The $10 Million Leak

Last week, when the Wall Street Journal reported that "industry insiders" said Goldman Sachs would report a loss this quarter, the sourcing raised eyebrows. There was ample evidence to conclude that the source of the leak was Goldman Sachs itself, perhaps in an effort to let the market absorb the bad news before reporting its numbers.

Today, the Journal has another scoop, this time about Merrill Lynch chief executive John Thain and the $10 million bonus he's asking the board's compensation committee to approve. "People familiar with the situation" say the committee isn't likely to approve the request.

Thain, or in this case, "a person familiar with his thinking," argues that his quick action to sell Merrill to Bank of America should be rewarded because it averted what could have been a much more severe crisis.

Meanwhile, the compensation committee, or "people familiar with their thinking," commend Thain's efforts but believe it would look bad if they forked over millions of dollars in a single bonus while executives at most other banks have agreed to forgo bonuses this year.

It would seem that certain members of the committee were so concerned about the public's perception of them that they chose to let the public weigh in on the matter by leaking it to the Wall Street Journal. Thain, who never formally declined to comment on the story, most likely had little choice but to defend his request on background once he knew the story was running.

But it's not clear that the leak is garnering the outrage the committee may have hoped for. Sure, New York attorney general Andrew Cuomo, who is investigating executive compensation awards at the financial firms in the center of the credit crisis, called the $10 million request "nothing less than shocking." He demands evidence from the Merrill board that such a bonus is justifiable.

But elsewhere the vitriol is relatively contained. After all, Thain has a point. Merrill appeared to be right on the heels of Lehman Brothers in the race to oblivion.

Joe Weisenthal at Clusterstock argues that Thain is among the few executives on Wall Street who actually does deserve a bonus this year. (But that bonus might not go far for his retention. John Carney predicts Thain will stick around at Bank of America for only one quarter.)

At Breakingviews, Rob Cox also defends Thain's request, arguing that his decision to sell Merrill was the smartest move by any executive on Wall Street this year, and he should earn a bonus, albeit on mostly in stock.

So if what the compensation committee leaker wanted was a public debate about Thain's bonus request, he or she got one. In the end, though, it won't likely matter much when the committee (we predict) gives Thain's request a thumbs down, making Carney's prediction even more likely to come true.

by Megan Barnett