The Company is Imploding: Time to Re-decorate!

January 23, 2009

John Thain

Update:  The fired corporate exec says redecorating was “a mistake” and he’ll pay the money back.

Your company is about to collapse financially, you’re firing employees and the entire economy is about to implode.  Sounds like a good time to redecorate the office, right?  Well, former Merrill Lynch CEO John Thain thought so.   Thain had a high brow decorator redo his office for $1.2 million, including among other lavish things an $87,000 rug, a $68,000 credenza, and a $35,000 commode on legs.  All this as his company was about to report a $15.45 billion 4th quarter loss.  Thain moved on to Bank of America after BofA bailed out Merrill, but as you might expect in light of this scandal, he’s now resigning.  The unbelievable nerve of this corporate executive was exposed by CNBC in an outstanding piece of reporting.

Former Merrill CEO Thain resigns from BofA

Executive comes under fire for spending $1.22 million on his office remodel news services
updated 8:27 a.m. ET, Fri., Jan. 23, 2009

NEW YORK – Former Merrill Lynch chief executive John Thain will resign from Bank of America, effective immediately.

Earlier, Bank of America’s shares fell sharply after a report that executives are meeting to discuss Thain’s future with the company.

A report on CNBC followed news that Merrill, which was about to report a $15.45 billion fourth-quarter loss, decided to move up its year-end bonuses, doling out cash just days before it was officially acquired by Bank of America on Jan. 1.

CNBC reported that Bank of America’s chief executive, Ken Lewis, met with executives Thursday to discuss Thain’s future.

CNBC has also learned that Thain spent $1.22 million redesigning his office — including $35,115 for a “commode on legs” — when he became CEO of Merrill Lynch a year ago. Thain also paid his driver $230,000 for one year’s work, which included the driver’s $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay, documents show. Drivers of top executives are often paid about half that amount.

Such expenses would have followed $12.2 billion of net losses at Merrill in the second half of 2007 as writedowns on mortgages and other toxic debt began to mount. Thain became chief executive in December 2007.

The outlays recall heavy spending on personal items by senior executives at other companies, including a $6,000 shower curtain owned by former Tyco International Ltd chief Dennis Kozlowski, and an office fish tank acquired by former Citigroup Inc executive Todd Thomson.

Bank of America has increasingly come under criticism in recent weeks for its acquisition of Merrill Lynch. The deal forced Bank of America to ask for a second multibillion dollar investment from the government as it absorbed the mounting losses at the New York-based investment bank.

On Thursday, Bank of America said it knew of Merrill’s plans to move up the bonuses.

“Merrill was an independent company until Jan. 1 of 2009,” said Bank of America spokesman Scott Silvestri. “John Thain decided to pay year-end incentives in December, as opposed to their normal date in January. Bank of America was informed of his decision.”

Bonuses were not paid, though, to Thain and four other top executives — President and COO Greg Fleming, Chief Financial Officer Nelson Chai, President of Global Wealth Management Robert McCann, and General Counsel Rosemary Berkery — who requested they not receive additional compensation.

Bank of America last week struck a deal with the government to receive an additional $20 billion in funds as part of the Treasury Department’s bank investment program. The government also agreed to backstop losses on additional assets. The investment comes after Bank of America already received an initial $25 billion as part of the program.