No Blame, No Credit
James Suroweicki makes the case for John Thain’s $10 million bonus:
It’s also true that Thain hardly needs the money, considering the hundreds of millions of dollars he made when he was at Goldman. But it’s also true that Thain probably is one of the few executives in corporate America who actually earned a bonus this year. To be sure, Merrill’s stock price is down almost seventy-five per cent from where it was when Thain took over the company, last November. But one would be hard-pressed to blame Thain for that, given the general collapse of the market and, more important, the fact that most of Merrill’s massive losses this year were the result of huge bets made long before Thain took office.
Here’s what I’d say. You learn in the downturn that the business community believes that the profits and losses of major firms has a lot to do with the general economic climate, and relatively little to do with the particular decisions of particular executives. You hear about things like “the general collapse of the market.” But these concepts seem to go mysteriously missing during boom times. But it can’t be both ways. Either executives should benefit when their company prospers and suffer when it doesn’t, or else variation should be sharply curtailed in either direction. The currently prevailing rule is “double-super-duper bonuses when things go up, and large bonuses when things go down.” It’s a stupid system.
60 Responses to “No Blame, No Credit”
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December 9th, 2008 at 10:18 am
There are plenty of ordinary dudes who did good work this year and are going to lose their jobs. I don’t see why John Thain can’t be a dude who did good work and doesn’t get a $10 million bonus.
December 9th, 2008 at 10:24 am
Let’s hear it for the fundamental attribution error. Good things that happen are because I am good, because I work hard and because I know what I am doing. Bad things happen because I am unlucky, because things didn’t fall my way, because the “market forces” are outside my control. Its classic intro college Psych.
December 9th, 2008 at 10:31 am
Matthew once again disappoints with shallow analysis.
Look, if I have cancer, and the best surgeon in the world manages to save my life, but has to remove both my legs and a section of large intestine, I’m not going to be happy about losing important parts of my body, but that’s a much better outcome than the death that would have resulted from the efforts of a less effective surgeon.
Similarly, if Thain did something that no one else could have done (or few could have done), then maybe he deserves a bonus–even if external circumstances resulted in a dramatic drop in ML’s value. I’m not saying Thain deserves $10M. I’m saying that someone in his circumstances could deserve a bonus.
Matt’s argument is accurate but irrelevant. It’s not about larger bonuses when things go up, and smaller bonuses when things go down. It’s about rewards for outperforming the market.
December 9th, 2008 at 10:40 am
Complaining about Matt’s shallow analysis is more compelling if your own argument isn’t completely stupid. Just sayin’.
December 9th, 2008 at 10:40 am
Dear Vorkosigan1: Ok by me. It’s up to Thain, then, to articulate clearly precisely what he did to earn the $10 million. What were his moments of superior judgment? If they can’t be listed, and independently verified, then no bonus. Otherwise Matt is entirely right, and even “outperforming the market” is just an expression of the trivial truth that averages have outliers above and below.
December 9th, 2008 at 10:44 am
The currently prevailing rule is “double-super-duper bonuses when things go up, and large bonuses when things go down.” It’s a stupid system.
You don’t say!!!! It always has been and always will be. Wall Street will stop at nothing to justify their bonuses. They’ll use logic worthy of the GOP if necessary.
December 9th, 2008 at 10:47 am
The übermanagerial class in this country needs to be blackjacked into realistic notions and reasonable expectations regarding compensation. End of story.
For all you “competition” nitwits out there, how come all the European companies that are kicking our asses don’t have execs pulling down zillions? The notion that guys like Thain somehow deserve millions and are going to gallantly have to suck it up and take one for the team because the peasants are revolting is flat-out, batshit crazy.
December 9th, 2008 at 10:48 am
Well, they did do better than Lehman, but that’s not something to be proud of. Compared to the general market they definitely underperformed. If the arguement is that Thain will leave if they don’t give him the cash, then let him. It’s not like getting bought out by BoA is something to list as a bullet point on the resume. Heck, take a look at NYX, he didn’t add a lot of shareholder value during his time there.
December 9th, 2008 at 10:48 am
I think that the quoted text from Surowiecki’s article misses his main point. He’s not saying that Thain should get a bonus for not doing anything wrong because other people ahd already screwed things up (which the quote seems to imply). Instead, he’s saying that Thain saved Merrill from bankruptcy by finding a partner to merge with, thus protecting jobs and shareholder value. Surowiecki thinks this was an impressive achievement, implying that an average manager would have been unable to avoid Lehman or Bear Sterns’s fate for Merrill. If he’s right about that (I don’t know enough to say), Matt’s argument is unresponsive since it just assumes that all that happened was that Thain didn’t screw up, when in reality he excelled.
December 9th, 2008 at 10:50 am
#3 mostly nails it. Fundamental attribution error – we all do this.
In fairness, though, a lot of firms adjust for that. it’s not easy, but it is also not impossible – and in the case of senior management can be very worthwhile – to do their bonus based on a benchmarking of targets rather than the hitting of absolute numbers followed by an adjustment at the end of the year in which the attribution error swings back in.
Otherwise, attribution error – why we’re all above average drivers and only get in accidents when it is the other guy’s fault, and our sports team is the best until it loses because the refs screwed them. You get the drill.
December 9th, 2008 at 10:53 am
Did Merrill Lynch get any of the $700billion bailout cash? If so, the Thain is SOL.
You work for me now, and I’m sure not paying you $10million unless you invented the AIDs vaccine, designed a car that runs on cardboard, and you look like George Clooney.
December 9th, 2008 at 10:53 am
Maybe Thain did something no one else could have done – or not. If he DID do something really stellar in problem mitigation then I’m sure the boards of Merrill and BoA will take care of him in future when the companies are back in the black. (Heh!)
And DTM – it isn’t really about competition for talent. Both Fortune and Business Week have spent the last decade (actually in Fortune’s case a lot longer) documenting the disconnect between executive pay and any reasonable measure of performance over time. In fact, the relationship between performance and relative compensation within most industries is reliably inverse. The higher paid the CEO is relative to other CEOs in the same industry the lower the return to investors tends to be.
December 9th, 2008 at 10:53 am
There was also a time when it might have been considered crass and greedy for an already-enormously-rich man to accept a giant bonus for essentially performing triage on a company that suffered massive losses, in an industry whose workers underwent enormous layoffs due to poor judgement on the part of management.
I’m not suggesting that we ever lived in a golden age of caring and respect. But historically, there was a point when management was expected to at least make some pretense of demonstrating solidarity (i.e., sharing the suffering) with the laborers.
December 9th, 2008 at 10:56 am
It’s not about larger bonuses when things go up, and smaller bonuses when things go down. It’s about rewards for outperforming the market.
No, it’s about not using taxpayer money to give massive bonuses to CEOs and upper managers who maybe kept things from sucking more than they do.
Right now, lots of good people who have worked hard, and maybe even outperformed other workers, are losing their jobs because of the downturn of the market. Lots of people who were lucky enough to keep their jobs are not getting year-end bonuses, or annual raises. Thain shouldn’t either, and I’m glad to see he’s agreed to forgo his bonus.
Incidentally, $10 million can pay the salary for 100-200 people making between $50,000 and $100,000 (not including benefits.) I think the outcry is justified.
December 9th, 2008 at 11:05 am
Its only stupid if you are paying the bonuses (shareholders and taxpers), not if you receive them. Since the people who decide the bonuses are also the ones who decide to give them (subject to board members who got their jobs throgh other top executives) it makes perfect sense. If you could write your own paycheck wouldn’t you be generous?
December 9th, 2008 at 11:05 am
It’s a stupid system.
No, it’s a clever system – if you can get away with it.
December 9th, 2008 at 11:07 am
Reading blogs and comments about Wall Street bonuses is like reading the Inquirer while in the check out line at the liquor store. Diverts us temporarily from our own pathetic lives.
It is bad enough these “masters of the universe” fouled up the financial system and our economy – now we have to gossip about them as if they were really important – like Paris Hilton. What’s next, “Thain vacations in Monaco?”
December 9th, 2008 at 11:09 am
The circumstances under which Thain gained control of ML are vastly different than most other CEOs in large financial firms. He got ML when Stan O’Neal was ousted, and immediately began to clean up shop, write down assets, reduce waste, etc. This was almost a year prior to this year’s match with BofA.
@DTM makes an excellent point about competition. What should keep Thain working for less when another company may be eager to scoop him up for $20mm+, based on his excellent leadership track record? I would love to see Thain give up his bonus voluntary, as a sign of goodwill, but I would not expect that action to be foisted upon him by the firm.
Furthermore, I do believe analysis of the company’s financial statements would reveal a fairly healthy position considering the current climate – Thain is more than an employee, his leadership capital is an asset – therefore, for a company that over $26billion in net tangible assets as of Sept. 08, could certainly allocate $10m to one of their most valuable assets in a time like this.
Without intimately knowing the details of a company’s financials, there is little judgement we can pass on isolated financial choices such as Thain’s bonus this year.
December 9th, 2008 at 11:18 am
He’s definitely worth less than Stephon Marbury.
December 9th, 2008 at 11:19 am
So let me get this right. The finance industry spend the first 7 years of this decade coming up with increasingly complex ways of hiding increasingly risky dept, while driving up the cost of real estate to unsustainable heights. While the going is goood, the rake in billions of dollars in revenue and millions of dollars in compensation for top-level management (for job well done). When the house of cards finally falls they ask for (and recieve) billions of dollars of tax-payer money to keep them afloat, while continuing to pay top-level management millions of dollars in compensation (for job well done). You’ve gotta be effing kidding me.
December 9th, 2008 at 11:22 am
You’ve gotta be effing kidding me.
No, you don’t understand! It’s all about the “free market” and the “efficient allocation of resources” and “competition!” You are stupid!
December 9th, 2008 at 11:27 am
Walt-
Your point might be compelling, if you managed to mention even one thing in my argument that’s stupid. Just sayin…
December 9th, 2008 at 11:30 am
I don’t care if Thain is the smartest man in America. Let him “lead” ML back to the position it once occupied and then he can take all the cash and stock options he wants. If he won’t serve with his $10M, then let the hell with him. In this market and in this economy, Thain is lucky to have a job and half a reputation intact. He is a multi millionaire – if he can’t see beyond his next pay-check then screw him.
December 9th, 2008 at 11:30 am
that should read… “if If he won’t serve without his $10M,..”
December 9th, 2008 at 11:31 am
It’s all part of compassionate conservatism.
But now it’s time to redistribute.
Anyone making over $1 million annually is overpaid.
December 9th, 2008 at 11:32 am
“Thain is more than an employee, his leadership capital is an asset”
Oh, shut the fuck up.
December 9th, 2008 at 11:35 am
One last point. Aren’t members of the ML board the same jokers who were paying million dollar bonuses to Thain’s predecessors? I’m sure they were justifying that too by claiming value. How’d that turn out?
I can’t believe people are still swallowing this crap.
December 9th, 2008 at 11:36 am
Executive compensation is a signal to shareholders. Of course it’s bloated; that’s the point.
December 9th, 2008 at 11:37 am
You work for me now
Nope, sorry. It’s your money that now works for Bank of America. They can tax you to pay Thain’s bonus, then you suck on it when their share price drops.
The banks weren’t nationalized. The treasury was privatized.
December 9th, 2008 at 11:57 am
“Thain is more than an employee, his leadership capital is an asset”
No, Thain is the guy in charge when everything went to shit. I don’t think you quite grasp the point of moral hazard.
Let’s stipulate that Thain is this incredible talented and wise man and he did exceptional work in the past year, doing things for his company that others couldn’t do. Everything still went to shit. And the reason it went to shit is because Thain and people like him, people who were smart enough and good enough to know better, stood by and said and did nothing while the Financial End of Days was built up piece by piece over the course of years.
Unless a corporate executive was running around with his hair on fire the last 5 or so years, trying to warn everyone about the problems being created in American finance, they don’t deserve a dime just because they’ve handled the collapse better than other people.
Mike
December 9th, 2008 at 12:11 pm
You learn in the downturn that the business community believes that the profits and losses of major firms has a lot to do with the general economic climate, and relatively little to do with the particular decisions of particular executives. You hear about things like “the general collapse of the market.” But these concepts seem to go mysteriously missing during boom times.
This argument bothers me a lot less in the context of executive pay than it does in the context of other Progressive goals. Frankly, if shareholders are ok seeing boards siphon off big money to the CEO, that’s fine with me. Markets are weird, complicated experiments in group psychology and I’m not going to pretend I understand what projects business strength more than Wall Street analysts and consultants.
But it is enormously frustrating to then see those CEO’s, and their spokespeople, going out and arguing against things like unions, universal healthcare, and other social institutions meant to establish just a little bit of humanity into American working life. If YOU shouldn’t be penalized based on the neutral functioning of a market, why should the guy who brings you your coffee or the woman driving the forklift in your warehouse?
It’s particularly unseemly considering that the interests at stake in most of the Very Scary Labor Demands are NOT just financial (as bonuses, by definition, are). People who want to spend more time with their kids, or want to make sure that their non-working spouse can get cancer treatments if he relapses, or need time to take care of a sick parent — in boom times, corporate America will say they’re all just greedy.
December 9th, 2008 at 12:21 pm
Here’s what is illogical with this analysis:
You have just awakened from the anaesthetic and don’t know if you’ll live out the day, but you’re praising the surgeon for saving you. You are also accepting a priori that the surgeon is better than “a less effective surgeon” simply because you are willing to pay him more.
The same reason given for not blaming Thain for the poor performance of ML is perfectly good reason for saying he deserves no bonus. Nobody can say if he’s done anything worth a damn until several years have passed.
December 9th, 2008 at 12:32 pm
His excellent track record? What exactly has he done to improve ML? They were so weak they had to be taken over. The best you can say is that he hasn’t shot anyone in the building lobby.
December 9th, 2008 at 12:33 pm
One thing I noticed just doing a few random searches, Merrill Lynch has a lot of its own executives on its board. I think this is common in financial services companies. It’s not very healthy in my opinion.
December 9th, 2008 at 12:37 pm
good post. it reminds me a lot of how many religious people think about god. he/she/it gets credit for all of the good in the world but somehow is not blamed for all of the terrible things that go on.
save me jebus!
December 9th, 2008 at 12:46 pm
The currently prevailing rule is “double-super-duper bonuses when things go up, and large bonuses when things go down.” It’s a stupid system.
These are stupid people.
Is it any surprise that lavishing these guys with all the wealth iin the country has lead us to disaster? Do we really think that individuals who only want to accumulate money through any means are the best persons to put in charge of the economy, or indeed in charge of anything?
December 9th, 2008 at 1:08 pm
The currently prevailing rule is “double-super-duper bonuses when things go up, and large bonuses when things go down.” It’s a stupid system.
It’s a stupid system except for the even stupider system of having government usurp salary decisions from a firm’s owners. Far better simply to raise rates on the wealthy – ideally a good deal higher than Obama plans to.
December 9th, 2008 at 1:26 pm
It’s a stupid system except for the even stupider system of having government usurp salary decisions from a firm’s owners.
I generally agree that the salary decisions are up to a firm and it’s stockholders and not the government. With the huge, gigantic exception of when the government has just given the firm a huge amount of money and will probably be asked to give more money, in which case it does have a say in how that money is spent.
December 9th, 2008 at 1:34 pm
I would have thought that the best system for executive bonuses (from a shareholder POV) would be to tie the bonuses to out-performing some broader market index, e.g. the S&P 500, or an industry-specific index. You could do this with stock options whose strike price moves up and down with the index.
Why isn’t this a common system? (Or maybe it is, and I’ve just never heard of it.)
December 9th, 2008 at 1:38 pm
There’s little the matter with this problem that Robespierre couldn’t solve in a few days.
December 9th, 2008 at 1:53 pm
This isn’t a “system”. It is looting.
December 9th, 2008 at 3:24 pm
Suroweicki does exactly that, in part of his post which Matt of course ignores:
“More important, had Thain not engineered the sale of Merrill to Bank of America, there’s a reasonable chance that the company would have either gone out of business or, more likely, been taken under in the way that Bear Stearns was in March. Either way, shareholders would have ended up billions of dollars poorer, and it’s also likely thousands more Merrill employees would have lost their jobs.”
“Unlike the executives at Lehman and Bear, Thain recognized Merrill’s vulnerability and its need for a deep-pocketed parent. He didn’t get wrapped in delusions about “weathering the crisis” or spend too much time fretting over the loss of Merrill’s independence. Instead, he played the hand he’d been dealt, and, as it turned out, played it very well. It’s obviously bad form at this point to say anything good about Wall Street executives, but if preserving shareholder value is still a criterion for evaluating executive performance, there’s little doubt that Thain did a bonus-worthy job.”
And when Bank of America goes under and ends up losing that money anyway and employees end up losing their jobs anyway?
I liked Cassidy better than Suroweicki. If I had time I’d go over Suroweicki’s journalism during the recent years with a fine tooth comb and demonstrate, I bet, how he was wrong as everyone else about Greenspan, the housing bubble, regulations, overleveraging, rampant accounting fraud, etc. I bet he was more or less a cheerleader too as I bet Thane was/is, since it pays well. Why should we trust Suroweick’s claims, like that Bank of America has deep pockets? Maybe it’s a house of cards too?
Meanwhile a US Attorney is charging Illinois’s governor with auctioning off the open US Senate seat like a sports agent. Could make one cyncial.
December 9th, 2008 at 3:26 pm
Unless I’m mistaken he claimed he could boost the stock price. He failed. Miserably. No employee with a similar track record would be granted a bonus. This dodge about “competition” doesn’t cut it. He had a goal, he didn’t meet it. He should consider himself lucky that he isn’t on probation.
Yeah, I know, this is the board room, you don’t pay for fucking-up there. And make no mistake, this is not a success story.
December 9th, 2008 at 3:37 pm
it would be a simple solution to te all CEO bonus’ to dividends paid on stocks (contract calls for bonus = to 100000 dividends for instance). That way, any bonus given to a ceo is shared by stockholders, and as such, they share in the “profitability” of the business. However, too large a dividend puts the company in immediate financial distress, so caution must be used. The danger in the current system is that giving cash bonus’ based on flimsy “outperforming the market” scenarios(which nearly every ceo seems to do), or providing for stock options only places too extreme a value on short term interests (which is never in the interest of shareholders), turning investing into gambling. In addition, super tax brackets (ie. 70% for every dollar earned over 2 million ) for such supersize salary/bonus, would do a lot to change the way that money is distributed in our country, and would begin to to address rich/middle class wealth disaparities that have always led to harsh economic outcomes (when a few have a lot of money and the economy cycles down, those few don’t still spend 80% of their income for food and housing like the middle class does. They stuck it away, taking large portions of wealth out of the system. the middle class has to spend a significant proportion of their wealth on daily expenditures no matter what the financial environment and thus the economy continues to work, even if at a slightly slower pace).
December 9th, 2008 at 3:49 pm
bonus – something given or paid in addition to what is usual or expected.
The idea that someone is entitled to excess is astounding. No. He does not deserve more than his salary. No one does.
December 9th, 2008 at 4:47 pm
No, this is not accurate, for the “things go down” case. When a company is tanking, you don’t want key top executives to leave; that would hurt the company, and send the wrong signal to the market. So, they must be given double-super-duper retention bonuses.
December 9th, 2008 at 5:06 pm
He should be fired, and certainly should not get a performance bonus for this year.
December 9th, 2008 at 5:48 pm
Meanwhile over at Morgan Stanley the CEO and two co-presidents are refusing to take bonuses this year (as they did last year too) despite the fact that MS at least did not quite get driven into the ground.
There’s still some integrity left on Wall Street. I;m waiting to hear what the Goldam Sachs CEO does, to see if maybe thsi will be a trend.
December 9th, 2008 at 7:33 pm
Uh, it is a weird thing that what one deserves, in the case of an assembly line working, is entirely at the mercy of what the company’s interest is. Why, then, would giving Thain a ten million dollar bonus benefit Merrill Lynch? I see no benefit at all. DTM’s rather comic routines about competition have a tendency to obscure what economic activity is about – which, of course, is to serve the social good primarily, and – in as much as the one is consistent with the other – for businesses under that rule to make goods and services at a profit. The pretence that a pathetic inbred labor market in the top management echelon, which has been so removed from real economic factors that there is no penalty for bad performance, nor any motivation to trim costs by getting the best executive performance at the lowest price, is competitive is like pretending anybody can become the Pope. It defies common sense and history. I can’t see any benefit accruing to Merrill Lynch whatsoever if no bonus goes to the man who presided over the 75 percent drop in its value. What is he going to do, quit? That can only be to the good. M.L., if it is to survive, needs people who were not immersed in the easy money, risky instrument wealth of the past decade.
December 9th, 2008 at 9:43 pm
Dtm, I think the problem is with your model of competition, rather than with MY. Your theory seems to be that the competition within the labor market of upper management personnel is synonymous with the competition between enterprises. Now, since the compensation packages are presented as “aligning” the interest of management with the company, we already know that, in practice, there are two levels of competition here. The question is, does the former competition among upper management personnel to gain the highest reward possible conflict with the competition between enterprises. The latter is a competition not only to profit in the short term, but to compete in the long term – to survive as an enterprise. The literature on the contradiction between these two contexts is long. Back in 1990, Michael Lewis wrote an entertaining piece about how the then CEO of Macy’s bought the company using his inside knowledge, threats,and enormous amount of borrowed money, and then went on to reap enormous profits for himself alone as he spun off real estate – shopping centers – which, as a CEO, he valued at 200 million, and which, as the owner of Macy’s, he sold a year later for 700 million. It was competition at its best! with the competitor who won being the CEO who was willing to embark on any kind of unscrupulous deal to allow him to extract rents from the company he was managing. CEOs are like cowbirds, parasitic, big birds who lay eggs in other birds nests. The hatched bird, being bigger, eventually kills the other birds. Competition does its work here, but not for the betterment of the other bird species, solely for the parasite.
If Thrain was a half way decent CEO, he’d realize what a black mark it would be against ML to even consider his bonus proposal, originally for 30 million dolllars. But, like a cowbird, he doesn’t care. I would find this an amusing instance of the psycopathy of the wealthy, except that currently, the wealthy can accrue amazing amounts of money without it being expropriated, as it should be, by a very high and progressive marginal rate – something like 90 percent over 10 million would be nice. Thus,such psychopaths gain political and economic power, and end up hurting millions of people.
It is entirely bogus to ask whether Thain deserves his bonus. From the competitive point of view, the question is, is that 10 million a good investment? The answer is obviously no – cheaper help is now available! You can look around Wall Street and pick up experienced help for a song. That’s what competition means, incidentally. Somebody said above that if ML didn’t jump, somebody would pick up Thain for 20 million. I’m sure that makes everybody tremble. Where are the other bidders for his excellent services?
December 9th, 2008 at 10:18 pm
I’m curious why no discussion of the relevant boards of all of these institutions isn’t taking place. My, undoubtedly naive, understanding of these things is that Board Members are supposed to be some sort of overseers, in some way protecting shareholder interests, etc. My understanding is also that Board positions for large public companies are highly sought after and are typically PAID. As with pretty much everyone else in this sorry debacle it appears that all these experienced, important board members screwed up every bit as badly as did all the other players.
I may be projecting as I served on a board of a small non-profit for a year and it was a completely disillusioning experience. The other board members were there soley to boost their resumes — they took no action whatsoever while the Executive Director of the agency ran the place into the ground. The ED wasn’t making payroll to staffers, but she and the Board President were able to take a trip to Italy to observe a similar agency there, paid for via the grants and donations the agency got. They had a nice little schtick and were able to fool enough people for about 4 years to have some good times before the funding dried up. Members told me over and over that the role of a Board is to advise and oversee, but from a distance, and not to interfere in the running of the organization. All the way around it was a nice little racket.
What’s the deal with these corporate boards?
December 9th, 2008 at 10:58 pm
The whole point, DTM, is that you can’t reduce the discussion of executive compensation to the question of competition between firms, given the terms in which this compensation is justified is about two levels of competition that are not reducible one with the other. Notice, in Suroweicki’s post,which echoes the editorial in CEO mag, says ABSOLUTELY NOTHING about whether paying the bonus will or will not contribute to the competitive posture of ML in the future, instead couching this in terms of what Thain “deserves”. The beginning of the great sucking sound of management pilfering the enterprises that they supposedly managed was that their interests weren’t “aligned” with the company’s, a mafia like slogan that came out of the late 80s Harvard Business School. Usually, for lower level homo sapiens, there is a simple solution to this. It is called firing. But in the world of “competitive” enterprises, in which competition is entirely within the purview of the board and large shareholders – notice the lack of shareholder interest,there – management has to be bribed enormously just to do its job.
So: it is your model of some unified, unilateral competition that is a distortion of corporate reality. The context in which corporations have to “compete” for high priced condittori to lead them is a context created entirely by an interlocking group of upper management types, headhunting agencies, and interested economists, and enabled by politicians unwilling to tax the shit out of these bloated packages, so that they would not be worth competing for. Its effect has been to produce short term gains for shareholders at the expense of long term sustainability – which we will see as the recession deepens. MY is correct to note Thain’s request was absurd. As is the rhetoric in which it is defended, which seems to depend entirely upon a merger that Thain is unlikely to be able to reproduce in the future. So how in the world would paying Thain 10 million dollars make the enterprise more ‘competitive”?
December 10th, 2008 at 12:37 am
Here is the real question: Why did he ask for $10 million when he could have asked for BoA stock options that in 5-10 years could be been worth 100’s of millions if not billions.
The the US Gov’t won’t let BoA go under – with all the stimulus the US will recover in a few years. A US recovery means a recovery for BoA stock – why not just take the stock…?
In terms of P.R. and in terms of $ asking for $10 million in cash now rather that billions in stock later seems crazy…
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