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Shame, Shame, John Thain

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Last month, I wrote that former Merrill Lynch CEO John Thain was one of the only Wall Street CEOs who actually deserved a bonus. The $10 million he was asking (and later backed off from) seemed justifiable in light of Thain's mystifying ability to sell Merrill to Bank of America (NYSE: BAC  ) for $50 billion last September.

Was I wrong? Absolutely. But not for the reasons I laid out at the time. Since then, it's become clear that whatever "value" Merrill seemed to have at the time, it's apparently gone now -- given last week's massive taxpayer bailout.

That alone is enough to chastise Thain for (although I think B of A should take the brunt of the blame) but, worry not, this executive pay story gets better.

Shortly after resigning yesterday, word spread that Thain spent $1.22 million sprucing up his office early in 2008 with a kingly collection of goods, according to CNBC; some of the more outrageous were:

  • Area rug -- $87,784
  • Pair of guest chairs -- $87,784
  • 19th century credenza -- $68,179
  • Commode on legs -- $35,115 (Get your mind out of the water closet; that's another name for a chest of drawers.)
  • Parchment waste can -- $1,405

If you're wondering, yes, that last one really is a $1,400 trash can. I'm going to assume it's made of parchment and not reserved exclusively for parchment that's being thrown away. Wasn't former Tyco (NYSE: TYC  ) CEO Dennis Kozlowski ridiculed for his $6,000 shower curtain affair? Even more dumbfounding, wasn't Thain brought in to run what's now NYSE Euronext (NYSE: NYX  ) , replacing CEO Dick Grasso, who was entangled in, ahem, an excessive-pay dispute?  

Now, mind you, Merrill was still 100% independent and free from Uncle Sam's munificence when the decor was purchased. Thain was free to blow as much money as he pleased while having to answer only to Merrill shareholders, who were likely still under the impression he could turn water into wine.  

Last month, however, he had no such luxury. After -- yes, after -- B of A CEO Ken Lewis went to Washington to tell Ben Bernanke and Hank Paulson that Merrill was a lost cause and he needed to dump the remnants on taxpayers, Merrill followed through with an out-of-the-ordinary move to pay billions of dollars in bonuses in late December -- at least a month or two before they're typically paid.

Sound familiar? Another Wall Street boss was caught last month suspiciously trying to pay bonuses to his employees a few months early. His name was Bernie Madoff. I'm certainly not drawing any comparisons of potential criminality, but the same sort of "take-the-money-and run-before-it's-too-late" behavior Merrill has exhibited at Thain's lead is, to say the least, appalling. (Admittedly, as details emerged, it became clear that this wasn't the innocent act I passed it off as yesterday.)

Corporate greed and excessive CEO pay is, of course, nothing new. What's new this time is that we're literally dealing with a company that taxpayers have grudgingly backstopped for hundreds of billions of dollars.

This story is too good to die.

Further Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Bank of America is a former Motley Fool Income Investor selection. Tyco International is a Motley Fool Inside Value pick. NYSE Euronext is a Motley Fool Rule Breakers recommendation. The Motley Fool is investors writing for investors.

Read/Post Comments (12) | Recommend This Article (76)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 23, 2009, at 7:22 PM, prginww wrote:

    It just shows that even the Motley Fool is foolish enough to grant outlandish bonusess to corporate crooks. Shane on you Fools

  • Report this Comment On January 23, 2009, at 7:37 PM, prginww wrote:

    I wish that some form of criminal charges could be filed against Thain, though I'm not sure that any would even be applicable. But what he did was sure as hell theft in reality if not quite legally, it was completely immoral and wrong.

    I never wanted to get jaded or cynical to the world around me and the human race- but when I hear things like this, all I can do is shake in disgust and wonder if there's any hope for humanity at all.

    There are people all over this world starving to death as we speak, people out there homeless in the cold, people with nothing- and here we have this man who would be king...

    It's sickening, and all I can hope is that Thain gets the cosmic payback he's got coming to him.

  • Report this Comment On January 23, 2009, at 7:46 PM, prginww wrote:

    This makes me ill, and angry. I now know that all the strings that could have been attached to this garbage are being braided to make a noose to hang us, the tax payers.

    Morgan, what can we, the Motley Fool community, do right now to stop this from happening with the fund that have yet to be distributed?

  • Report this Comment On January 23, 2009, at 8:08 PM, prginww wrote:

    I find it pretty amusing - and reason enough to tell everyone I know - that the Motley Fool site is run by a bunch of fools.

    John Thain is listed as a contender for the "Best CEO" award for 2008 in another article on this site:

  • Report this Comment On January 24, 2009, at 5:47 AM, prginww wrote:


    (Minnie the Moocher, Cab Calloway)


    Sing along link:

    Hey folks heres the story bout Kenny the bailout moocher

    He was a low down Charlotte BAC hoocie coocher

    His was the roughest toughest banking sob tale

    But Kenny had an appetite as big as a securitized whale

    Hidehidehidehi (hidehidehidehi)

    Hodehodehodeho (hodehodehodeho)

    Hedehedehedehe (hedehedehedehe)

    Hidehidehideho (hidehidehideho)

    One weekend he messed around with a bloke named Thain

    He wanted the Merrill Bulls so he couldn't complain

    Thain took him round the block to Chinatown

    And showed old Ken how Wall Street scamsters kick the gong around

    Hidehidehidehi (hidehidehidehi)

    Whoah (whoah)

    Hedehedehedehe (hedehedehedehe)

    A hidehidehideho (hidehidehideho)

    Ken had a dream about a gigantic supermarket bank

    It would give him things that he was needin

    It would give him a home built of gold and steel

    A diamond Learjet with platinum wheels

    A hidehidehidehidehidehidehi (hidehidehidehidehidehidehi)

    Hodehodehodehodehodehodeho (hodehodehodehodehodehodeho)

    Thain sold Ken a herd of sick cows and a bottomless pit of subprime losses

    Each meal Ken ate was full of surprise derivative courses

    Had a billion dollars worth of taxpayer nickels and dimes

    He sat around and counted them all a million times

    Hidehidehidehi (hidehidehidehi)

    Hodehodehodeho (hodehodehodeho)

    Hedehedehedehe (hedehedehedehe)

    Hidehidehideho (hidehidehideho)

  • Report this Comment On January 24, 2009, at 10:05 AM, prginww wrote:

    Why would the elaborate spending on executive offices and other perks surprise anyone? It goes on everywhere all the time. He just happened to have bad timing, bad judgement and a tin ear. Like most of them, they grow to think that they are entitled.

    But seriously, having read a lot about BofA and ML lately, and having the majority of my investments manged by ML, I wonder, if I were to dump them: where should I go, If I am not inclined to do it myself?

  • Report this Comment On January 25, 2009, at 8:03 AM, prginww wrote:

    The Nationwide BS has a new Director who is giving £3m to the CAB, which is under government control. Where is this large sum coming from, and do all the customers know if it is their money.

    I smashed a fraud at the High Wycombe CAB when the MoD planted an ex Wing Commander in the CAB as manager, who processed senior RAF officers wives through the next door solicitor. We were victims of a contrived divorce just before retirement and were asset stripped with a vengeance, no promised half pension or substantial gratuity payment, intended for house purchase, very few of our personal possessions but worst of all we never see our abducted and brainwashed children again. When I persuaded the Head of the CAB to change the managers to female, the solicitor lost `his nice little earner` as he was cornering the local market in Legal Aid Cerificates, therefore he was compensated by being promoted to President of the Law Society, thus ensuring that no other solicitor would take our case to sue him.No publicity is allowed due to the OFFICIAL SECRETS ACT,which has recently been criticised by the World Head of the Human Rights organisation. therefore I created my website in 1998. Eileen North

  • Report this Comment On January 26, 2009, at 7:45 AM, prginww wrote:

    Why is there a newsletter from Motley Fool every 3 months and claims of big returns..the million dollar portfolio lost money last year and was a joke..they would do a lot better and more accountable if they just had one service.....however..if i did have to use their services it would be for the humour of the articles...

  • Report this Comment On January 27, 2009, at 2:21 PM, prginww wrote:

    As shareholders of companies and consumers we can vote with our feet. Highly compensated executives need to experience lost revenue, lost compensation etc. for flagrant disregard of shareholder value and for unethical behavior. We need to hold companies responsible for greedy and dangerous executive decisions, by choosing not to buy their shares, products, or services. Shareholder value can be achieved with ethical and socially responsible behavior - if we make it a success criteria for our business.

  • Report this Comment On January 27, 2009, at 5:17 PM, prginww wrote:

    Well, the good news here is that maybe Thain will get what's coming to him sooner rather than later. As a result of these multi-billion dollar bonuses, Thain's been subpoenaed by New York Attorney General Andrew Cuomo to determine:

    Why the timetable for paying the bonuses was moved up to December from its normal period in January; who knew about the bonuses; and how Merrill could justify spending billions of dollars on bonuses knowing its was on the brink of reporting a multibillion loss for the quarter.

    You go, Andrew Cuomo. Nail this scumbag to the wall!

  • Report this Comment On January 29, 2009, at 5:20 PM, prginww wrote:

    As a BofA shareholder, I can tell you that even though he wasted 1400 for a trashcan, Thain did a lot more good for MER's shareholders than Lewis did for us. I'd easily forgive an overpriced trashcan to a CEO who could sell a POS company for 50 bilion.

  • Report this Comment On January 31, 2009, at 12:24 AM, prginww wrote:

    Thain must have got his $1400 trash can from the military. I heard that they had some of those.

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