble.
Thain withdrew the request after backlash from the public and hesitation from the board of directors. What possessed him to ask in the first place?
A little bit of history: Mr. Thain joined Merrill Lynch as CEO in November 2007, less than a year before the Merrill Lynch-BofA merger was announced. According to MarketWatch, he recently took heat from BofA’s management for not coming clean about the Merrill’s growing losses late last year. Merrill closed out 2008 with a fourth quarter loss of $15 billion.
According to the NY Times, Mr. Thain reportedly drew the ire of BofA folk when he opted to pay his employees an early bonus just before the merger’s January 1 closing.
Before I bash his audacity to ask for a multi-million dollar bonus, I have to come to his defense. Just for a moment, I promise!
He came in as CEO of Merrill Lynch, once a worldwide brokerage powerhouse. I think we can agree that there is a learning curve for such an undertaking. What learning curve is allowed for a person coming into any company remotely involved in banking in the midst of the subrprime mortgage meltdown, the credit crunch and the near worldwide collapse of financial markets?
Furthermore, why were BofA executives looking for Thain to disclose the depth of Merrill’s losses? I thought due diligence was conducted prior to acquisitions for the acquiring firm to become deeply acquainted with their targets. We are in the age of the bailout, a time when pre-merger activities may be hurried by the government and crammed into a weekend. But that is not John Thain’s fault.
Could he have been more forthcoming? Perhaps. But he may not have known just how bad it was.
What he should have known is that there is a time and a place to ask for a $10 million bonus. Needless to say, the time was not 2008 and the place was not BofA.
(Image source: Picapp)
Good post, Prof!
I may be a little picky but I think when your comp package is $83 million, you’re supposed to know what to do when you come into a job and not have a learning curve.
Learning curves are for temps and kids coming out of college. :)