John Thain

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John Thain

Thain in 2006.
Born John Alexander Thain
May 26, 1955 (1955-05-26) (age 54)
Occupation currently unemployed
Home town Antioch, IL
Salary $83.1 million[1]
Board member of INSEAD, MIT Sloan School of Management, National Urban League

John Alexander Thain (born May 26, 1955) is an American businessman and investment banker.

Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America. He was designated to become president of global banking, securities, and wealth management at the newly combined company, but he resigned on January 22, 2009. Ken Lewis, CEO of Bank of America, reportedly forced Thain to resign after losses at Merrill Lynch proved to be far larger than the due diligence team at Bank of America had estimated.

Contents

[edit] Career

Before he came to Merrill, Thain was the CEO of the New York Stock Exchange from January 2004 to December 2007. He also worked at Goldman Sachs, as head of the mortgage desk from 1985 to 1990,[2] and president and co-chief operating officer from 1999 to 2004.[3]

Thain reportedly was a front runner to head Citigroup.[4][5][6] Merrill Lynch and Citigroup sought new leaders following the sudden departure of their former CEOs after the disappointing performance in the third quarter of 2007.[7][8]

Thain arranged the sale of Merrill to Bank of America at $29 per share, a 70 percent premium over the market price. The deal valued the brokerage at $50 billion. Thain was expected to be president of global banking, securities and wealth management, a new division at Bank of America to oversee its corporate and investment bank and most of wealth management business.[9]

[edit] Compensation

In December 2003, interim chairman John Reed at the New York Stock Exchange told The Wall Street Journal that Thain would be paid "a plain vanilla number", about $4 million a year including bonus, with no "strange retirement" program like the one former NYSE CEO Dick Grasso was given.

Upon joining Merrill Lynch, Thain received a $15 million signing bonus. The firm announced that Thain would receive at least $50 million a year and could be paid as much as $120 million a year, based on the company's stock price. The Associated Press [1] in 2007 identified Thain as the best paid among the executives of S&P 500 companies, as he had received $83.1 million. In 2007, John Thain earned a total compensation of $83,785,021, which included a base salary of $750,000, a cash bonus of $15,000,000, stock grant of $33,013,151, and options grant of $35,017,421.[10]

Thain suggested to directors that he receive a bonus in 2008 of as much as $10 million, because he "saved Merrill" by selling it off to Bank of America. After the compensation committee at Merrill resisted the request, Thain reportedly dropped his request on December 8, 2008.[11][12]

On January 22, 2009, it was revealed that, in early 2008, Thain spent $1.22 million in corporate funds to renovate two conference rooms, a reception area, and his office, including $131,000 for area rugs, a $68,000 antique credenza, guest chairs costing $87,000, a $35,000 commode, and a $1,400 wastebasket. Thain subsequently apologized for his lapse in judgment, and reimbursed the company in full for the costs of the renovation.[13][14][15][16]

Thain accelerated approximately $4 billion in bonus payments to employees at Merrill just prior to the close of the deal with Bank of America. Bank of America was aware of the decision, as the payout was reportedly one of the conditions under the merger agreement. Speculation mounted that TARP funds were used for the bonus payments, but the TARP recipients are yet to disclose how TARP funds were segregated, or what they were used for.

[edit] Departure from Bank of America

On January 16 2009, Bank of America announced that Merrill suffered an unexpected loss of $15 billion for the fourth quarter of 2008. Bank of America CEO Ken Lewis said that, without $138 billion in government assistance, including the infusion of $20 billion from the federal government, he would have pulled out of the Merrill deal, which had been approved by Bank of America shareholders in early December. People close to Lewis say his relationship with Thain was strained by Merrill's massive fourth quarter loss. Lewis himself faced criticism for rushing to buy Merrill for $28 billion after less than two days of due diligence.[17]

On January 22, 2009, on CNBC's The Call, Charlie Gasparino said that Thain was going to meet Lewis later in the day. Gasparino added that Thain's future at Bank of America was in doubt, although it was not certain whether he would be leaving. Gasparino then said that Thain spent $1.22 million to refurbish his office, shortly after he was named as CEO of Merrill in January 2008.[18] Merrill was still an independent firm at the time, and some analysts predicted that, with Thain as new CEO, the company would be back on track for a strong performance in the midst of disappointing results on Wall Street.[17]

The tension between Thain and Lewis had been building since mid-December and culminated on January 22, 2009 when Lewis flew to New York to meet with Thain. After a 15-minute conversation between the two men, Thain agreed to resign.

[edit] Obama administration

On January 23, 2009, President Obama referred to John Thain by saying "the reports that we’ve seen over the last couple of days about companies that have received taxpayer assistance then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately." Obama's press secretary Robert Gibbs also said taxpayer money shouldn't go to "line the pockets of people" who've gotten financial assistance. "The American people need to be greatly assured that their hard-earned money is not going to the bonuses or the remodeling of an office at a bank that’s in trouble," Gibbs said.[19]

On January 29, 2009, President Obama publicly criticized the large bonuses such as those handed out by Thain. Obama said: "I saw an article today indicating that Wall Street bankers had given themselves $20 billion worth of bonuses at a time when most of these institutions were teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don't provide help that the entire system could come down on top of our heads—that is the height of irresponsibility. It is shameful. And part of what we're going to need is for folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility. The American people understand that we've got a big hole that we've got to dig ourselves out of—but they don't like the idea that people are digging a bigger hole even as they're being asked to fill it up."[20] Vice President Joe Biden also said the bonuses "offends the sensibilities. I mean, I'd like to throw these guys in the brig." [21]

[edit] Criminal investigation

On January 27, 2009, New York Attorney General Andrew Cuomo issued a subpoena to Thain in a probe into the bonuses he paid and received just days before the Bank of America takeover. Charges of criminal fraud against those involved in the payouts could be brought under the 1921 Martin Act. [22]

[edit] Memberships

Thain's memberships include:

  • Howard University - Board of Trustees
  • MIT Corporation, Dean's Advisory Council – MIT Sloan School of Management
  • INSEAD – U.S. National Advisory Board
  • James Madison Council of the Library of Congress
  • Federal Reserve Bank of New York's International Capital Markets Advisory Committee[23]
  • French-American Foundation[24]
  • Board of Trustees of the National Urban League
  • The Trilateral Commission[25]
  • Yale University - John and Carmen Thain established the "Thain Family Café", which is part of the Yale University Anne T. and Robert M. Bass Library. The Café offers refreshments prepared with organic and local ingredients, secured through the Yale Sustainable Food Project. At the dedication of the Library in November 2007, Thain spoke warmly of Yale’s attention to its undergraduates (his daughter attended the University) and stated, “This was a way for us to give back and contribute to the student experience.”
  • New York-Presbyterian Foundation - Thain serves as a governor [26]
  • Republican Party - Thain is a prominent member of the party and a personal friend of Senator John McCain. Thain was a senior economic policy adviser to McCain and was considered a leading candidate to be his Treasury Secretary[27]. In support of McCain's unsuccessful 2008 bid for the presidency, Thain sponsored a number of fundraisers, including a $2,300-a-seat breakfast at The Regency Hotel on Park Avenue on December 14, 2007[28].

[edit] Personal life

Thain was born in Antioch, Illinois. His father is a medical doctor.[29][30] He earned a bachelor's degree in electrical engineering from MIT in 1977 and an MBA from Harvard Business School in 1979.[31] While attending MIT, Thain joined the Delta Upsilon fraternity. He is active in social work and served as gala co-chair for a Publicolor event in in New York city that honored Rick Segal, Publicolor's former board chair. Thain and his wife, Carmen, have two daughters and two sons.

Thain's 25-acre (100,000 m2) property in New York state spans three townships, Rye, Harrison, and Rye Brook.

[edit] References

  1. ^ a b "List of highest-paid CEOs in 2007". Associated Press. ap.google.com. 2008-06. http://ap.google.com/article/ALeqM5joqFL0xgMcnWcdP4piX5YpeBwh7wD91AMG903. Retrieved 2008-06-20. "The total pay figures are rounded, and are based on the AP's compensation formula, which adds up salary, perks, bonuses, above-market interest on pay set aside for later, and company estimates for the value of stock options and stock awards on the day they were granted last year." 
  2. ^ The Times Online. http://andheblogs.andyrush.net/wp-content/photos/expendability_star_trek.jpg
  3. ^ Business Week. http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=398631&ric=NYX
  4. ^ John Thain to Head Citi?
  5. ^ John Thain, taking over Merrill's helm, is no longer a prospect for the leaderless Citigroup - International Herald Tribune
  6. ^ Citi Snub: Thain Going To Merrill - New York Post
  7. ^ At Merrill Lynch, accountability for a record loss on Wall Street - International Herald Tribune
  8. ^ Worcester Telegram & Gazette News
  9. ^ http://www.boston.com/business/ticker/2008/10/merrills_john_t.html
  10. ^ CEO Compensation for John A. Thain, Equilar.com
  11. ^ http://online.wsj.com/article/SB122870455251587405.html?mod=special_page_campaign2008_mostpop
  12. ^ http://ridingtheelephant.blogs.fortune.cnn.com/2008/12/08/news/economy/Cuomo_Thain/?postversion=2008120817
  13. ^ http://www.usatoday.com/money/industries/brokerage/2009-01-26-thain-merrill-bank-of-america_N.htm
  14. ^ "Big bonuses, costly commodes: Thain out at B of A". Globe and Mail. Globe and Mail. 2009-01-23. http://www.theglobeandmail.com/servlet/story/LAC.20090123.RTHAIN23/TPStory/Business. Retrieved 2009-01-23. 
  15. ^ "Merrill Lynch CEO Thain Spent $1.22 Million On Office". CNBC. 2009-01-22. http://www.cnbc.com/id/28793892. Retrieved 2009-01-23. 
  16. ^ http://www.cnn.com/2009/US/01/22/campbell.brown.thain/index.html#cnnSTCText
  17. ^ a b Charlie Gasparino (2009-01-22). "John Thain's $87,000 Rug". The Daily Beast. http://www.thedailybeast.com/blogs-and-stories/2009-01-22/john-thains-87000-rug/full/. Retrieved 2009-01-23. 
  18. ^ "Lewis & Thain Meeting". CNBC.com. 2009-01-22. http://www.cnbc.com/id/15840232?video=1009357569. Retrieved 2009-01-23. 
  19. ^ "Obama hints that missteps by Thain will haunt banks". Los Angeles Times. Los Angeles Times. 2009-01-23. http://latimesblogs.latimes.com/money_co/2009/01/thain-bailout-j.html. Retrieved 2009-01-23. 
  20. ^ "Obama Calls Wall Street Bonuses ‘Shameful’". New York Times. New York Times. 2009-01-29. http://www.nytimes.com/2009/01/30/business/30obama.html?em. Retrieved 2009-01-29. 
  21. ^ "Obama calls $18B in Wall Street bonuses 'shameful'". Associated Press. Associated Press. 2009-01-29. http://www.google.com/hostednews/ap/article/ALeqM5jUtOqjn-Gmqh0fIoTp_GZIOAVVEwD9614F7G0. Retrieved 2009-01-29. 
  22. ^ "Cuomo subpoenas Thain over Merrill bonuses". Reuters. Reuters. 2009-01-27. http://www.reuters.com/article/topNews/idUSTRE50Q4TR20090127. Retrieved 2009-01-27. 
  23. ^ Federal Reserve Bank Of New York
  24. ^ French American Foundation aims to strengthen the French American relationship
  25. ^ Goldman's Thain Trades Money For Fame - Forbes.com
  26. ^ Presbyterian Foundation
  27. ^ "Thain is Good for McCain". Conde Nast. 2007-11-14. http://www.portfolio.com/views/blogs/capital/2007/11/14/thain-is-good-for-mccain. Retrieved 2009-01-24. 
  28. ^ Scrambled with Thain (or McCain) on a Roll, $2,300.00 MyRye.com [1] and [2]
  29. ^ "Merrill's Repairman". Bloomberg.com. 2008-02. http://www.bloomberg.com/news/marketsmag/mm_0208_story1.html. Retrieved 2009-09-21. "His father, Allan, was a doctor on the town's redbrick Main Street who has since handed his practice on to Thain's two brothers, Dennis and Robert, both general practitioners." 
  30. ^ "The IRobot rides in to sort out Merrill Lynch". Times Online. 2007-11-18. http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article2889495.ece. Retrieved 2009-01-25. 
  31. ^ "John A. Thain Named Chairman and Chief Executive Officer of Merrill Lynch". Newsroom. Merrill Lynch. 2007-11-14. http://www.ml.com/index.asp?id=7695_7696_8149_74412_84736_85585. Retrieved 2009-01-22. 

[edit] External links

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