December 8, 2008 -- On the heels of a report in the Wall Street Journal that he was seeking a $10 million bonus and a blistering letter from New York Attorney General Andrew Cuomo, Merrill Lynch CEO John Thain, as well as four other key members of Merrill management - the Chief Operating Officer, the Chief Financial Officer, the General Counsel and the President of Global Wealth Management - all will forego bonuses this year, according to the ABC News Business Unit.
New York's Attorney General Andrew Cuomo said Thain took appropriate action in asking the board of the beleaguered financial giant specifically to not award him a bonus this year. Cuomo told ABC News that the board made the "appropriate decision" in accepting his request.
Despite $11 billion in losses and 30,000 lay-offs, Merrill Lynch CEO John Thain was reportedly seeking a $10 million bonus, which prompted Cuomo to reach out to the firm's board of directors urging them not to grant the "shocking" payment to Thain in light of the firm's "abysmal" performance.
Cuomo's office fired off a letter to Merrill's board this morning after the Wall Street Journal reported that Thain has suggested to the board of the financial giant that he should be awarded a bonus during a year in which 30,000 Merrill employees were laid off.
Cuomo reminded Merrill that it had informed his office on November 5th that any bonus would be based on performance and executive retention needs.
By that measure, Cuomo said, "utilizing Merrill's own criteria, a bonus of this size appears unjustified."
Thain joined Merrill as CEO in 2007 when the firm was already in trouble and received a $15 million signing bonus before he began a top-to-bottom review of the company. His salary is $750,000 a year.
Merrill has managed to stay afloat through the banking industry crisis in a large part because of the merger Thain engineered with Bank of America, according to attorneys who have examined the firm's financials. The merger was approved last week by shareholders for both institutions.
But a key underpinning of the deal is the $15 billion in public funds that the Treasury Department provided BofA and $10 billion offered to Merrill that it is expected to accept once the merger with BofA is completed. As such, any bonus to the firm's CEO would have be "a thumb in the eye" of taxpayers, Cuomo said.
"In terms of performance, Merrill has reported losses for every quarter this year and has lost more than $11 billion for the year as a whole. Indeed, Merrill's decision to be taken over by Bank of America seems to have been the only thing that saved Merrill from collapse," Cuomo said. "Clearly, the performance of Merrill's top executives throughout Merrill's abysmal year in no way justifies significant bonuses for its top executives, including the CEO."
"With respect to retention, it is our understanding that Bank of America has already determined that Merrill's CEO will run the merged company's global banking, securities, and wealth management businesses," Cuomo said. "Thus, the need for retention does not appear to justify a substantial bonus for him".
Cuomo's letter reiterated the point he made to the board at the end of October:
"As we stated in our letter in October, in this new environment, it is vital that Boards of Directors demonstrate independence and complete devotion to corporate responsibility. It is imperative that Merrill's Board prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation."
Stating that the idea of such a bonus was "a thumb in the eye" to taxpayers, Cuomo asked Merrill's board to meet with his office before awarding it to explain its justifications.
Merrill Lynch so far has had no comment on the reported bonus discussion.