John Thain: What Was He Thinking

January 27, 2009

Okay, if my memory serves me correctly, John Thain was brought in to replace Stan O’Neal as Merrill Lynch’s CEO. This occured in late 2007. Thain was hired to clean up Merrill Lynch after they lost lots of money during the mortgage/credit crisis.

So, what does Mr. Thain do after he becomes CEO? He decides to spend $1.2 million renovating his office (emphasis mine):

Mr. Thain said he plans to reimburse Merrill for the $1.2 million spent to renovate his office, saying those expenses were “incurred in a very different environment.” Mr. Thain renovated his office when he first arrived at Merrill in late 2007. Among the items purchased for the office were an area rug for $87,784, Roman shades for $7,315 and four pairs of curtains for $87,784.

Ummm…no they weren’t! True, we didn’t know how bad things were going to get, but we knew things were bad.

My question is: how bad could his office have possibly been in that would require a $1.2 million renovation?

Oh, and don’t even get me started on bonuses:

According to a person familiar with the situation, the merger agreement specified that Merrill pay regular bonuses. Since the company was going to cease to exist at the end of 2008, that meant, by definition, that the bonuses had to be paid before the end of the year.

Why would Bank of America agree to this in the first place? These companies are losing money left and right and they have the audacity to even think about paying out bonuses. COME ON!

Source: Thain Fires Back at Bank of America, Wall Street Journal Tuesday, January 27, 2009

11 responses to John Thain: What Was He Thinking

  1. and you forgot to mention the $3000 “commode” in the office. yes, u got that right….$3000 for Thain to !@#@#! into!

  2. This is disgusting and one of the reasons I left Merrill Lynch in 2006. I was sick and tired of apologizing to my clients for things like this. And sadly, these examples of corporate excess and no accountability seemed to happen more frequently leading up to my departure. Scary to think about all the crap a firm like Merrill does that doesn’t make it to the press.

  3. I’ve come to the conclusion that publicly traded companies are basically like many not-for-profits; they exist largely for the benefit of management and not the owners.

    I would like to never invest in equities again, but I don’t know where to put my money where it can grow faster than inflation. Maybe I should just stick with bank/credit union certificates of deposit and sleep soundly.

  4. There’s the everyday “entitlement” that lots of Americans suffer from, and then there’s the Wall Street corporate exec brand of “entitlement.”

    One large way they differ? Price tags.

    If I were running the show, Mr. Thain (and a cadre of his closest buddies) would be doing the perp walk.

  5. A “commode” is a small table with drawers – and not a toilet in this case – but it’s still way overpriced. Even on Wall Street, most people work in relatively simple cube farms, with some fancier stuff in the lobby or customer meeting areas.

    As for the comment about public companies; a friend of mine who worked there for about 20 years says that Wall Street’s downfall was when the old partnerships “went public”. After that, the partners were playing with “house money” and only cared about cashflow, not risk.

    Before that, traders were using the partners’ money, and the partners made darn sure they knew where the risks were.

  6. I could pay off my house for the price of those curtains. Twice almost!

    I need a bailout:-P

  7. I’m sick and tired of hearing people bad mouth Thain. His job as CEO was to maximize shareholder value, and boy did he ever, convincing one of the largest banks in the world to buy the place for $50 Billion, which turns out to be at least $50 Billion more than it was worth. I’m not sure I’d want to work for him, but I’d be happy to have him work for me.

  8. Thain was lying. He was only hired by Merrill after the company was in terrible financial shape and had posted quarter after quarter of losses.

  9. Thanks for the article.

    It’s good to know, I’m looking for a house that’s 1/6 of what he renovated his office for.

  10. this is the typical behavior of corporate american executives.
    even more sadly, it is even true for the typical manager in a government organization.

  11. Those prices are just amazing. I’m doing a lot of redecorating in my house lately. I don’t exactly have a budget and I’m not cutting corners, but those prices are incredible. Even the most expensive fabrics I’ve looked at aren’t as expensive as what he paid. Are they exotic fabrics hand-made by elves and fairies in Tibet or something? How could they be that costly?