A few years back, Merrill Lynch & Co. chose John Thain, the chief of NYSE Euronext, as

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A few years back, Merrill Lynch & Co. chose John Thain, the chief of NYSE Euronext, as its new chief executive. The move was interpreted as signaling that after years of inner turmoil and risky expansion, the board of the beleaguered ﬁ nancial giant wanted a pair of steady hands at the helm. Wall Street executives said that the companies that appeared to emerge relatively unscathed from the credit risks that gripped some of the nation’s biggest banks were led by men who knew the innards of their businesses. Also, they couldn’t be fooled too easily by bond traders and were hands-on to a fault.
Thain, who studied electrical engineering at Massachusetts Institute of Technology and has a Harvard M.B.A., revels in the nitty-gritty of the businesses he has run. The 52-year-old spent twenty-four years at Goldman, holding various jobs from mortgagebond trader to chief ﬁ nancial ofﬁ cer before rising to president in 1999. He took the NYSE job to have a chance to take a CEO role and work to turn around an important ﬁ nancial institution facing governance and technological challenges. Thain said he accepted the offer from Merrill because it has a “great franchise” with strong positions
Leadership Case Problem A
in wealth management, investment banking, and sales and trading, among other areas. “It’s got one problem area,” he said, “and I know a lot about that area” from running Goldman’s mortgage desk from 1985 to 1990. The problem was reﬂ ected in an $8 billion after-tax loss for 2007, along with $22 billion in writedowns. Known for a somewhat robotic personality, Thain deﬂ ected concerns during an interview that he doesn’t have the charisma to lead a ﬁ rm known for its “thundering herd” of 16,000 brokers. “I think I have better interpersonal skills than people give me credit for,” he said. He added that he has taken a lot of time to get to know the Big Board’s ﬂ oor traders, a task somewhat akin to one challenge at Merrill: winning the support of its army of stockbrokers. Another selling point for the Merrill board is that Thain was known to be a consensus builder, and has the ability to attract and retain talent. His predecessor, Stan O’Neal, was known for driving away potential challengers and ﬁ ring executives who were a threat to his power. Some Merrill alumni expressed surprise that their alma mater would turn to an outsider and a former rival. “It’s shocking they picked someone from a Goldman Sachs background,” said former Merrill CEO Dan Tully. He added that Thain didn’t seem to be a folksy “people person” consistent with the culture of Merrill, which has a huge brokerage force. “I understand he’s very cerebral,” Tully said. As a youth, Thain put together a ham radio for his mother. At a meeting with a consultant at the NYSE on its lower trading ﬂ oor, Thain jumped in with questions about what color the prices and data on the screen should be to make the job easier for traders. Two years earlier, a visit to the Chicago Board Options Exchange ran long when Thain asked a series of questions about how the ﬂ oor traders on that exchange used technology. “There’s an awful lot of substance there,” says William Brodsky, the CEO of the Chicago Board Options exchange. “Merrill is lucky to have him.” Thain at times grew frustrated with parts of the job at the NYSE, especially the ceremonial ones.
Early on, he preferred to stay away from twice-aday bell-ringings on the balcony above the trading ﬂ oor. Later he showed up at bell-ringings more often, using them as an opportunity to show CEOs and other business leaders in person what actually happened on the trading ﬂ oor. “He’s a detail person and understands the inner workings, but he also appreciates the big picture and is well connected,” says Amy Butte, a former NYSE ﬁ nance executive. One of Thain’s biggest accomplishments was in getting the Euronext deal done, in the face of a bid by Frankfurt’s Deutsche Borse that many European politicians preferred. So despite his reputation as an operations person, he showed he could get a tough deal done through delicate negotiations. “That really impressed the board” of Merrill said one person close to the board. Adding to the board’s conﬁ dence was Thain’s extensive experience in some of the very areas bedeviling Merrill Lynch: mortgage trading. Thain is also known to be willing to take bold action when necessary. Faced with major losses in 2008, he facilitated the sale of Merrill Lynch to Bank of America Corp. Thain was thought to be a contender to become the CEO of the combined company.

Questions 1. Which traits and characteristics of Thain are revealed by this story? 2. What emphasis did the Merrill board place on cognitive characteristics in their selection of Thain? 3. Based on the information presented, what advice can you offer John Thain about emphasizing the right traits to be successful as the head of Merrill? 4. How strong does Thain’s power motive appear to be?