I wouldn’t want my money spent that way

*참으로 부끄러운 일입니다.

Merrill 회사의 최고 경영자인 John Thain은 자기 사무실을 치장하는데 $87,000을 소비하고 작별인사로 $25 million을 사용했으며 또한 회사를 떠나기 전 billions란 많은 돈을 bonuses로 뿌립니다. 회사경영으로 번 돈으로 이렇게 한다면야 무슨 문제가 있겠습니까? 사실 도덕적으로 조금 문제가 - -. 결론은 우리들의 돈으로 이렇게 했다는 것에 문제가 있는 것입니다. Wall Street Journal 기사를 직접 인용합니다.

 

Bank of America-Merrill Lynch: A $50 Billion Deal From Hell

By Heidi N. Moore, Wall Street Journal

January 22, 2009, 2:16 PM ET

 

Mergers often prove troublesome, but few have set the land-speed record for disaster as fast as Bank of America’s $50 billion acquisition of Merrill Lynch.

Let us detail the ways. Only three weeks after the deal closed on Jan. 1, there has been the departure of several high-level executives including the president, chief executive and head of wealth management of Merrill Lynch; an additional $20 billion in Treasury support; $118 billion of government backstops; a $15 billion loss at Merrill that came after repeated assurances from both sides that due diligence was solid; the massacre in Bank of America shares, which have fallen 78% since the bank agreed to acquire Merrill on Sept. 15; lawsuits surrounding the surprise announcement of the Merrill Lynch loss; the revelation that BofA CEO Kenneth Lewis himself contemplated calling the whole thing off in December; and widespread fears of even steeper losses on Merrill’s troubled assets. That doesn’t even count the loss of market value. Bank of America closed at $33.74 on the Friday before the deal was closed. At Wednesday’s close of $6.68, the company’s market cap was $42.7 billion. The stock was at a 52-week low of $5.50 recently. BofA’s low trading price represents a complete wipeout of Merrill Lynch’s $17 trading price before the deal and the $29 price at which Merrill was acquired.

*Then there are the embarrassing revelations: that former Merrill CEO John Thain–a man who criticized the largesse shown to former NYSE Chairman Dick Grasso–furnished his office with an $87,000 rug, arranged $25 million goodbye packages for his own hires, and handed out billions of dollars in last-minute bonuses to his staff before the acquisition closed. “That was a terrible precedent he set and a terrible decision at this time or any other time. I wouldn’t want my money spent that way,” Sen. Richard Shelby of Alabama–who added that he likes John Thain–said this morning of the outgoing executive’s decorating expenditures.

It is official. In Bank of America’s acquisition of Merrill Lynch is a candidate for the title of “A Deal from Hell.” You might remember that this is inspired by a book from Robert Bruner, dean of the Darden School of Business at the University of Virginia, “Deals From Hell: M&A Lessons That Rise Above the Ashes.” Bruner’s requirements for consideration included destruction of market value; financial instability; impaired strategic position; organizational weakness; damaged reputation; or violation of ethical norms and laws.

Check, check, check, check, check and mate.

Bank of America and Merrill Lynch arranged the deal in less than 48 hours, and the hasty work shows. Thain’s departure Thursday is the clincher, particularly on the matter of the culture clash to come between Bank of America and Merrill Lynch. Dealbreaker has the internal memo here.

Thain’s departure isn’t a surprise, given the scope of Merrill’s loss and the clash between Bank of America’s cautious commercial-banking culture and Merrill Lynch’s ties to the more risk-hungry Wall Street and Chicago business communities. Lewis is a canny political player, and if he had any hope of wrangling the acquisition, he had to try to break the will of the Merrill Lynch employees to impose Bank of America’s dominance. To do that, the best thing a CEO can hope for is to find a prominent executive, pillory the ways in which he behaved outside of Bank of America’s expected behavioral code–for instance, by publicizing the decorating costs, pinning Bank of America’s need for government money on Merrill write-downs–and oust him as an example to the Merrill underlings.

All of this isn’t to say the deal shouldn’t have happened. If Bank of America hadn’t acquired Merrill, it is likely the investment bank would have collapsed like Lehman Brothers under the force of market skepticism–which is exactly why the U.S. Treasury provided funds to keep it together. Bank of America may yet make the acquisition work by offering generous retention packages to Merrill brokers and carefully integrating the Merrill employees. Still, for now, the deal shows what happens when chief executives enter an agreement with eyes closed.