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 profession where money and trust are their stock in trade, in a world riddled with money-madness. It is not uncommon for brokers to work for firms that have mismanaged their personal assets, their retirement accounts comprised as they are primarily of company stock. Lehman may be remembered for setting the standard in this arena, but Merrill Lynch is a current case in point. “The Blundering Herd”, a Vanity Fair article excerpted from All the Devils Are Here, by Bethany McLean and Joe Nocera, poignantly documents the evisceration of Mother Merrill’s culture before and during the sub-prime mortgage debacle.
The Power of One
The intrigue, the scheming, the plotting, and the deception perpetrated by Merrill leadership’s inner circle is literally fantastic. Once again, history demonstrates how so few people, and often just one person, in this case, E. Stan O’Neal, can undermine and jeopardize the sustainability of a venerable and reputable firm, or of 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 equities culture (see Wall Street to Main Street by E. J. Perkins). By chasing the rich, the new company policy, Merrill abrogates what made it great. Merrill Lynch did once become the world’s leading brokerage; they did bring Wall Street to Main Street.
Now, Merrill has become easy pickings for Ken Lewis and Bank of America. The rest is history, and well known. But now Bank of America is in trouble. Warren Buffett recently invested $5 billion in Bank of America Corp. In September of 2011, Mr. Buffett told 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. The essential thrust of Merrill’s CEO, Brian Moynihan, has been to lower the payout to less successful brokers, and to create a culture that caters to the rich. Lower-quartile brokers will literally have to produce nearly twice as much to tread water. On December 23 2011, Jennifer Cummings posted an article on a Wall Street Journal blog documenting the particulars of this arrangement. 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 others 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, 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 ten years, who can say? Anything is possible.
The sudden paradigm shift in Merrill’s compensation plan has driven many of the retail brokers in my practice to SSRIs (Prozac, Lexapro, Zoloft) in an attempt to manage their anxiety, depression, pain, 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. A variety of alternative stress-management techniques, however, are highlighted in my forthcoming book, The Wall Street Psychologist: Mastering The Moneyed Mind. Perusal of the book’s blog: www.thewallstreetpsychologist.com offers many insights and observations.
Shareholder Activism Begins at Home (in the Office)
Now, let’s talk turkey here. Shareholder activism begins at home, or in the workplace, particularly if you work for a publicly-traded company. If you don’t watch the store from the inside out, and create mechanisms to ensure sustainability, then who will? It is your life, after all. My Merrill patients are starting to get out of the box, beginning to initiate their own campaigns out of a sheer striving for survival.
Several of my patients still work for Merrill, and they have struggled of late. Treating any employee in the Merrill manner only breeds contempt, inhibits productivity, and jeopardizes the sustainability of a company. To my knowledge, Merrill brokers haven’t joined the Occupy Wall Street 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 workers’ stress levels will soar, with performance less than stellar going forward.
Peter Elkind et al brilliantly documented Pfizer’s palace coup vis-à-vis CEO Jeff Kindler (CNN Money, July 28 2011) for Fortune magazine. Should CEOs be entitled to immunity? E. Stan O’Neal certainly walked out with a sweet deal: $162 million. Is Brian Moynihan safe? All will play out in due time. In the meantime, we know one thing for sure: empowerment for Main Street and Wall Street alike is a prerequisite for survival.