$40m for five months: has Merrill overpaid for Montag?

5 August 2008

1 minute read

$40m for five months: has Merrill overpaid for Montag?

Has John Thain been too kind to his old Goldman buddy, Thomas Montag?

According to Bloomberg and various other news sources, Merrill's paying Montag a $600k salary plus $40m for the five months' work he does between now and the end of the year. It's also alleged to have compensated him for the $50m of stock options he forfeited when he left Goldman.

Merrill Lynch can ill afford such lavishness. Last week it agreed to sell CDOs with a face value of $30.6bn for a mere 22 cents on the dollar. In mid-July it posted a $4.9bn Q2 loss following an earlier $9.4bn of writedowns.

What does Montag bring to this troubled table? According to Bloomberg, he tripled Goldman's Japanese profits in two years. In the hope that he'll be able to repeat that magic on a larger scale and in a far more hostile environment, Merrill reputedly delayed making strategy and staffing decisions until Montag arrived yesterday.

Is Thain wrong to pin so much on one individual? Should Merrill have stuck with an insider to resolve its problems? And can anyone seriously merit that kind of money? Let us know below.

AUTHOReFinancialCareers UK

Insider Comment

Ke
Kermit the Dog
6 August 2008
The only thing he can do too justify that kind of cash is encourage Merrill to take on a whole lot of new risk on its trading desks. Is that a good idea right now? I think not.
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Ga
Game
5 August 2008
Is Montag being paid in stock? If he isn't, he should be. Get the stock back up to $50, and then he can get his payout. He should get nothing if not. We can't afford this.
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Bi
Big brain
5 August 2008
This is a classic case of hubris. Just because he came from Goldman, Thain thinks he can call on someone else from Goldman to sort out Merrill's problems for $80m. The right person to sort out the problems at Merrill Lynch is someone who knows Merrill Lynch. Shame, therefore, that the bank has dumped a lot of the people who knew what went into all those CDOs and could have helped find a way out of this mess.
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ed
ed
5 August 2008
One messiah swallow doesn't make a summer and only thing Merrill shareholders will be swallowing at the end of this summer will be more value destruction.
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