Banker remuneration has been in the news a great deal lately–Fred Goodwin, the former chief executive of the Royal Bank of Scotland Group has been trying to keep his £703,000 pension despite leading the bank to its decline and subsequent need to be bailed out by the UK government. Merrill Lynch distributed bonuses early last year, and the company is now being investigated to determine whether the early payments encouraged Merrill traders to mark down their portfolios so they could report gains in January. And government bailout money, meant to keep banks solvent, has been used to pay out bonuses–Dresdner Kleinwort in Germany is one example . [...]

This week’s financial upheaval on Wall Street gives us an opportune moment to discuss the leadership of executives at Merrill Lynch and Lehman Brothers. Have they been making good decisions over the past few months (and years)? Could they have possibly changed the outcome for their respective companies?
The effectiveness of leadership is determined by being able to recognize the appropriateness of actions relevant to the circumstances of the situation. As Henry Blodget explains in this article on Slate, Merrill Lynch’s CEO Peter Thain was brought in last year to ‘clean up the mess’ created by his predecessor. In the process he became aware of the growing problems posed by declining credit and real estate markets. He took responsibility bad debt and acted, taking big write-offs and swallowing his pride in the process. These actions helped Merrill Lynch stay strong enough to find a buyer [...]