IN mid-September, as Wall Street unwound and venerable financial institutions were brought to their knees, the mood inside the Manhattan law offices of Wachtell, Lipton, Rosen & Katz was decidedly celebratory.
After a weekend of whirlwind deal-making and emergency meetings at the Federal Reserve Bank of New York, John A. Thain and his team at Merrill Lynch had sold their troubled brokerage firm to the Bank of America Corporation, dodging the financial sinkhole that was swallowing Lehman Brothers.
But before Wachtell lawyers, who were representing Bank of America, signed off on the deal, they told Merrill’s lawyers that they wanted to be sure about just one more thing: the size of the bonuses that Mr. Thain and his colleagues would snare at the end of the year. A page was ripped from a notebook, and someone on Merrill’s team scribbled eight-digit figures for each of Merrill’s top five executives, including $40 million for Mr. Thain alone.
Although Merrill had been bleeding money all year — and would continue to do so — the bonuses weren’t, as Merrill executives later explained to colleagues, about that performance. Rather, they were fees for getting the merger done, akin to what investment bankers receive for blockbuster deals. Mr. Thain in particular felt he deserved a hefty payout for his deal-making heroics, according to five individuals with detailed knowledge of the situation who requested anonymity because of their personal and business relationships with those involved.
A few weeks later, Merrill’s human resources director visited John D. Finnegan, the head of the compensation committee on Merrill’s board, and told him about the bonuses, according to four people briefed on the conversation. “That’s ludicrous,” said Mr. Finnegan, the chief executive of the Chubb Group of Insurance Companies. He thought that the lush bonus requests came across as greedy and insensitive — particularly because Wall Street was in such dire straits that it was likely taxpayer support would be needed to survive.
Another interesting detail from the article: John McCain was apparently considering Thain for Treasury Secretary if he won the presidency, I guess so Thain could just take the money directly.
http://www.nytimes.com/2009/02/08/business/08split.html?_r=1&em
