John Thain: The Right Man for Merrill. Can We Clone Him?

Big news. Huge news. Good for Merrill investors and even better news for Merrill employees, IMHO. Stan O’Neal clearly had to go, having lost the trust of both employees and the investment community. Further, it was never clear that Stan was the right cultural fit to be the CEO of Merrill, being a pretty brusque, harsh sort, not exactly the kind of guy who would endear himself to its massive and powerful brokerage arm. While he spent a stint running the private client group, most of his career was in the realm of leveraged finance and capital markets. It is a rare manager in these areas that can balance transactional DNA with relationship DNA, both of which are extremely important in running a firm of Merrill’s scale and complexity.

It is hard to understand the root cause behind Merrill’s staggering losses. Was it simply overly-aggressive risk-taking while playing catch-up to Goldman? Was it a conscious decision to swing for the fences in an effort to collect massive current compensation (like the $48 million Mr. O’Neal collected in 2006) and if the bet didn’t work out, oh, well, too bad? Or was it a function of a breakdown in risk management and controls? This is a topic for another day, but is was clearly a result of short-term thinking that led Merrill down a path that will cost the firm at least $10 billion, and maybe much more.

So what does John Thain bring to the party? John is clearly a more cerebral kind of guy, a consensus-builder with a strong analytical bent. He has experience at the top of one of the most successful financial enterprises the world has ever known, Goldman Sachs, a firm with a culture of collaboration, long-term thinking and investing in people. He has experience running a big cooperative, the NYSE, that he led through a public offering and a merger. These are large, complex firms with vast constituencies, far more numerous and complex than those making up Merrill Lynch. There aren’t too many executives in today’s financial services industry with his experience base and youth, and this is a big, big problem. Is he up to the challenge of righting Merrill, securing the confidence of employees up and down the hierarchy as well as the investment community? Absolutely. But what about Citigroup? Bear Stearns? UBS? And the list goes on.

Institutional investors should demand far better succession planning and talent management at the largest financial institutions, many of which have either been run as fiefdoms or with revolving doors that have provided little management continuity and consistency in strategy. This absolutely has to change. The stakes are simply too high. With the largest financial firms controlling tens of trillions of dollars in assets and being counterparty to hundreds of trillions of dollars of financial transactions, depth of leadership is critical. No, it is necessary. And it is up to us, the investors, to force the issue. And for Boards of Directors to heed our call.

——-

——-

COMMENT:

AUTHOR: Kate

EMAIL: kbacheski@gmail.com

URL: 

DATE: 11/15/2007 10:05:11 AM

Got linked here from Newsvisual. Great analysis! Between the connections ( http://www.newsvisual.com/newsvisual/2007/11/john-thain.html ) and the high expectations, Thain is looking pretty good at this point. Do you think that Citi/Bear/UBS will follow suit with their own executive changes in light of Merrill’s decision?

——-

COMMENT:

AUTHOR: Fred

EMAIL: fredsmith1967@gmail.com

URL: 

DATE: 11/26/2007 08:46:06 PM

Do we need the government to protect us from financial institutions that have policies like subprime mortgages? For the most part, the working poor were the ones who had the American dream pulled out from underneath them by loosing their houses.  The world could hardly seem like a fair place to them.   It does seem like powerful people are no longer accountable, though.  For example, you lose money on Wall Street as a big-time CEO and you get fired.  This is ultimately why OíNeal lost his job.  Merrillís board members, whom the  NewsVisual article  http://www.newsvisual.com/newsvisual/2007/10/who-should-repl.html  identifies, needed to replace OíNeal because he lost huge sums of money.  Nevertheless, Mr. OíNeal still leaves as a wealthy and happy man.

——-

————