Thursday, January 22, 2009

Merrill Lynch's Thain Can Only Work on $87,000 Area Rugs

For any of you struggling in your workplace, John Thain understands your pain. You probably work on a $3/sq foot area rug. How the soles of your feet make it through the day is beyond him. Just remember, if the soles of our CEO's feet are not soothed they cannot be motivated. We need to do everything in our power to help them remain motivated because just going to work and doing a proper job is only motivation for the sapless souls that make up the bottom 98% of the work force. Unfortunately the $87,000 area rug under Thain's feet were not enough as he was forced out today... should of gone for the $200,000 area rug.

Back in September I wrote about the outrageous pay packages flying from Merrill [Sep 17: Thain's Aides May Get $200M for Weeks of Work]

First, let me say running Merrill Lynch is difficult work and a stressful life, I am sure. Second, let me say working in a coal mine for a 10 hour shift sure isn't easy either. Third, I do realize the 2 Goldman Sachs executives Thain recruited gave up lucrative pay packages at Goldman to come to Merrill so you have to understand that when you read these numbers. But in the "heads I win, tails I win" culture of executive payouts these are some staggering numbers nonetheless.

Keep in mind Thain has been at Merrill for under a year. And his associates have been well under a year. In fact, Thomas Montag joined Merrill on August 4th. For his 6 weeks of hard work he is looking at a payday of $76 million. Peter Kraus joined Merrill last week and looks to make $95 million. That's good work for one week. (again it is replacing his Goldman package but it truly is jaw dropping if you think about it) This is why I don't harbor any ill will to athletes - what most of them make is nothing compared to what the top cheese in corporate America is. Stock goes down 60%? Not a problem - the payout is the same.

Keep in mind this is the same shop that paid out Stanley O'Neil $160M just to be fired [You're Fired! Now Here is $160M to Help Ease the Pain]

In the best spirit of Bob Nardelli, poor Stanley O'Neil was shown the exit (err, retired) but to make sure his family can eat he is being given $160 million to soothe the pain.
  • Sources confirm that O'Neal leaves with about $90 million in stock, $40 million in options and another $30 million in pension and other goodies. The finer points are still being worked out. And the values change with the company's share price.
  • Not bad for years of alleged "underperformance." Makes you wonder what Merrill would pay for a really good CEO.
  • A spokesman for Merrill said O'Neal gets no special severance package, but he does get to keep shares and options that had not yet vested.
  • And he gets to say that he "retired" at 56. Sure. Kind of the way Julius Caesar "retired" as dictator of Rome.
  • It's only been 21 months since the same board members were lavishing O'Neal with praise and a special $36 million bonus for doing such a good job.
  • They gave him another $18.5 million cash bonus plus another $27 million in stock and $2 million in extra incentives just last January.
But I digress! As a service to my readers I want to give you a gift - something you can hand to your boss to show that any potential lack of efficiency is due to your trashy surroundings... how can any human be made to work in a cubicle or in fact even a simple office. *THIS* is how you must live to make decisions on how to run our financial system into the ground.
  • In early 2008, just as Merrill Lynch CEO John Thain was preparing to slash expenses, cut thousands of jobs and exit businesses to fix the ailing securities firm, he was also spending company money on himself, senior people at the firm say.
  • Thain spent $1.22 million of company money to refurbish his office at Merrill Lynch headquarters in lower Manhattan. The biggest piece of the spending spree: $800,000 to hire famed celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000.
Yes folks, that's $1.2 million for one office. More than the cost of 99.8% of the homes in America - so our "king makers" can live in their just rewards.
  • The other big ticket items Thain purchased include: $87,000 for an area rug in Thain's conference room and another area rug for $44,000; a "mahogany pedestal table" for $25,000; a "19th Century Credenza" in Thain's office for $68,000; a sofa for $15,000; four pairs curtains for $28,000; a pair of guest chairs for $87,000.... (the list goes on and on and on)
  • The documents also show that Thain signed off on the purchases personally. "Labor to relamp the six wall sconces" cost $3,000, and Thain authorized the payment of another $30,000 to pay the expenses Smith incurred in doing the work. Thain has hired Smith—whose celebrity client list includes Steven Spielberg, Michelle Pfeiffer, Cindy Crawford and Sir Evelyn de Rothschild—to design and decorate his private residences. They include a Manhattan apartment at 740 Park Avenue, and his 10-acre mansion in Rye, NY.
Yet another reason why the dogma that "the board of directors is there to watch out for the shareholders" or... "shareholders know what is going on, hence that's good enough governance" is just a pile of baloney. Do you really think "shareholders" are good with this? Maybe in a bull market when we are all "sharing in Greenspan's gifts"....

Go ahead and buy all the opulent stuff in your personal life - but when the company coffers are being raided like this - it's just another example of why corporate governance in America is a frightful joke. Even the folks on CNBC Europe say it... but dogma in the U.S. says "keep it the way it is! It's working great!"
  • At the time, Thain was preaching the virtues of cost control, telling employees to reduce expenses including car services, entertainment and travel. In addition to the personal expenses on his office, documents show Thain paid his driver $230,000 for one year’s work, which included the driver's $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay, documents show. Drivers of top executives are often paid about half that amount.
Do as I say, not what I do .... and this is where our bottomless pits of tax dollars are going to bail out.

If you ever have time this is a good article from February about how badly investment banks had been as investments for anyone but insiders since they have become public - and what was BEFORE Bear Stearns, Lehman and the like happened. [Feb 11, 2008: Investment Banks - Are you Dear Investor...the Sucker?]

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