Troubled by Thain

“A commode is not a toilet.”
~ John Thain, ex-CEO of Merrill Lynch

I always thought John Thain was a smart guy. He earned an engineering degree from my alma mater, MIT, and he graduated from HBS. However, when Thain came to speak at HBS on September 30, I was unimpressed and disappointed with his answers.

I first started following Thain’s career when I was an intern at Goldman Sachs and he was President of Goldman Sachs. He then went on to take a $16 million pay-cut to be the CEO of the NYSE. Thain’s latest gig was as CEO of Merrill Lynch before he quit in January 2009 after being in the eye of the financial storm, orchestrating the sale of Merrill Lynch to Bank of America for a dismal merger price of $29 a share, which was half the price of Merrill Lynch by the time he took over the company.

Ever since Thain’s fall from grace and thus entry into the land of unemployment, he has been reinvigorating his image in the public eye by working the media circuit, including visiting MBA students at Wharton and HBS.

In question and answer format, Professor Clayton Rose moderated questions from a packed audience in Burden Hall. Thain entertained several questions from the audience around the genesis of the financial crisis, financial companies poor risk management, the merger of Merrill Lynch and Bank of America, government oversight, and Wall Street compensation (he thinks bonuses don’t lead to excessive risk taking). Thain spent a lot of time talking about feedback and how important it is for managers to take feedback from employees. That got me thinking, why didn’t he ever receive feedback that he probably shouldn’t have spent $1,400 on a wastebasket when he could get a real nice one at Crate and Barrel for $29.99? I decided to ask him.

Mia: Mr. Thain, can you please walk me through your thought process when you made the exorbitant expenditures to refurbish your office?

Thain: “My office suite which was two conference rooms and a reception area needed to be renovated because of the way it was set up. About half the costs of the renovation was HVAC and electrical stuff. You know working in a high rise building in Manhattan is incredibly expensive. The actual furniture purchases were a mistake given what happened in the world. I’ve said that before. Those of you when you become CEOs, when you furnish your office, furnish it someplace else and with inexpensive antiques. And look I admit it was a mistake and I gave back the money so the shareholders didn’t suffer anything from that.”

Let’s pick this apart a little:
Thain: “You know working in a high rise building in Manhattan is incredibly expensive.”
Nope had no idea.

Thain: “The actual furniture purchases were a mistake given what happened in the world.”
So it’s okay to make those excessive purchases in a bull market?

Thain: “Those of you when you become CEOs, when you furnish your office, furnish it someplace else and with inexpensive antiques.”

Great. Future HBS CEOs listen carefully.
As someone who has a lot of respect for John Thain, I was saddened in the way he danced around the fundamental question, which was, “What was your thought process behind those purchases?” I felt that even nine months after his departure from Merrill Lynch he felt the need to be defensive and evasive in his commentary. I wanted to know why he thought he could spend $1.2 million redecorating his office at a time when Merrill’s balance sheet was in disarray. I wanted him to talk about how ethically he had committed a wrongdoing by taking advantage of the company and its shareholders, and how as future MBA graduates we should always point our moral compass in the right direction. I wanted him to tell me that regardless of whether we are in an up or down market, it is irresponsible to make extravagant purchases. And I wanted him to not tell me that the press doesn’t know the difference between a commode and a toilet.Especially if the “commode” was $35,000.

At HBS we are trained to be future leaders that will shape the world. Whether you become CEO, C-something, or hit the highest echelon of management, please think twice about how you spend your company’s money, because regardless of how smart you are, sadly your reputation will subsist on your latest lapse of judgment.
Your HBS Money Honey,
Mia Saini

Mia Saini is a born and raised California girl. She is earning her MBA and plans to be a business broadcast journalist. She honed her journalism skills at CNN, WB, CNBC, and as a TV reporter at Jim Cramer’s She is the Founder of HBS TV and is a video host for MBA PodTV on Each week she will write a “Money with Mia” column about Money, Business, and Personal Finance, so email HBS’s Money Honey your questions, story ideas, and feedback.

October 13, 2009
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