John Thain’s decision, according to the Wall Street Journal, to press for a $10m bonus this year as chief executive of Merrill Lynch surprises me.
It evokes Barack Obama’s nice comment on the leaders of Detroit car companies flying to Washington by private jet to ask for a federal bail-out: “Well, I thought maybe they’re a little tone deaf to what’s happening in America right now.”
Indeed, that is what surprises me about Mr Thain’s stance, since he has built a reputation as among the most tone-sensitive of Wall Street chief executives. He restored stability at the New York Stock Exchange after the departure of Dick Grasso.
Jim Surowiecki asks: “Does John Thain deserve a bonus?” before concluding that he, in fact, does. He cites Mr Thain’s adeptness in guiding Merrill Lynch into the embrace of Bank of America while Lehman Brothers collapsed, which was about the best Merrill shareholders could have hoped for. Evan Newmark agrees.
But that depends, pace Bill Clinton, on what the meaning of “deserve” is.
If it means justifying a big reward by doing a good job then the answer may be “yes”. On the other hand, many people do good jobs, work hard, and have a lot of responsibility – Army generals and head teachers, for example – without getting $10m bonuses.
So “deserve” in this context really means performing to the standard that, on Wall Street and in big US corporations, used to merit a $10m (or bigger) bonus.
The problem here is obvious: the world has changed in the past year. Not only has the US government recapitalised Wall Street with public money but the bursting of the financial bubble has cast doubt on whether revenues from which bonuses were paid at the height were all they seemed.
Under the circumstances, most Wall Street bosses have decided it would be wise – or at least prudent – to skip a year of bonuses and see what happens next year. Mr Thain’s efforts to stand out from the crowd lack sensitivity.
