Merrill Lynch CEO: "Nothing Happened In The World Or The Economy" That Would Justify Suspending Bonuses
You know how Merrill Lynch recently lost $15 billion? Remember how we're in a unbelievably huge global financial crisis that threatens to unravel the fabric of our economy? John Thain says that's no reason not to pay billions of dollars in bonuses.
NY AG Andrew Cuomo is seeking to force John Thain, former CEO of Merrill Lynch, to release the names of the Merrill executives who shared over $3.6 billion in bonuses before the merger with Bank of America. Thain is refusing, and said this about the bonuses:
"Bonuses were determined based upon the performance and the retention of people, and there is nothing that happened in the world or the economy that would make you say that those were not the right thing to do for the retention and the reward of the people who were performing," Thain said, according to the transcript.
Mr. Cuomo's office recently released information that suggests that Merrill Lynch may have moved up the bonuses in order to pass the cost on to tax payers, and claims that the bonuses were not spread evenly throughout the organization — but were structured in such a way as to enrich the top Merrill executives. Cuomo says that the top four bonus recipients received a combined $121 million, and that 696 individuals received bonuses of $1 million or more.
Cuomo said the bonuses were set Dec. 8 and not adjusted later when it turned out pretax losses were $7 billion more than expected. Merrill reported Jan. 16 that it lost $15.31 billion in the fourth quarter and $27 billion for the year.
Thain was dismissed in January by Bank of America chief executive officer Kenneth D. Lewis. The move came after disclosure of the bonuses and Merrill's unexpectedly large fourth-quarter loss.
Cuomo Seeks to Force Thain to Reveal Merrill Bonuses (Update2) [Bloomberg]
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Comments:
This just in: There is no honor among thieves.
pardon the obscenity, but I believe it would be in John Thain's best interest to eat a dick.
I don't really see what the deal here is. You can't just not pay people bonuses that are in their contract (unless... you're bankrupt). That would be illegal and would open themselves up to a civil suit.
I really do believe John Thain is the new devil...
@z4ce:
The bonuses couldn't have been that iron clad in contracts or they wouldn't have been able to move them forward into December.
Although I think Thain is a disgrace, I generally agree with his comment as quoted. Everyone who works for a financial firm has a compensation structure that is partly comprised of discretionary performance compensation, which is what is reffered to here as a bonus. That means that everyone from the administrative assistants on up receive a portion of their annual income at the end of the year. Obviously $5M bonuses are excessive, but if bonuses were not paid at all, many average working Americans would miss out on a large portion of their annual income that they depend on to pay their mortgage or put food on the table. And for every person making a $5M bonus there are 1,000 making $5,000 bonuses that they rely on to pay bills.
For those in the know: Jerkwad.
>the top four bonus recipients received a combined $121 million
$30 1/4 mill to each, divided equally. If you gave me even just a quarter of that I could pay my all bills, stop working and retire. Goddamn.
Didn't he say "If you don't pay your best people, you'll destroy your franchise." Even though those "best people" did do such a thing?!
@z4ce: You really don't see the absurdity in paying billions of dollars in tax payer bonuses for a failed company? You must live in a world similar to a David Lynch movie. Or maybe you are a robot sent from the future where money doesn't exist anymore.
@concordia: On a completely juvenile note, dude looks like a gorilla or something, his eyes are positioned really creepily.
Also, a black jacket with a red tie? How plain.
"for the retention and the reward of the people who were performing"
How on God's green Earth can you want to retain, let alone reward, people who have screwed up so royally?!!!
If HE, who surely got the biggest bonus, deserved to get fired for incompetence then OF COURSE most of the others probably deserve the same thing. Even if they don't, how can they possibly defend taking a PERFORMANCE bonus in the fiscal year that killed the bank through mismanagement?
Complete. abject. moral. FAILURE!
You know what would justify scaling back on the bonuses?
Snipers taking out crooked CEOs, blood running in the streets, even the "legal" method of making them pay every penny back, with interest!
But yeah, until one of those things (or more), happens, tough luck, it's business as usual.
If these guys were such 'top performers' why not tell us who they are, so we can compliment them all on the wonderful job they did.
This guy needs to go to prison. That Federal PMITA prison. Along with all these 'top performers'
dumbest. statement. ever. what I would like to know is why dont we lock these people up, when are we going to stop putting up with this crap and rise up and say enough, the goverment needs to grow a pair and put an end to this injustice.
Retention? O RLY? Where the hell are they going to go? People are so freaked out that they might be next to get drop kicked out the door, they ain't going to walk out willingly.
So, the person who shorts the market in September 07 gets no bonus? That person probably netted the company billions. People really need to understand how investment banking works.
I'm not trying to argue that the scheduling of the bonuses isn't criminal. Myself, like every commenter here, doesn't know enough to make that claim. The AG doesn't either and that's why he's requesting information. You should just understand that while the firm may have lost massive amounts, there were still people in the bond market and such who helped the company and deserve cash.
There are cases where many times 90% of the employees generate 10% of the profit and the rest generate 90% of the profit. In this case it is reversed. 90% of the people generated 10% of the profit and the rest generated 100% of the losses and took out all the profits as well.
So should we force a company to not pay bonuses to the employees who did well, just because the management didn't oversee the idiots who almost bankrupted the company?
more than the economic crisis, it's moves like this that will drive people to seek some sort of mob justice and riot.
$3.6B is 75 000 people with salaries of $48 000 , the median household income of the US. Contractually obligated or not, with such definite organizational failure, the people at the top should not receive reward for incompetent performance.
This guy is an FNNNNNin dip stick . under his leadership they lost billions.
Oh - that's why i moved 2 millions out of there service.
Oh I see the absurdity. I don't think they should have been bailed out. Rather, they should fallen into Chapter 11 bankruptcy and and the bonuses owed would just become another "debtor" in the bankruptcy.
But if they have cash to meet their existing contracts what choice do they have but to pay them out?
@z4ce:
Sure you can! I know many people who were denied their bonuses this year due to the economy. If we can handle it, I wonder why these guys can't.
So, what he's really saying is that executive bonuses in the past, for instance, while Merrill was highly profitable instead of hemorrhaging money, were severely inadequate.
Given that -$15,300,000,000 = $3,600,000,000 bonus, imagine how much they would have made if they'd broken even!
What he also said is that 'nothing happened in the world, or the economy..." meaning that their $27,000,000,000 loss is entirely on the shoulders of management. I want a job where I can fail that catastrophically, and still make my yearly bonus. God Bless America.
remind me again how giving these people taxpayer money is going to "stimulate" the economy...
has anyone figured out why these bonuses are even allowed in the first place? oh here, our company is going in the shitter, have all our money! Good job CEO, you screwed up, here's your paycheck! I mean It's almost like they purposely build up a huge empire and bring it down, just to cash out the bonuses.
@z4ce: Bonuses are never* guaranteed. We've just (as a society) come to see it as part of our annual salary, if you're lucky enough to get one.
*I have seen work contracts that stipulated that if a company or product met a certain profit, you would get a % of that profit. When the company fails, I don't see these bigwigs putting a % of their own money back in to help fix the problem.
These asses need to be put in front of a firing squad and nothing less.
@SexCpotatoes: With people like Thain and Madoff, I'm actually very surprised this hasn't happened yet.
Maybe someone needs to start a 7.62mm donation pool or something.
@waltcoleman: Somebody has to accept those millions for redecorating their offices. Time to go into interior design.
Thanks for the picture. Now if I see this dick-for-brains, I can beat him into a living pulp. Thanks!
His excrement doesn't stink like ours, it comes out wrapped in cellphone, a bow and a delicate bouquet. He and his buddies are so much better than us they deserve bonuses
Seriously. Time for a revolution. If you FAIL you get NO BONUS.
Ok, here's a nice compromise. You can have your bonus, but the tax on it is 100 PERCENT. The company obviously didn't need our money to stay afloat, so we should tax the recipient 100%,and put the money back in our hands.
@z4ce: Uhhmmm if my company can effing freeze MY salary ... and cut 5% off my friends salary due to the "economic environment" then these guys can sure as hell lose an effing BONUS!
Working my rear off for a year with no chance of a merit ... or even cost of living increase? Yes, and at least I have a job!
Bit of a contrarian take here. But...
This is not John Thains fault.
He is simply doing what people without ethics (and morals ) do. He is helping himself and his cronies to all the money that they can carry off because, well , he can. You would,too,if the owners of your company looked the other way while you took whatever you could out of the till. Even though the money that he divvied up to his buds like monkeys at a salad bar rightfully belonged to the shareholders,they had extraordinary powers to do so because the board of directors approved their salary and bonus plans unanimously ,year after year. All was well as long as the shareholders were getting theirs. It's only after the company was wrecked (and has damn near taken Bank Of America down with them) that everbody gets their knockers in a bunch and starts calling for heads to roll.
Shareholders could have rebelled .(Indeed,some companies shareholders have placed their CEO's pay and perks up for votes by everyone. These initiatives are usually blocked and always voted down).The Board of directors could have voted "no" to these outrageous thefts of company money. We all know how that turned out.Or the fucking owners of the company could have read the public filings and proxy staements and sold their stock when they realized they were being swindled.
But no. It's a lot easier to talk about firing squads and ass whoopins' AFTER the damage is done.
I cannot imagine that a million+ dollar bonus isn't exactly detailed in a contract. Not all bonuses are tied to company profitability (my current one isn't). In the case of brokerage executives, you would think it would be. But that appears otherwise, doesn't it?
I any case, I don't see how you can renegade on the contract unless you force the company into bankruptcy. And we didn't do that. We bailed them out.
@WBrink: I help MY company make money and MY salary is frozen this year. I said it above, and I will say it again ... Eff their bonuses. I work for a technology company that has nothing to do with Wall Street except as a member, and these fellows can rot in hell
Nothing happened ? WTF. Is this goofball related to " Baghdad - Bob" the EX Iraqi "Information minister'?
@concordia: And I'd be willing to bet that you could easily run the company into the ground just as well as any of them.
@z4ce: Bonuses are almost never guaranteed and are up to the discretion of management, hence the term "bonus" as in additional comp.
If the pay were guarnteed, it would be in "base pay".
Given that losses were $27 Billion, I don't know how targets could have been met by anyone.
@z4ce: The Merrill Lynch bonuses were based on profitability, which is why they had to accelerate the bonus schedules, so they could calculate them on market conditions before the collapse/bailout.
@B:
Ah, I see. So basically they wouldn't have gotten bonuses if they hadn't manipulated the schedule. Yeah, that looks pretty much like fraud.
I would say or do anything to get that money. It doesn't matter how ridiculous it sounds to us, cause in the end he get's the money and we get left holding the bag. There is no fix to the current economic problem other than hardship. We were living on borrowed money and now the bills are paid. No amount of money printing is going to fix the problem. It will just boost inflation and we'll still be in the same place. The key is to fix make sure you have a mountain of money and a safe place to live for the next decade. Thain is doing just that.
Nothing in the world or the economy justified punching Dick Fuld in the face...
...oh wait, yes it did.