John Thain, head of Merrill Lynch was fired by BofA chief, Ken Lewis, last week, after the Financial Times revealed that he had accelerated several billion dollars of executive bonuses. The bonuses were made possible after a bailout. In other words, tax payer cash is ironically what prevented this from being illegal conveyance of funds in a bankrupt company.
Anyone who has worked in an American company of even modest size will know that politeness to departing executives is a result of the threat of litigation.
I worked for a company where the CEO slept with an employee and then threatened to fire the employee for not continuing to agree to do so, which resulted in a sexual harassment suit. This was actually one of the more minor infractions, but it was the one that surfaced. Publicly, this CEO was not fired, but ‘resigned’ with an agreement that the details of this would never surface, because the board felt threatened by the CEO’s history of being litigious.
Similarly, John Thain ‘was resigned’. However, over the course of the last week something interesting happened. In newspaper coverage, resigned changed to dismissed, and even to fired. This tiny flicker of rebellion suggests that the litigation shell is cracking and if it continues it will spiral. From an historical perspective, it is even possible that Thain will end up in jail.
We are in a dangerous time where similar economic problems have historically led to public unrest. There will be a lot of public anger, and there needs to be a plan to deal with it. There are arguments on both sides as to whether focusing anger augments it or channels it away.
Evans Pritchard points out that we are a long way from 1933, where public anger was destabilizing:
The New York Stock Exchange and the Chicago Board of Trade had closed. Thirty-two states had shut their banks…Illinois and much of the South had stopped paying teachers. Schools closed for months. An army of 25,000 famished war veterans squatting in view of Congress had been charged by troopers of the 3rd US cavalry with naked sabres – led by a Major George Patton… More than 100,000 New Yorkers applied to go to the Soviet Union when Moscow advertised for 6,000 skilled workers.
Will channeling public anger against Wall St. make things worse or create an outlet? Evans Pritchard suggests that in the Depression, actively punishing Wall St. helped, and that FDR channelled public “anger against Wall St., diffusing it”.
Although revenge is sweet, directing mob anger at people like Thain could make things worse. Currently, the government (and Ken Lewis) may be able to quietly purge places like Merrill and put things in order rather than publicly lynch Thain. But they can’t do nothing at all, because as Evans-Pritchard points out, we are in 1931 and 1933 is around the corner.
Nice article. I worked at Merril Lynch for twenty years until 1998. Fifteen of those years were quite wonderful: five were awful as the ethos of the place changed to one of power grabs fueled by the egotistical aspects of greeg married to entitlment. Thaim is latest in a line of ML Ceo’s who were “legends in their own minds.” The other were Stan O’neal and Dave Komansky who should be considered the godfather of stupidity at ML.
Please keep writing like this.
I believe ML may in the past have had a good attitude toward their clients. But no longer. Aside from losing 60% of my account, they summarily confiscated $25,000 interest charges when one advisor, Nick Sweeney, purposefully allowed my account to go into a margin debit situation. I am looking for more ‘Lynched’ clients.