WSJ’s Deal Journal has the scoop:
Memo from John Thain
It has been an honor to lead this company over the last very difficult year. The decisions that I made were always with the best interests of our shareholders and employees above all. I believe that the decision to sell to Bank of America was the right one for our company and our clients. While the execution has been difficult, I still believe in the strategic rationale of the transaction and I wish you all the best for the future of the combined companies.
I want to address several topics that have been inaccurately reported in the press. The first issue is our year end bonus payments. Our 2008 discretionary bonus pool was 41% lower than 2007. The size of the pool, its composition (cash and stock mix), and the timing of the payments for both the cash and stock were all determined together with Bank of America and approved by our Management Development and Compensation Committee and our Board.
The total bonus pool was also substantially less than the amount allowed under our merger agreement.
The fact that the bonus pool is smaller than last year and within the limits allowed by the merger agreement is no consolation. Merrill (and all the investment banks) paid out billions in bonuses to their workforces over the past 5 years based on phantom profits that are now unwinding violently. Not only should there be NO BONUSES this year, past bonuses should be clawed back.
The second topic is the losses in the fourth quarter, which were very large and unfortunate. However, they were incurred almost entirely on legacy positions and were due to market movements. We were completely transparent with Bank of America. They learned about these losses when we did. The acting CFO of my businesses was Bank of America’s former Chief Accounting Officer. They had daily access to our p&l [Deal Journal translator: that means "profit and loss," or the statement of the bank's accounts], our positions and our marks.
Our year end balance sheet target (which we more than met) was given to us by Bank of America’s CFO.
Thain is getting blamed unfairly for these losses. While some speculate that the bank may have run up mammoth trading losses even after the deal was announced (but before it closed on Jan 1), certainly the lion’s share of the banks total losses to date are due to positions entered when Stan O’Neal was still CEO. He’s the guy that deserves blame for Merrill’s downfall…more than Thain anyway, who rescued Merrill from certain death by selling to BofA.
The final topic is the expenses related to my office. The $1.2 million reported in the press was for the renovation of my office, two conference rooms and a reception area.
The expenses were incurred over a year ago in a very different environment.
Nonetheless, they were a mistake in the light of the world we live in today. I will therefore reimburse the company for all of the costs incurred.
I thank all of you for your hard work and your support over the past year. I wish you all success in the future.
It’s nice of him to return the money for the office expenses. A better gesture would be to return bonuses from his days at Goldman…