John Thain quits Bank of America Thursday, January 22, 2009
Image via WikipediaWell it took a week from my asking the question "Can John Thain remain at Bank of America?" and concluding it seemed unlikely to his "mutually agreed" departure today following a meeting with his boss, Ken Lewis as reported here. Shares in Bank of America fell 16% on the news.
Perhaps the "icing" on the cake was the news that John Thain's new office had been lavishly re-furbished e.g. waste bin for $1,400 and a rug for $87,000, which isn't the sort of thing that goes well with tax payers or politicians who've just bailed out your company.
Merrill's staff should have cause to be thankful to Thain. He
- found them a safe-ish harbour in the storms and thus avoided the fate that befell Lehman
- negotiated a good deal with Bank of America despite Merrill's awful prospects, as borne out by their Q4 results
- paid their bonuses in December, totalling over $4bn despite the huge losses, which was some two months earlier than usual and days ahead of Bank of America taking over
Might John Thain follow his former colleague, Hank Paulson into academia and avoid the hassle of commercial life? Paulson has just stepped down as US Treasury Secretary and can easily afford not to work again. Similarly Thain is unlikely to be pressured by the need to work again, even without any payoff he may receive from Bank of America. However, his talents are widely recognised and it is probable that a number of firms are already weighing up the possibility of engaging him in some capacity after a short break, especially in the private equity sector where he could avoid much public scrutiny.
Any payoff he does receive will be a matter of public disclosure because Bank of America is listed. So it will be interesting to see whether he extracts one final huge "pound of flesh", despite the company having only just received a huge bailout. For Bank of America any sizeable payout will be a PR disaster since it will clearly be described as a payment for failure that has been funded by the taxpayer. However, John Thain probably has a pretty watertight employment contract under which he will inevitably be entitled to some pre-determined payoff. I also doubt that Ken Lewis will press any case that Thain was dismissed for misconduct or something similar, regardless of his personal feelings, since this would embroil the Bank in far too much unwelcome press over a protracted period, as each side makes disclosures helpful to their case.
Thain could, of course, choose to forego a payoff in recognition of the climate as he evidently decided to do with his bonus. Yet having conceded over his bonus to save face for Ken Lewis, he may be less inclined to do so given the manner of his departure. Watch this space.
Meanwhile, I hear his successor could be inheriting a nice new office.