1. If you put the issues related to bonuses and personal perks to one side, how would you judge the effectiveness of John Thain as the leader of an organization deep in crisis?
2. Where the actions that John Thain took on personal perks and bonuses legal? Were they ethical? What does this case teach you about the differences between staying within the bounds of the law and behaving ethically?
3. Why do you think John Thain pushed for such high bonuses in 2008 given that Merrill was in a deep financial crisis? What might his motivations have been?
4. What might John Thain have done differently? If he had pursued a different set of actions with regard to personal perks and bonuses, what might the outcome have been for him and for Merrill Lynch?
5. At the end of 2008, the financial markets were in the middle of the deepest crisis since the great depression. Losses were increasing in financial institutions by the hour as the value of their holdings of mortgage-backed securities plummeted. Given this situation, shouldn't Ken Lewis have expected higher losses at Merrill Lynch? Was Thain really misleading him? Why might he have been misled?
John Thain ran the NYSE from 2004 to 2007 after his predecessor, Richard Grasso, was dismissed over excessive executive compensation charges. The NYSE prospered under his leadership and he was seen as a golden boy. In 2007, Thain was recruited to run (save) Merrill Lynch which was reeling from losses as a result of the mortgage crisis. Thain immediately began deep cost cuts, laying off thousands of employees and divesting companies, while extolling the virtues of tight cost control to his managers and patting himself on the back in the press. The savings enabling him to raise enough capital to stave off bankruptcy. In the fall of 2008, Thain engineered the sale of Merrill Lynch to Bank of America, with pressure and financial backing from the federal government. During the buyout, Thain was kept on at Bank of America reporting to CEO Ken Lewis. It was at this point that Thain's activities while at Merrill Lynch were made public. Such activities included spending exorbitant amounts on lavish furnishings and décor for his personal office and authorizing billions in bonuses to executives, while reporting bigger-than-expected losses in the 4th quarter. Ken Lewis was furious and almost nixed the buyout. John Thain was excoriated in the press for his hypocrisy and quietly left the organization three weeks after the deal closed.