Merrill Lynch: The Benefits of Loss

As Stan O’Neal prepares to leave Merrill Lynch behind, Rachel Beck(AP) writes:

Stan O’Neal’s legacy will be cemented as the $8 billion man. That’s about the size of the massive writedown that Merrill Lynch & Co. had to take during its just-ended quarter, which has ruined the reputation of the investment bank’s CEO.

The denouement of O’Neal’s five-year tenure is a good reminder that risk sometimes doesn’t come with rewards.

Sometimes risk doesn’t come with rewards.  Sometimes it comes with consequences and punishments.  Like more than 100 million dollars (msnbc):

Stan O’Neal was on Monday in talks about the terms of his departure as chairman and chief executive of Merrill Lynch, which could see him walk away with more than $100m.

Mr O’Neal, who was paid $48m last year, has accumulated more than $100m in deferred compensation and retirement benefits. But much of this is at the board’s discretion.

So even though a CEO is finally “taking the heat” for his poor decisions, that still entails a massive payout.  As Ben Stein notes (NYTimes):

And we stockholders and taxpayers foot the bill, of course. But even this is not the worst part: there are still lots of people who can say with a straight face that the world of finance is overregulated, that we should trust the power players to do the right thing, that if we put finance under a microscope, or allow financial miscreants to be sued for misconduct, America will be harmed. There are still people, and I know many of them well, who believe that old myth that you can trust the markets to fix everything — that old magical thinking that some thieves will stop other thieves from robbing the sheep like us. That’s the really sad part. Some babies never learn.

And some wolves never pay for their mistakes.  Apparently that falls to us.  As we prepare to do what it takes to keep the bad decisions made by people like O’Neal in order to protect our economy, let’s keep in mind what happened here.  A CEO made decisions motivated by greed, failed, and walked away a richer man.  What kind of message does that send?

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2 Responses

  1. Do I sense the color green? Envy? Oops, my mistake!

  2. Hell yeah I’m envious! Hot damn, I want to make millions of dollars bankrupting a company, cost taxpayers millions, ruin lives with bankruptcy and job loss, and then “resign” filthy rich.

    Who wouldn’t?

    The invisible hand would stop me though. Just like its stopping O’Neal.

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