Some readers have suggested that while ex-Merrill CEO John Thain’s actions post the agreement to buy his firm were questionable, his ouster was an effort to divert blame and attention for the turkey deal from BofA CEO Ken Lewis.
If Thain, as Lewis charged, ducked direct questions about Merrill’s deteriorating financial condition, or worse, was misleading (how could he have not known?) that alone would be a hanging offense. This Financial Times report says that BofA got daily p&l reports starting in November, but notes it is “unclear” whether they showed daily trading gains and losses.
Regardless, the flap over the accelerated bonus payments is not going away, and the continued embarrassment is sure to dog Lewis.
From the Financial Times:
Bank of America played a role in Merrill Lynch’s controversial decision to pay $4bn in bonuses in December…
BofA has said that the payment of $4bn in compensation in a fourth quarter in which Merrill racked up $15bn in losses was sanctioned by John Thain, Merrill’s chief executive.
Ken Lewis, BofA’s embattled chief executive, ousted Mr Thain on Thursday after news of the bonus payments appeared in the Financial Times. BofA told the FT last week that Mr Thain had made the decision to pay bonuses in December instead of January and it had been “informed” of the move. The bank said Merrill was an independent company until the deal closed on January 1.
However, a person familiar with Mr Thain’s actions said the ousted chief had at least two conversations with BofA’s chief administrative officer, J. Steele Alphin, one of the bank’s most senior executives, before a December 8 board meeting at which Merrill’s bonus payments were approved.
This person said Mr Alphin recommended, and Mr Thain accepted, a proposal to change Merrill’s incentive compensation mix – 60 per cent cash and 40 per cent stock – to conform with BofA’s system of 70 per cent cash and 30 per cent stock. The stock portion of the payouts was made January 2, the day after the deal closed, in BofA stock.
In addition, Andrea Smith, a senior executive in BofA’s human resource department, had been seconded to Merrill since September, according to people close to the situation.
BofA on Sunday confirmed there were conversations about the bonus payments prior to the pay-outs: “We never said we didn’t talk with them about it. But, in the end, it was their decision and they informed us of it.”