Merrill Lynch & Co., Inc. (MER) Chairman and Chief Executive Officer John Thain has suggested to the directors that he get a 2008 bonus of nearly $10 million, but the battered company's compensation committee is resisting the request, the Wall Street Journal reported Monday, citing people familiar with the situation.
The news comes in the wake of earlier reports that Merrill Lynch intends to cut year-end bonuses by some 50%, and that some traders and investment bankers would face steeper cuts. The compensation committee that makes recommendations on pay and bonuses, as well as the entire board of the New York-based securities firm, will be meeting on Monday to hear Thain's formal bonus recommendations for himself and other senior executives of the company.
Citing sources, the WSJ stated further that no decision has been taken yet and also the contents of Thain's recommendation remain unknown. However, the compensation committee seems to be fixated on not awarding any bonuses to executives.
The decision of giving or denying executive bonuses assumes great importance in the current economic and financial scenario, as many Wall Street firms have taken the decision to curtail their expenditure on executive compensation amid a slew of job-cuts. Wall Street firms, with their fat paychecks, are being seen as the trigger mechanism that fueled the credit crisis that eventually dragged the economy into recession.
As Wall Street firms line up for Government assistance in this unstable economic environment, the hefty bonus, if paid, to Thain would look incongruous. Merrill Lynch, which posted a net loss of $11.8 billion for the first three quarters put together and opted out of the recent multi-billion dollar federal capital injection, is set to be taken over by Bank of America Corp., Inc. (BAC) later this month. Last Friday, shareholders of Merrill Lynch and Bank of America separately endorsed their aproval for the all-stock deal of $50 billion.
Since the deal was announced on September 14, shares of Bank of America shares have slid 57%, reflecting the company's exposure to the U.S. housing market, rising credit-card defaults, and a weak economy. As a result, the value of the acquisition has plunged to $19.7 billion from the initial price of $50 billion.
Incidentally, Merrill Lynch is faring better than some of its peers through the credit crisis. Lehman went bankrupt in September and had to be bailed out by the government, while Bear Stearns was bought by J.P. Morgan Chase & Co. (JPM) in a government-brokered deal in March.
Before joining Merrill Lynch, Thain served as chief executive officer and a director at NYSE Euronext, Inc. (NYX) following the merger of the NYSE Group and Euronext N.V. in June 2006. Prior to that, Thain worked for Goldman Sachs Group Inc. (GS) as president and chief operating officer.
MER closed Friday's regular trading on NYSE at $13.04, up $1.13, or 9.49%, with a volume of 54.02 million shares. However, in the extended hours trade, shares fell by $0.21, or 1.61%, to close at $12.83.
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