wiseass thain wants 10m bonus WTF

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Thain Spars With Board Over Bonus at Merrill Article
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By SUSANNE CRAIG
Merrill Lynch & Co. chief John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered securities firm's compensation committee is resisting his request, according to people familiar with the situation.

The committee and full board are scheduled to meet Monday to hear Mr. Thain's formal bonus recommendations for himself and other senior executives of the New York company. No decision has been reached, and it isn't known what Mr. Thain will recommend, but the compensation committee is leaning toward denying the executives bonuses for this year, these people said.


John Thain
The difference of opinion between Mr. Thain and directors who hired him just a year ago is part of the bigger debate about compensation practices at Wall Street firms. Many blame Wall Street for fueling the credit crisis that dragged the U.S. economy into recession, and the giant paychecks that are routine at many Wall Street firms have received deepening criticism as the government extends aid to banks and securities firms.

Merrill has suffered net losses of $11.67 billion this year and is about to complete its acquisition by Bank of America Corp. later this month. On Friday, shareholders of both companies separately approved the deal. Mr. Thain has said he deserves a bonus because he helped avert what could have been a much larger crisis at the firm, say people familiar with his thinking.

Since taking over as Merrill's chairman and chief executive officer last December, Mr. Thain cleaned up messes inherited from his predecessor, and the takeover agreement in September averted a possible collapse of the 94-year-old company. 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.

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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 Cos. Lehman filed for bankruptcy in September, and Bear was sold to J.P. Morgan Chase & Co. in a government-engineered deal in March.

Members of Merrill's compensation committee, which makes recommendations on pay and bonuses to the full board, say they agree with Mr. Thain that the takeover is in shareholders' best interest, according to people familiar with their thinking. But they say it would be foolish for the committee to ignore strong public sentiment against large compensation packages, even though Merrill says it opted not to take the recent multibillion-dollar federal capital injection that many of its rivals did.

Committee members are also weighing the fact that other firms are paying no bonuses, these people said. Also, they considered that most other Wall Street firms, including Goldman Sachs Group Inc., which did better than Merrill this year, isn't giving out bonuses to top executives. Executive bonuses also would look bad when as much as 20% of Merrill's employees will soon lose their jobs.

Any decision to pay Merrill executives big bonuses could also raise eyebrows at Bank of America, which is known for its often thrifty ways. Bank of America spokesman Scott Silvestri said: "We have no comment. They are still an independent company."

Mr. Thain's request is still relatively small by Wall Street standards and in recent years, as many CEOs were making in excess of $50 million, Mr. Thain took home much less.

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.

It isn't known whether Mr. Thain was aware of the initial suggestion. According to a person familiar with the matter, Mr. Thain's first formal discussion with the firm's compensation committee will be Monday.

Wall Street bonuses can include cash and stock, and typically account for a majority of a person's annual compensation. Top traders and bankers on Wall Street typically make a base salary of about $250,000, with the rest coming as a bonus. Employees in most firms tend to get their bonus numbers just after their fiscal year ends in November, with the cash coming early in the new year. Merrill operates on a calendar year, so bonuses come a bit later.

A debate has been raging for months over how big these bonuses should be. At most firms, about half of all revenue is allocated to compensation, and multimillion-dollar bonuses are routinely paid out to ensure the best talent stays put. Most of Wall Street's rank and file will get bonuses, compensation experts say, but overall levels are likely be less than half of those in 2007.

Mr. Thain, 53 years old, gets an annual salary of $750,000. He worked for years at Goldman, most recently as the firm's president, and was a partner when Goldman went public in 1999, resulting in a financial windfall. He left Goldman in 2004 to run the New York Stock Exchange and received $9.4 million in 2006, his last full year as chief executive of that firm.

When Mr. Thain landed at Merrill in late 2007, he received a $15 million cash signing bonus and a pay package that was valued from about $50 million to $120 million over a number of years.

Merrill shares were trading above $50 when he was hired, and his pay package was structured heavily toward his ability to increase the price by another $40 or more. Merrill's shares have fallen steadily this year, closing Friday at $13.04 in 4 p.m. New York Stock Exchange composite trading.

Once Bank of America's acquisition of Merrill is complete, Mr. Thain will run the combined global banking, securities and wealth-management business.

A decision not to give a bonus to Mr. Thain would represent an about-face for Merrill's board, which has long come under fire for not taking a stand against management as the firm's mortgage investments got out of control. On Friday, amid a vote to approve Bank of America's purchase of Merrill Lynch, Merrill shareholders criticized the firm's board.

Winthrop Smith Jr. -- the 59-year-old son of one of the founding partners of Merrill Lynch, Pierce, Fenner & Smith -- admonished Merrill's board and the company's previous chiefs. "This is the story of failed leadership and the failure of a board of directors to understand what was happening to this great company, and its failure to take action soon enough," Mr. Smith said, according to meeting minutes. At the firm's annual meeting in April, one board member said she and fellow members did ask questions, but in many cases didn't learn about certain issues until late in the process.

Merrill's compensation committee is led by John Finnegan, chairman, president and CEO of insurer Chubb Corp.

—Dan Fitzpatrick contributed to this article.
Write to Susanne Craig at susanne.craig@wsj.com