John Thain was ousted on Thursday at Merrill Lynch, just three weeks after the brokerage firm was acquired by Bank of America. Mr Thain's departure came in a meeting with BofA chief executive Ken Lewis, who flew up to New York from Charlotte, North Carolina, for a face-to-face meeting.
This can hardly come as a huge shock to Mr. Thain. It certainly isn't shocking to anyone who's ever spent more than five minutes in a corporation, or for that matter, a meeting of the Altar Society. Someone had to go. And if it wasn't Mr. Thain, it was going to be Ken Lewis.
I've actually developed quite a bit of sympathy for Mr. Thain. After all, he didn't create the mess at Merrill Lynch; rather, he was brought in to clean up after Stan O'Neal's MBS binge led to predictable results--all over the trading floor. Given the situation in the markets, and the balance sheet he was handed, I'm not sure how anyone could have expected Mr. Thain to do better at the core mission he was hired for: taking care of his shareholders and employees.
Nonetheless, you could hardly expect BofA managers or shareholders to take a happy view of his doings, given that much of his hard labor ended up costing them money. Besides, Ken Lewis needs someone to throw to the wolves running close behind the sleigh.
Most people I've talked to think that regulators made Lewis an offer he couldn't refuse to get him to take on Merrill's toxic assets: push the thing past shareholders, and he could be sure of the support of Treasury and the Fed in the coming financial chaos. More than a few people of my acquaintance have suggested that taking this deal was not quite bright, knowing as he did that Treasury was very likely about to change hands. But when the two most powerful men in American bank regulation come to you with a request, it's got to be awfully hard to say no, sorry, I'd really rather not. Lehman, after all, shows what happens to those who didn't have Bernanke's and Paulson's backing when the chips were down.
But "making the best of a bad situation" is rarely enough to save CEO jobs. I suspect that neither a good excuse, nor a substitute victim to feed shareholders, will provide Lewis much protection in the long run--if the shareholders don't get him, the nationalization probably will.
The problem for Lewis is that the wolves are in front.
Typical of Megan to have sympathy for a guy who was, only a few weeks ago was, requesting a $10MM bonus for delivering shareholders with a multi billion dollar loss. It was disclosed today that this same guy had spent $1.2MM of OPM redecorating his office. Yeah...let the free market decide. What a good idea.
"Yeah...let the free market decide."
Who do you propose makes the decisions the bureaucracy, the politicians, who?
Agree with earlier comments. Thain got $15mn to sign on and then demanded another $10mn for really do something he had no choice but to do - merge to survive. Hardly the stuff of genius. He also had the wisdom to pay Goldman's Montag some $50mn to join Merrill. $50mn! Seriously if Montag didn't show up for work next Monday it wouldn't make an iota of difference to BoA's business. Montag's defining attribute seems to be negotiating the best deals - for himself. Well done all.
What ever happened to the bottom line? I mean jeez. The guy blew all that money to redo his office while thousands of people were losing their jobs. What a scumbag.
My point is that when you let the free market decide this is what you get. People like Thain basically stealing from others (the shareholders). I think that the guy should go to jail.
Lest us not forget that we the taxpayers are now the biggest shareholders in BofA/Merrill, I think we should get the 1.2MM back from Thain's personal account as well as any compensation that he earned over that period.
I imagine the merger is even harder to withstand in an environment where the government and the public believe that the banks need to make a bit of sacrifice for the greater good after taking advantage of a bubble economy for so long.
Good Riddance to Thain
another lantern-jawed mediocrity why "saved" the NYSE and I'm sure to his own way of thinking "saved" Merrill
we now have mediocrity personified with Dick Parsons running Citigroup (last man standing at 2 behemoth corporations, pretty impressive, puts him head and shoulders above, say, a Caroline Kennedy type)
I would like to see a real meritocracy where people who deliver can get paid, but only if they deliver. Walking away from a smouldering wreck or being last one out to turn off the lights should not be an accomplishment
Steve Martin used to joke "I believe the "Battle of the Network Stars" should be fought with guns" [it was an old reality TV show from the 70's] I am all for tremendous rewards but also tremendous penalties for screwing up - I am a real free market man
I'd have some sympathy for Thain if he was at the guillotine, like Marie Antoinette. If I saw his Ferrari I would key it however, happily.
True, the mess at Merrill was not of Thain's making, and he was a mere steward of the ship as it went down in the final throes of the crisis.
But I refuse to have sympathy for him and the countless others like him. Around the holidays he was pleading for billions in bonus money for what? Shareholders? Hardly. And CNBC is reporting that bonuses at ML were higher than they were a year ago (?!?) Also, today we have the news that Thain spent $1.2 million renovating his office, including a credenza which cost $68,000--a little more than our country's median household income.
Despicable.
Thain's a scumbag. I hope he gets herpes of the eye.
It's time to end the cult of the CEO and adjust the tax code to make the extreme compensation the bastards are granting themselves non-deductible. Free market fetishists can whine all they want. There is no free market. Not in this century. Not in the last one, either.
If I understand this post, we're meant to have sympathy for Thain, who concealed massive debt problems from Ken Lewis, and blame the Black guy, Stanley O'Neal.
And Ken Lewis was coerced into buying Merrill (and Countrywide), though he went around boasting on television about the acquisition of both companies.
Uh....
I've actually developed quite a bit of sympathy for Mr. Thain.
HA!
We are tired of CEO's like Thain!!! What a piece of shit! People loosing their jobs and these mother fuckers flying on private jets? Enough is enough. Our tax money is getting wasted on scumbags!!!!!!!!!!!!!!!!!!!!!!!!!!!! We should kill these bastard CEO's. People hungry trying to find a job and they just rush their bonuses before the end of 2008? What kind of world is this???? Lets kill all of the CEO's!!!!! Lets burn them alive... they have to learn somehow that we are watching them!
Agree with all the (sane) comments about d-bag Thain and his ilk. There truly is something wrong with our current version of Capitalism. To those who decry Government intervention - well, piss off, you guys had your chance and blew it.
Wow some people are so jealous. I guess it must suck to be a grown man who has never made more than 70k a year.
Reece the ones who (selectively) decry govt intervention are the ones who
A. Either feed off of Thain et al
or
B. Imagaine themselves as Thain someday
or
C. Have a fundamental misunderstanding of how real free markets work.
k1
Capitalism favors meritocracy but the results sometimes fall short. Government favors those who can best appeal to the mob. Only sometimes does meritocracy result. Justice demands we seek a meritocracy; pragmatism favors the results achieved by a capitalist system.
The bane of Thain
Flew swiftly down by plane.
And where's that emplaned bane?
With Thain, with Thain...
With apologies to My Fair Lady....
t's time to end the cult of the CEO and adjust the tax code to make the extreme compensation the bastards are granting themselves non-deductible.
I give you my friend the US Code, 26 USC 162(m).
You may wish to check the law before commenting about it next time.
Let's not forget that Lewis seems to be locked in a urinating contest with Jamie Dimon.
Thain seems to have gotten the Merrill shareholders a lot more than they deserved in the deal with BofA. Ken Lewis got ripped a new one by William Cohan for that deal (and the Countrywide one) in the FT this week: "The tattered strategy of the banker of the year". Excerpt:
& Rob, I give you 162m4(C), aka the big giant loophole:
(C) Other performance-based compensation
The term “applicable employee remuneration” shall not include any remuneration payable solely on account of the attainment of one or more performance goals, but only if—
(i) the performance goals are determined by a compensation committee of the board of directors of the taxpayer which is comprised solely of 2 or more outside directors,
(ii) the material terms under which the remuneration is to be paid, including the performance goals, are disclosed to shareholders and approved by a majority of the vote in a separate shareholder vote before the payment of such remuneration, and
(iii) before any payment of such remuneration, the compensation committee referred to in clause (i) certifies that the performance goals and any other material terms were in fact satisfied.
If there is any justice in the world, someone would murder these CEOS, and hang them upside down like with Mussolini. And then no jury would convict him.