John Thain took over Merrill Lynch & Co. just 12 months ago. Since then, the investment banking firm has lost more than $10 billion. Its stock has dropped about 75 percent. In September, Thain struck a deal to sell the firm at a steep discount.
For that, he wanted a $10 million bonus.
It's hard to imagine the value Thain would have placed on his brief tenure if Merrill had made a profit.
A bonus is supposed to be a reward for stellar work above and beyond your daily job requirements. How difficult can it be to run a company for less than a year, lose more than $10 billion, then sell the business on the cheap to avoid a possible collapse?
In Thain's very limited defense, the troubles that beset the venerable Wall Street firm were the result of decisions made before he was hired. Merrill made risky investments in toxic subprime mortgages during the housing boom.
Those bad bets went sour when the housing bubble burst. In Thain's first nine months on the job, Merrill lost $11.7 billion. The fourth- quarter losses haven't been tallied yet.
Similar bad investments imperiled other investment banks as well. Competitor Bear Sterns was bought for a rock-bottom price by JPMorgan Chase in March. Lehman Bros. went bankrupt in September.
As Lehman imploded, Thain rushed to sell his 94-year-old firm to Bank of America for $50 billion. The deal averted billions of dollars in possible losses for Merrill shareholders and saved many jobs - though thousands of employees will be laid off as a result of the sale.
For that, Thain thought he should be justly rewarded. So he lobbied Merrill's board for a $10 million bonus.
But it's easy to see why Thain feels so entitled. Shortly after joining Merrill, he brought along two executive friends from his days at Goldman Sachs, where he made $20 million in some years.
One of the executives Thain hired at Merrill received a guaranteed payout of $39.4 million this year. The other joined the firm in September but is leaving because of the sale and will get a $25 million separation package.
As for Thain, 53, his financial future is secure. His salary this year was a mere $750,000. But he received a $15 million signing bonus when he joined Merrill last December and a long-term pay package valued between $50 million and $120 million.
Merrill's compensation committee met on Monday and, thankfully, had the good sense not to give Thain any bonus, let alone $10 million.
Other investment banks, including Goldman Sachs and Morgan Stanley, aren't giving their chief executives bonuses this year, either. That's a good sign. The bonus system - especially on Wall Street - has run amok.
In previous years, obscene financial awards encouraged overly risky and, in some cases, nefarious, behavior.
Now some banks, including Morgan Stanley, are implementing a program known as a "claw back." Under that provision, companies can seek to recoup payments later if an employee caused big losses or other damages.