No Blame, No Credit

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James Suroweicki makes the case for John Thain’s $10 million bonus:

It’s also true that Thain hardly needs the money, considering the hundreds of millions of dollars he made when he was at Goldman. But it’s also true that Thain probably is one of the few executives in corporate America who actually earned a bonus this year. To be sure, Merrill’s stock price is down almost seventy-five per cent from where it was when Thain took over the company, last November. But one would be hard-pressed to blame Thain for that, given the general collapse of the market and, more important, the fact that most of Merrill’s massive losses this year were the result of huge bets made long before Thain took office.

Here’s what I’d say. You learn in the downturn that the business community believes that the profits and losses of major firms has a lot to do with the general economic climate, and relatively little to do with the particular decisions of particular executives. You hear about things like “the general collapse of the market.” But these concepts seem to go mysteriously missing during boom times. But it can’t be both ways. Either executives should benefit when their company prospers and suffer when it doesn’t, or else variation should be sharply curtailed in either direction. The currently prevailing rule is “double-super-duper bonuses when things go up, and large bonuses when things go down.” It’s a stupid system.