Asides

Montag’s Pay Package

By The Prince ⋅ May 4, 2008 ⋅  Email This Post ⋅  Print This Post ⋅ Post a comment

4 May 2008 - When Merrill Lynch filed its employment agreement with Thomas Montag with the SEC on Thursday, they gave all the enemies of Wall Street yet another example of excessive pay being handed out even in difficult times.  Montag, who is the new head of Merrill global sales and trading, will receive a guaranteed payout of $39.5 mn in 2008.  That is likely to be far more than most Wall Street CEOs will earning in 2008, given the headwinds the investment banks face.  Yet, that is only the beginning.  Merrill also agreed to compensate him for the nearly $50 mn in restricted stock he still has at Goldman.  Even the Prince, who has rarely complained about executive compensation, thinks this package is absurd.  That pay package would have been fine in 2006 but given the weakness that is going to be seen in 2008, there is no way Montag will generate enough value to justify his compensation.   Montag may have lead Goldman’s trading operations as they emerged relatively unscathed from the credit crisis, but no amount of leadership can protect him from the lower earnings that will be generated by a sales and trading unit facing an industry wide shutdown of the credit markets and deleveraging.