Former Merrill Lynch boss leaves Bank of America
Wall Street bonuses, a sore point as the government gives billions of dollars in bailout money to the financial industry, have apparently cost former Merrill Lynch & Co. chief executive John Thain his new job at Bank of America Corp.
Thain resigned from Bank of America Thursday following news that Merrill Lynch had rushed out its year-end bonuses, paying them just before Bank of America completed its acquisition of Merrill Lynch and sought $20 billion US in additional government bailout money.
The company gave no reason for Thain's departure, but its timing, coming hours after news reports about the bonuses, made it likely that there was a connection with the payouts.
The bonuses to Merrill Lynch executives were also paid out as the company prepared to report a $15.3 billion fourth-quarter loss — a loss that led Bank of America to request and receive government funds on top of the $25 billion it had already been given.
Bank of America spokesman Scott Silvestri issued a terse statement: "(BofA chairman and chief executive) Ken Lewis flew to New York today to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign."
The bonuses raise the question of how proper it was for executives in a struggling company to be given big payments even as its soon-to-be-parent was accepting billions of dollars in government money.
"He's just completely tone-deaf to the culture of BofA" if he was paying out bonuses days before reporting a multibillion-dollar quarterly loss and as Lewis was securing more government support, Tony Plath, a finance professor at the University of North Carolina at Charlotte, said about Thain.
"My surprise is the board gave him an opportunity to resign and didn't just fire him."
Silvestri said Bank of America was informed of Thain's decision to grant the bonuses. It was not immediately known what fallout from the bonuses there might be for Lewis.
"Merrill was an independent company until Jan. 1 of 2009," Silvestri said.
"John Thain decided to pay year-end incentives in December, as opposed to their normal date in January. Bank of America was informed of his decision."
Bonuses were not paid to Thain and four other top executives — president and chief operating officer Greg Fleming, chief financial officer Nelson Chai, president of global wealth management Robert McCann, and general counsel Rosemary Berkery — who requested they not receive additional compensation.
Charlotte, N.C.-based Bank of America has increasingly come under criticism in recent weeks for its acquisition of Merrill Lynch, a deal fostered by the government to save Merrill Lynch on the same day that Lehman Brothers Holdings Inc. collapsed amid the ballooning credit crisis.
There is also concern among government officials about banks that have received bailout funds still going ahead with year-end bonuses.
New York Attorney General Andrew Cuomo's office has started an investigation into the "secret, last-minute" bonuses paid out by Merrill, according to an individual familiar with the investigation who asked for anonymity because it is ongoing.
Thain was heading a wealth management division of the two firms' merged businesses. Some analysts expected him to leave at some point soon even without the bonus issue — when two huge companies link up, the usual turn of events is that one of the CEOs from the standalone companies departs.