Too Close to Home…Too Close for Comfort

Retail stockbrokers are shareholders. Not only are they co-owners of their company, but they are on the front line in a world riddled with money-madness where “money and trust” are their stock-in trade. It’s not uncommon for brokers to work for firms that have mismanaged their personal assets which are embedded in their retirement accounts, comprised primarily of company stock.

Merrill Lynch is a current case in point. However, Lehman may be remembered for “setting the standard” in this arena.

“The Blundering Herd,” excerpted from All the Devils are Here by Bethany McLean and Joe Nocera, is a poignant article published in Vanity Fair, November 2010. It documents the “evisceration of Mother Merrill’s” culture vis a vis the sub-prime mortgage debacle.

The Power of One

The intrigue, the scheming, the plotting, and the deception perpetrated by Merrill’s inner leadership circle is literally fantastic. Once again, history demonstrates how so few, and often one person (E. Stan O’Neal), can undermine and jeopardize the sustainability of a venerable and reputable firm (or a civilization).

Let us never forget that Merrill brought Wall Street to Main Street. Charlie Merrill’s marketing wizardry helped make the middle class an equity culture (see Wall Street to Main Street by E.J. Perkins).  By chasing the rich, Merrill’s new company policy, they will abrogate what made them great. Merrill Lynch did become the world’s leading brokerage; they did bring Wall Street to Main Street.

Merrill became “easy pickens” for Ken Lewis and Bank of America. The rest is history, and well known. However, at this juncture B of A is in trouble. Warren Buffett recently invested $5 billion dollars in Bank of America Corp. In September of last year, Mr. Buffett did tell Bloomberg News that “the bank has a wonderful underlying business—it’s got lots of problems.”

Merrill’s New Broker Compensation Plan

“Street Workers” have recently begun to talk about the firm’s new revised compensation plan for its retail stockbrokers. At the peak, Merrill employed more than 15,000 retail brokers.

On December 23, 2011 Jennifer Cummings posted an article on a Wall Street Journal blog. The essential thrust of Merrill’s CEO, Brian Moynihan, is to lower the payout to “less successful” brokers, and create a culture that caters to the rich. Lower quartile brokers will literally have to produce nearly twice as much to tread water. Ms. Cummings documents the particulars. And it should be noted that Merrill won’t be reaping the profits, the parent company Bank of America will.

The neurotransmitter chaos and havoc wreaked by Merrill’s “New Compensation Plan” is making for lively counseling and psychotherapy sessions in my office, and many throughout Manhattan. Brainstorming, risk management scenarios, and early retirement planning appear to be the psychotherapy agendas of the day.

Many think that Bank of America wants to reap quick profits as a function of leaner broker payouts, and then spin the company off and ultimately crush it, or buy it back cheap on the “corporate auction block.” The human brain’s capacity for imagination is unlimited, but based on Wall Street history over the past 10 years who can say. Anything is possible.

The sudden paradigm shift in Merrill’s compensation plan has driven many retail brokers, in my practice, to SSRIs (Prozac, Lexapro, Zoloft) in an attempt to manage their anxiety, depression, pain and anger. Subscription medications can be effective as pro-tem coping adjuncts, but the Street’s systemic and endemic emotional and environmental problems require deeper corrective actions and therapies.

Shareholder Activism Begins at Home (in the Office)

Now let’s talk turkey here. Shareholder activism begins at home, in the workplace, particularly if you work in a publically traded company. If you don’t watch the store from the inside out, and create mechanisms to insure sustainability, then who will? It is your life anyway. My Merrill patients are starting to “get out of the box,” and initiate their own “campaigns” out of sheer survival.

Treating any employee in this manner only breeds contempt, inhibits productivity and jeopardizes the sustainability of a company. To my knowledge, Merrill brokers haven’t joined the OWS movement yet, but as we all know anything is possible on The Street. I certainly don’t know where any of this will end up, but I suspect Street worker’s stress levels will soar and performance will be less resilient going forward.

Peter Elkind et al documented Pfizer’s palace coup vis a vis CEO Jeff Kindler (CNN Money, July 28, 2011) brilliantly for Fortune magazine. Should CEOs be entitled to “immunity?”

Certainly, E. Stan O’Neal walked out with a sweet deal: $162 million dollars. Is Brian Moynihan safe? All will play out in due time.

Empowerment for Main Street and for Wall Street is survival.

Today several of my patients still work for Merrill, and they have struggled of late.

To contact Christopher Bayer directly, please email Christopher.Bayer@TheShareholderActivist.com.