Granted we have had many blows to the integrity of the financial services industry to date but the newly disclosed actions of John Thain go way beyond simple greed, corruption and questionable judgment.
Let's start with this: Thain should have known better. After all, he replaced a CEO who embodied the corruption and excesses of the time - Richard Grasso. Grasso, you may remember, got the boot because he approved his stunning pay package - a whopping $187.5 million a year.
But Thain did him one better. In December, before Bank of America could complete its acquisition of Merrill Lynch, Thain hurriedly pushed through gigantic bonuses (somewhere around $4 BILLION!) for himself and his executive cronies. The bonuses are usually paid in January but he forced them to be paid in December. Why before the BofA acquisition? One can only speculate that BofA probably would not have approved of them, given their shock at the fact that the brokerage had lost $15 BILLION in the fourth quarter and more that $27 Billion for the year.
Perhaps it was Thain's end-of-year vacation in Vail that got people up in arms even as his soon-to-be boss at BofA, Ken Lewis, recommended against it.
But no, the icing on the cake? Thain's decision to spend $1.2 MILLION decorating his Manhattan office -- this as Merrill Lynch was hemorrhaging money and layoffs were pending. How nice that he has volunteered to pay for these extravagances, stating, "They were a mistake in the light of the world we live in today. I will therefore reimburse the company for all of the costs incurred." Ya think???
The era of entitlement at financial companies must change if we are to see any real change for the better. If not, I fear we will read more stories similar to this one. And to Mr. Thain, all I can say is:
May you rot in an exceptionally hot place.
Yours in better times in 2009.
Claudia
Technorati Tags: John Thain, Merrill Lynch, corruption,
Posted January 26, 2009 11:00 AM
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After @stevepr104 posted that hilarious Craigslist post: http://www.craigslist.org/about/best/nyc/1004463995.htm
I went out to read more about the guy. http://www.time.com/time/business/article/0,8599,1873835,00.html
Unbelievable behavior, and how on earth did he not think anyone would notice? Why wasn't the BofA M&A team aware of this pending $15B loss? This speaks to openness and transparency of information. If only that team had access to quality data and information from Merrill Lynch, they might have been able to deal with this ahead of Thain's antics.
I don't think the sense of entitlement is just financial companies. It is everywhere in corporate boardrooms and high-level politics. I think it's created in large part by the corporate money flowing into politics and the favors flowing back, as exmplified by the FDA, SEC, USFS etc. being run by former corporate employees and lobbyists.
The regulators for the public good are the same people benefiting by not regulating for the public good. Allowing corporate money into politics created a positive feedback loop (really a death spiral) that is the single largest factor contributing to the current level of malfeasance.
The only way to fix it is to stop allowing this insanity of political money for favors, and to then have the will to enforce and prosecute.
Part of my bailout plan would be to employee laid off workers as investigative agents at regulatory agencies in their field of expertise -)
Terri - Indeed, where was BofA's often touted BI capability here?
Mark -- you make very good points. I especially like the idea of hiring laid off employees to do the investigating - Excellent!
At some point the public must stand up and shout "I'm not going to take this anymore!"
Claudia
On January 29th, the WSJ posted this story indicating that Starbucks CEO Howard Schultz was taking a paycut and that after deductions for healthcare he would have a comfortable salary of $4 a month. http://online.wsj.com/article/SB123317714771825681.html
Here's a great leadership example that John Thain, Ken Lewis and many other CEOs and Directors of troubled companies can learn from. With Schulz net earnings he might not even be able to afford to buy John Thain or Ken Lewis a decent cup of coffee. However if they both want to join in they would have skip the fancy latte and go for a no-frills plain cup of Joe. OMG, What a nightmare that would be!!!
You know, I might even buy Mr. Schultz a latte -- just for being a "good Joe". Thanks, Mr. Schultz!
Claudia