The Methodical John Thain Takes Over at Merrill 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 signalling that after years of inner turmoil and risky expansion, the board of the beleaguered financial 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 nations biggest banks were led by men who knew the innards of their businesses. Also, they couldnt be fooled too easily by bond traders and were hands-on to a fault. John Thain, who studied electrical engineering at Massachusetts Institute of Technology and has a Harvard MBA, reveals the nitty-gritty of the businesses he has run. The 52-year-old spent twenty-four years at Goldman, holding various jobs from mortgage bond trader to chief financial officer 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 financial institution facing governance and technological challenges. Thain said he accepted the offer from Merrill because it has a great franchise with strong positions in wealth management, investment banking, and sales and trading, among other areas. Its got one problem area,he said,and I know a lot about that area from running Goldmans mortgage desk from 1985 to 1990. The problem was reflected in an $8 billion after-tax loss for 2007, along with $22 billion in write-downs. Known for a somewhat robotic personality, Thain deflected concerns during interview that he does not have the charisma to lead a firm 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 floor traders, a task somewhat akin to one challenge at Merrill: winning the support of its army of stockbrokers. Another selling point for Merrill board is that Thain was known to be a consensus builder, and has the ability to attract and retain talent. His predecessor, Stan ONeal, was known for driving away potential challengers and firing 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.Its shocking they picked someone from a Goldman Sachs background,said former Merrill CEO Dan Tully. He added that Thain didnt seem to be apeople personconsistent with the culture of Merrill, which has a huge brokerage force. I understand hes 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 floor, Thain jumped in with questions BMG 501/03 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 Operations Exchange ran along when Thain asked a series of questions about how the floor traders on that exchange used technology. Theres 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-a-day bell-ringings on the balcony above the trading floor. 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 floor. Hes 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 finance executive. One of Thains biggest accomplishments was getting the Euronext deal done, in the face of a bid by Frankfurts 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 boardof Merrill said one person close to the board. Adding to the boards confidence was Thains 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 be the CEO of the combined company. Source: DuBrin, A.J. (2012). Principle of Leadership. 6th edition, pp. 62-63, Singapore: Cengage Learning Question 1 Evaluate the cognitive characteristics emphasised by Merrill Board in the selection of Thain as the successor. (50 marks)