NEW YORK (AP) — Former Merrill Lynch & Co. CEO John Thain resigned from Bank of America Corp. Thursday following news that Merrill had moved up its yearend bonuses, paying them just before BofA completed its acquisition of Merrill and sought more government bailout money.
The company gave no reason for Thain’s departure. Bank of America spokesman Scott Silvestri issued a terse statement: “(BofA Chairman and CEO) Ken Lewis flew to New York today to talk to John Thain. And it was mutually agreed that his situation was not working out and he would resign.”
The bonuses to Merrill Lynch executives were also paid out as the company prepared to report a $15.45 billion fourth-quarter loss — a loss that led Bank of America to request and receive $20 billion in government bailout money. Merrill also received bailout funds.
Charlotte, N.C.-based Bank of America has increasingly come under criticism in recent weeks for its acquisition of Merrill Lynch, a deal fostered by the government to save Merrill Lynch on the same day that Lehman Brothers Holdings Inc. collapsed amid the ballooning credit crisis. On Thursday, Bank of America said it knew of Merrill’s plans to more up the bonuses.
“Merrill was an independent company until Jan. 1 of 2009,” Silvestri said. “John Thain decided to pay year-end incentives in December, as opposed to their normal date in January. Bank of America was informed of his decision.”
Bonuses were not paid, though, to Thain and four other top executives — President and COO Greg Fleming, Chief Financial Officer Nelson Chai, President of Global Wealth Management Robert McCann, and General Counsel Rosemary Berkery — who requested they not receive additional compensation.
The bonuses raise the question of how proper it was for executives in a struggling company to be given big payouts even as its soon-to-be-parent was accepting billions of dollars in government money. Bonuses are widely seen in the investment banking industry as necessary to retain top performers, but the fact that they were granted while tens of thousands of jobs were being eliminated across the securities and banking industry raises another question: How necessary were they to prevent defections?
Shares of Bank of America which were already tumbling Thursday, initially fell further after reports of Thain’s departure, but regained some of their ground. Bank of America shares fell 83 cents, or 12.4 percent, to $5.85 in afternoon trading.