The behind the scenes fighting between John Thain and Ken Lewis continues. Now Susanne Craig of the Wall Street Journal has obtained a non-public schedule to the merger agreement between Bank of America and Merrill Lynch, and it supports Thain’s contention that Bank of America’s executives knew about the Merrill bonuses ahead of time.
We may never know who told who what, but the nuts and bolts of Merrill’s year-end bonus payouts were in fact spelled out in plain language to BofA. The private bonus agreement shows that the two sides agreed that the variable incentive compensation pool, also known as the discretionary bonus pool, shouldn’t exceed $5.8 billion, and that 60% of it should be awarded in cash and 40% should be awarded either in terms of equity or long-term cash awards.
“The form and terms and conditions of the long-term incentive awards shall be determined by the company in consultation with parent…,” the agreement adds. Furthermore: “The allocation of the 2008 VICP among eligible employees shall be determined by the company in consultation with the parent.” In this case, Merrill is the company, Bank of America is the parent.
It’s fascinating to watch this battle between Thain and Lewis press on through leaks to the press. The details of Thain’s office expenses were almost certainly leaked by Thain’s enemies. And if we had to guess, we’d say that this was leaked by Thain’s team in order to show that Bank of America was not being fully honest when it implied that it was surprised by the size of the Merrill bonus package.