Twilight Zone of Executive Compensation
I continue to hope that we’ll all awake from a bad dream and discover that the past several months haven’t happened. No financial crisis. No bailouts. No layoffs. Rather, stocks soaring. Profits higher than ever. Jobs growing. Record retail sales. A Christmas for the ages.
I try to wake up everytime I read an article like the one in the Wall Street Journal about the ongoing debate over the bonus the CEO of Merrill Lynch will receive for 2008. Yes, it’s the same Merrill Lynch that’s on the verge of closing its rescue deal with Bank of America. It’s the same Merrill Lynch that has suffered net losses of $11.67 billion in 2008. It’s the same Merrill Lynch where 20% of its employees will lose their jobs as soon as the deal with BOA is signed.
Merrill’s CEO is John Thain, who was installed in December of 2007 when the firm’s troubles began to sink in with the powers that be. Thain arrived at Merrill when the firm’s stock was trading at $50 a share with the expectation that he would increase the share price at least another $40. The share price is now $13. Thain’s argument for getting a bonus of $5-$10 million for 2008 is that things would have been a lot worse without his leadership.
Thain has been in the Twilight Zone a long time. He was president of Goldman Sachs, receiving a financial windfall when Goldman went public in 1999. He left Goldman in 2004 to run the New York Stock Exchange, receiving $9.4 million in 2006, his last full year with the NYSE. When he arrived at Merrill, he was given a $15 million cash signing bonus. His annual salary this year is $750,000.
Twilight Zone happenings are foreign to the real world where the economy is in a free fall, millions of workers are being laid off, and businesses are closing their doors every day. The only place there could be a debate about whether the CEO of a firm at the center of all that’s gone wrong with our financial system should be paid a bonus is the Twilight Zone. Just as the CEOs of the big three automakers never thought twice about using their private corporate jets to fly to Washington to ask Congress for billions of dollars, other CEOs accustomed to exorbitant homage from their feudal vassals can’t come to grips with a world that’s been turned upside down.
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About Chris Parker
Chris Parker's practice focuses on the representation and counseling of companies in matters pertaining to the workplace and the protection of their intellectual property and trade secrets. In addition to serving as an advocate for clients, Mr. Parker is also trained as a mediator and frequently serves as a third-party neutral.
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Jimmy Daniel provides counseling to businesses of all sizes related to the employment relationship. He assists in the drafting of employment agreements, policies, and handbooks, as well as provides guidance related to compliance with federal, state, and local legislation such as the Fair Labor Standards Act and the Family and Medical Leave Act.
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About Larry Bridgesmith
While serving in an Of Counsel relationship with the firm, Mr. Bridgesmith also serves as the Executive Director at the Institute for Conflict Resolution at Lipscomb University and as an officer and principal in Strategic Resolutions Group, LLC. In these roles, Mr. Bridgesmith brings over 30 years of legal experience in dispute resolution and innovative workplace strategies to clients, students and business entities alike.
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But he deserves this because “he helped avert what could have been a much larger crisis at the firm, people familiar with his thinking told the WSJ.”
Who is he kidding?
Only himself. As my later post indicates, he’s had a “change of heart,” albeit one forced upon him.
That’s it, I’m starting my blog
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