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Published on: 6/7/2009
Last Visited: 6/23/2009
For Dow Kim, 2006 was a very good year.
While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that - $35 million.
The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill's mortgage business.
Mr. Kim's colleagues, not only at his level, but far down the ranks, also pocketed large paychecks.
In all, Merrill handed out $5 billion to $6 billion in bonuses that year.
A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000.
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Dow Kim stepped into this milieu in the mid-1980s, fresh from the Wharton School at the University of Pennsylvania.
Born in Seoul and raised there and in Singapore, Mr. Kim moved to the United States at 16 to attend Phillips Academy in Andover, Mass.
A quiet workaholic in an industry of workaholics, he seemed to rise through the ranks by sheer will.
After a stint trading bonds in Tokyo, he moved to New York to oversee Merrill's fixed-income business in 2001.
Two years later, he became co-president.
Even as tremors began to reverberate through the housing market and his own company, Mr. Kim exuded optimism.
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Mr. Semerci, Mr. Lattanzio and Mr. Mallach joined Mr. Kim as Merrill entered a new phase in its mortgage buildup.
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Yet Mr. Kim was growing restless.
That same month, he told E. Stanley O'Neal, Merrill's chief executive, that he was considering starting his own hedge fund.
His traders were stunned.
But Mr. O'Neal persuaded Mr. Kim to stay, assuring him that the future was bright for Merrill's mortgage business, and, by extension, for Mr. Kim.
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Mr. Kim stepped to the lectern on the bond trading floor and told his anxious traders that he was not going anywhere, and that business was looking up, according to four former employees who were there.
The traders erupted in applause.
"No one wanted to stop this thing," said former mortgage analyst at Merrill.
"It was a machine, and we all knew it was going to be a very, very good year."
Merrill Lynch celebrated its success even before the year was over.
In November, the company hosted a three-day golf tournament at Pebble Beach, Calif.
Mr. Kim, an avid golfer, played alongside William H. Gross, a founder of Pimco, the big bond house; and Ralph R. Cioffi, who oversaw two Bear Stearns hedge funds whose subsequent collapse in 2007 would send shock waves through the financial world.
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Back in New York, Mr. Kim's team was eagerly bundling risky home mortgages into bonds.
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Mr. Kim's fixed-income unit generated more than half of Merrill's revenue that year, according to people with direct knowledge of the matter.
As a reward, Mr. O'Neal and Mr. Kim paid nearly a third of Merrill's $5 billion to $6 billion bonus pool to the 2,000 professionals in the division.
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Mr. Kim received $35 million.
About 57 percent of their pay was in stock, which would lose much of its value over the next two years, but even the cash portions of their bonus were generous: $18.5 million for Mr. O'Neal, and $14.5 million for Mr. Kim, according to Equilar.
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Mr. Kim and his deputies were given wide discretion about how to dole out their pot of money.
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Mr. Kim, for example, was paid a total of $116.6 million in cash and stock from 2001 to 2007.
Of that, $55 million was in cash, according to Equilar.
Leaving the Scene
As the damage at Merrill became clear in 2007, Mr. Kim, his deputies and finally Mr. O'Neal left the firm.
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Mr. Kim opened a hedge fund, but it quickly closed.
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