Why Bother With All That Work Ethic?
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
You know, it seems I've got this whole "working for a living" thing the wrong way around.
(Oh, by the way, remember when I wrote last week that I'd be disparaging a political candidate in this week's column? Well, I'll get back to that next week. This week's financial market absurdities are just too heinous to pass up.)[[In-content Ad]]But I digress.
Honestly, all along I thought hard work was its own reward. You know. Do the right thing and all that.
But that's only for us common folk, you see. All that ethical, moral warm-and-fuzziness is lost on financial institutions.
Merrill Lynch & Co. wasn't doing so good. So they - and by they I mean company executives - shopped it around. They found themselves a buyer in Bank of America Corp.
They were led by a guy named John Thain. He's the CEO. He took the job on Dec. 1, 2007. Since his first day on the job, Merrill Lynch shares have fallen 60 percent as the company had to writedown devalued mortgage holdings.
Nonetheless, Thain and a couple of buddies he recruited from Goldman Sachs Group will do quite well.
The three may reap nearly $200 million for running Merrill if they leave or are demoted after the Bank of America deal closes.
Thain got a $15 million bonus when he was hired in December and he stands to get an additional $11 million in stock payouts if he doesn't stay after the deal.
Merrill's trading chief is Thomas Montag, who joined the team in August. He may get $76 million, including bonus and accelerated awards. And then there's the strategy guy Peter Kraus who was given $95 million, including bonus and stock awards, to replace a Goldman package he had to give up.
Kraus joined Merrill last week and spent last weekend helping negotiate the Bank of America deal.
All in all, the team was able to engineer a merger, which, I suppose, may have been quite a feat in this market.
Probably far preferable to what happened to Lehman Brothers (bankruptcy) and American International Group Insurance (government takeover).
And at least these weren't the guys who bought all that crappy mortgage paper.
But honestly, how happy can Merrill shareholders be? Merrill's stock returned around 13 percent a year from 2000 to 2006. A year ago it was trading at more than 78 bucks a share. This week it's hovering around $20.
Thain: "This isn't necessarily the outcome I would have expected when I took this job."
He said a mouthful there, eh?
AIG will give outgoing CEO Martin J. Sullivan a severance package valued at $47 million. His resignation took effect July 1.
He got a severance of $15 million and a bonus of $4 million for the portion of 2008 he worked. He also gets to keep outstanding equity in long-term cash awards worth $28 million.
Lehman CEO Richard Fuld is unique in that he is the longest serving CEO on Wall Street. He's been with Lehman since 1993.
Fuld tried to come up with a turnaround deal that didn't work out before Lehman filed for bankruptcy protection.
The company reported a preliminary loss of $3.9 billion and net revenue was a negative $2.9 billion. Lehman shareholders have seen their holdings decline almost 90 percent this year.
Fuld declined a bonus this year - how very frugal of him - but it's not like he needs the financial cushion.
He got $22 million in retirement pay earlier this year.
But Fuld's $22 million is downright paltry when compared with his counterparts who were busy running their giant Wall Street firms into the ground.
Thain's predecessor at Merrill was E. Stanley O'Neal. He raked in a cool $161 million when he left last October. That was right after steering his company through $40 billion in subprime write-downs.
The Citigroup guy, Chuck Prince walked away with $68 million.
Former Bear Stearns chairman Jimmy Cayne reportedly "earned" $60 million from selling Bear stock after his company's sale to J.P. Morgan.
All these companies pay their people quite well, thank you very much.
In September 2006, Lehman reported that its "remuneration costs" totaled $6.4 billion for just nine months - up $1 billion from the same period in 2005.
Goldman Sachs, during that same nine-month period, paid $13.9 billion in "compensation expenses," up 50 percent on the same period the year before.
In January this year, Wall Street's five biggest banks reported paying $39 billion in bonuses alone for 2007 - a record.
That's right. In 2007 the biggest financial institutions in Wall Street were paying their employees record bonuses.
For what?
Running their companies into bankruptcy?
These are supposed to be the sharpest minds in finance. These are the people who are supposed to know better. How could they not see something like this coming?
How could they think they could - as in the case of AIG - tie up fully 40 percent of the company's assets in mortgage derivatives, the riskiest of U.S. mortgage bonds?
Greed is good, baby - until it destroys your company and threatens the underpinnings of the global economy.
I realize that $1 trillion in AIG assets thrust into the markets in some high-finance firesale would have created economic chaos. But I still bristle at the thought of taxpayers bailing those dudes out.
See, it must be the rest of us that have it all wrong. Heck with all that hard work and reward nonsense.
Why not pay ourselves some ridiculous, obscenely stratospheric salaries, run our companies into the ground, get a taxpayer-funded bailout and live happily ever after?
You know, it seems I've got this whole "working for a living" thing the wrong way around.
(Oh, by the way, remember when I wrote last week that I'd be disparaging a political candidate in this week's column? Well, I'll get back to that next week. This week's financial market absurdities are just too heinous to pass up.)[[In-content Ad]]But I digress.
Honestly, all along I thought hard work was its own reward. You know. Do the right thing and all that.
But that's only for us common folk, you see. All that ethical, moral warm-and-fuzziness is lost on financial institutions.
Merrill Lynch & Co. wasn't doing so good. So they - and by they I mean company executives - shopped it around. They found themselves a buyer in Bank of America Corp.
They were led by a guy named John Thain. He's the CEO. He took the job on Dec. 1, 2007. Since his first day on the job, Merrill Lynch shares have fallen 60 percent as the company had to writedown devalued mortgage holdings.
Nonetheless, Thain and a couple of buddies he recruited from Goldman Sachs Group will do quite well.
The three may reap nearly $200 million for running Merrill if they leave or are demoted after the Bank of America deal closes.
Thain got a $15 million bonus when he was hired in December and he stands to get an additional $11 million in stock payouts if he doesn't stay after the deal.
Merrill's trading chief is Thomas Montag, who joined the team in August. He may get $76 million, including bonus and accelerated awards. And then there's the strategy guy Peter Kraus who was given $95 million, including bonus and stock awards, to replace a Goldman package he had to give up.
Kraus joined Merrill last week and spent last weekend helping negotiate the Bank of America deal.
All in all, the team was able to engineer a merger, which, I suppose, may have been quite a feat in this market.
Probably far preferable to what happened to Lehman Brothers (bankruptcy) and American International Group Insurance (government takeover).
And at least these weren't the guys who bought all that crappy mortgage paper.
But honestly, how happy can Merrill shareholders be? Merrill's stock returned around 13 percent a year from 2000 to 2006. A year ago it was trading at more than 78 bucks a share. This week it's hovering around $20.
Thain: "This isn't necessarily the outcome I would have expected when I took this job."
He said a mouthful there, eh?
AIG will give outgoing CEO Martin J. Sullivan a severance package valued at $47 million. His resignation took effect July 1.
He got a severance of $15 million and a bonus of $4 million for the portion of 2008 he worked. He also gets to keep outstanding equity in long-term cash awards worth $28 million.
Lehman CEO Richard Fuld is unique in that he is the longest serving CEO on Wall Street. He's been with Lehman since 1993.
Fuld tried to come up with a turnaround deal that didn't work out before Lehman filed for bankruptcy protection.
The company reported a preliminary loss of $3.9 billion and net revenue was a negative $2.9 billion. Lehman shareholders have seen their holdings decline almost 90 percent this year.
Fuld declined a bonus this year - how very frugal of him - but it's not like he needs the financial cushion.
He got $22 million in retirement pay earlier this year.
But Fuld's $22 million is downright paltry when compared with his counterparts who were busy running their giant Wall Street firms into the ground.
Thain's predecessor at Merrill was E. Stanley O'Neal. He raked in a cool $161 million when he left last October. That was right after steering his company through $40 billion in subprime write-downs.
The Citigroup guy, Chuck Prince walked away with $68 million.
Former Bear Stearns chairman Jimmy Cayne reportedly "earned" $60 million from selling Bear stock after his company's sale to J.P. Morgan.
All these companies pay their people quite well, thank you very much.
In September 2006, Lehman reported that its "remuneration costs" totaled $6.4 billion for just nine months - up $1 billion from the same period in 2005.
Goldman Sachs, during that same nine-month period, paid $13.9 billion in "compensation expenses," up 50 percent on the same period the year before.
In January this year, Wall Street's five biggest banks reported paying $39 billion in bonuses alone for 2007 - a record.
That's right. In 2007 the biggest financial institutions in Wall Street were paying their employees record bonuses.
For what?
Running their companies into bankruptcy?
These are supposed to be the sharpest minds in finance. These are the people who are supposed to know better. How could they not see something like this coming?
How could they think they could - as in the case of AIG - tie up fully 40 percent of the company's assets in mortgage derivatives, the riskiest of U.S. mortgage bonds?
Greed is good, baby - until it destroys your company and threatens the underpinnings of the global economy.
I realize that $1 trillion in AIG assets thrust into the markets in some high-finance firesale would have created economic chaos. But I still bristle at the thought of taxpayers bailing those dudes out.
See, it must be the rest of us that have it all wrong. Heck with all that hard work and reward nonsense.
Why not pay ourselves some ridiculous, obscenely stratospheric salaries, run our companies into the ground, get a taxpayer-funded bailout and live happily ever after?
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