Merrill paid huge bonuses and it's OK

Merrill Lynch and Bank of America (NYSE: BAC) are about to come in for some more criticism. The Wall Street Journal reports that several senior executives at the broker got bonuses of over $10 million last year. According to the paper, "While Merrill staggered, 11 top executives were paid more than $10 million in cash and stock last year, say people familiar with the situation. An additional 149 received $3 million or more." Some of the bonuses were paid in stock, which has lost much of its value.

Before the mob shouts for the executives to return their bonuses, it is worth pausing to think why they were paid. It is the nature of investment banking that some departments make most of the money in any given year. Last year at Merrill that was in divisions like M&A and corporate finance. The fact that Merrill as a company lost money should not be taken out on the largest contributors. Without their efforts, earnings would have been much worse.