Less than two months ago (Dec 10, 2008), I excoriated Merrill Lynch CEO, John Thain, for having the temerity to go before his Board of Directors requesting (demanding?) a $10 million bonus for successfully negotiating an 11th hour merger with Bank of America (see, "I Admire His Pluck But His Timing is Deplorable"). Prior to the inexplicable act, Thain was roundly praised throughout the industry and from within his own company for grasping a life-ring while other companies were foundering. What followed was a fire storm of negative criticism that resulted in the Board denying his request. Everyone agreed that while his actions might have been heroic, his judgment was breathtakingly bad.
It has now been revealed that two weeks after his own bonus was denied, Thain paid Merrill Lynch staff $1.4 Billion in bonuses. And he did this three days before the deal with B of A was official. Experts speculate that Thain, anticipating that the conservative leaders at B of A would deny such payouts, took it upon himself to rush them through on December 27th when normally they wouldn't have been paid until late January. By then, he surmised, B of A would be firmly in control and such payouts would be impossible.
When Thain approved these payouts, Bank of America had already received $10 billion in federal bailout money ear-marked specifically for the Merrill Lynch deal. So, in one sweeping act, Thain personally appropriated more than 10% of the taxpayer dollars expected to fund loans and stimulate the economy and paid it out in employee bonuses.
As if this news wasn't bad enough, it was also revealed yesterday that Thain spent well over $1 million dollars of Company money earlier in the year to redecorate his office. Click here to see what he bought.
What is truly fascinating about all this is what emerges when you attempt to read between the lines. Consider the fact that thousands of Merrill Lynch's employees receive most of their annual pay in the form of incentives. Had Thain not pushed to pay them, they would have taken a much deeper pay cut than the 10 or 15 percent that so many others have suffered. Consider also that by the time these bonuses were paid, many top ML employees had already abandoned ship to join other firms. To Thain, those that remained had demonstrated loyalty and resolve to see it through. And lastly, Thain knew that the vastly different corporate culture at B of A would deal a crushing blow to his loyal staff.
Thain must have known that B of A would ultimately discover his bold act, yet he did it anyway. Is it possible that Thain is not merely a corporate villain, but also something of a hero? As always, such judgments depend on which side you are on. To B of A, Thain is the poster child of the failed economy. He is also the ideal person to deflect any blame that B of A executives might have for entering into a bad deal that ultimately led to them losing 80% of their stock value. To many ML employees, Thain is a selfless leader who ultimately sacrificed himself for the good of his staff (although even they acknowledge his many flaws).
It is no coincidence that the revelation about Thain's office shopping spree was exposed on the same day he was fired. With the sharks circling, B of A new a little blood in the water would speed up the attack. It worked so well that the whole sordid mess ended up as a feature story on the august and respected Jim Lehrer News Hour on PBS. Such is life in the cut-throat world of high-stakes corporate America where the name of the game is draw first and shoot straight.
People it seems, especially under duress, can be counted on to exhibit predictable frailties, lapses in judgment and false heroism. Twenty five hundred years ago, the Greeks had already assigned this tendancy a name -- they called it hubris; excessive pride, unfounded self-confidence, and arrogance. It has always led to a fall, then, as it does now.