Inside John Thain’s Million Dollar Executive Suite
January 23, 2009 by Tisa Silver
Filed under Finance
I don’t want to spend too much of my time on John Thain, but after writing my previous post I came across an interesting tidbit from his stint as CEO of Merrill Lynch.
Apparently, Mr. Thain was very into office decor. CNBC put together a slideshow highlighting Mr. Thain’s executive suite shopping spree. The final cost: $1.22 million. Click here to see what he spent it on.
Just to put things in perspective: According the National Association of Realtors (NAR), as of 12/31/08 the median price for a single-family home in the United States is just under $185,000. So, the money spent on Mr. Thain’s office could have purchased and furnished six homes! BTW- I used an $18K furniture budget per home.
Is anyone surprised by this male diva behavior? Look at who he’s hanging out with, P. Diddy! Just kidding, the fancy office digs are really uncool and unnecessary. Sounds like an episode of Extreme Makeover: Office Edition on steroids.
Today, President Obama expressed his disappointment with companies who used taxpayer assistance to renovate bathrooms and offices. I hope he continues to address the inappropriate behavior and maybe things will be done to discourage such acts!
BTW: What are they going to do with all of that stuff now?
(Image source: Picapp)
This is not only disgraceful it should be criminal. Through the years executive pay has grown exponentially and labor wages have stagnated. This guy has a compensation package of 80+ million dollars/year and has nothing to show for it – save asking for an early bonus of 10M.
Being business-inclined yourself what do you think of execute compensation and should it be regulated for public companies? Since the 80’s it has grown from something like 50:1 to more than 300:1. And what further irritates me is that most of it is giving as a bonus thereby skirting tax law by placing it as a capital gain (15%) and not salary (I believe this is the case). Searching CIO.com for IT pro salaries gave some surprising numbers from the survey. One of the top compensated CIO’s made 600K in salary and ~6M in bonus.
So, for publicly traded companies, considering the mess they have gotten use in presently, do you think exec compensation should be regulated? As in a multiple of the average wage earner or as a reflection of the company’s performance? Inquiring minds want to know.
I do believe executive compensation should be regulated, but the shareholders will have to make the push for it. I have many ideas on this, but haven’t settled on any one just yet, it may take a combo of some of them to come up with something feasible. Here are a few:
1. Limit executive pay to a set percentage of the company’s revenues or profits
2. Apply the same bonus scale company wide. It makes no sense for someone to have a bonus that is 5-20 times their base pay.
3. Create a compensation scale or grid similar to the government pay scale. The numbers wouldn’t match the gov’t pay scale, but there would be predetermined increments of pay increases between worker levels to make sure that there were no 50:1 situations with CEO vs. wage/non-management worker pay.
If you ask many CEOs, they will defend their compensation packages because they are in line with the “market.” The market meaning everybody else. The argument is basically that since the other CEOs are getting a large base, multi-million dollar options contracts, bonuses and company perks, that makes it ok. It doesn’t make it ok; it just gives them someone else to point the finger at. Take a look at this Forbes list: http://www.forbes.com/lists/2008/12/lead_bestbosses08_Lawrence-J-Ellison_JKEX.html
Good CEOs are valuable, but there is no talent that justifies paying one person $192 million in one year.
It is too bad that it took a bailout to bring this type of outrageous stuff to the mainstream news.
It has been going on for many years.
So, yes I believe regulation is needed, but the iniative must come from the bottom up. If shareholders won’t stand up for themselves, no one else will!
Hey, thanks for the link. I noticed some of those people actually founded their companies so I have no problem with them making a ton of money. I am aware of Larry Ellison because he is in the tech world. 192M does seem huge but he founded the company and most of it is from the stock that he retained in ownership. I don’t have a problem with someone making huge dollars off of innovation and value in a company. It is the executives that are hired with huge comp packages and golden handshakes. That bothers me.
Your suggestions for curbing these obscene packages are pretty good but I don’t think they are going to make you any friends in your chosen field.
You say regulation should be bottom-up. Yes, that would be nice. But why this approach? Do you think it would be unsuccessful if mandated by the govt for publicly traded companies? Since they are using the ‘public’s’ money I just feel that the govt has a role. But that just might be coming from my particular political perspective and not gleaned from any specific business acumen.
I’m used to pitching the unpopular view! That is one big perk of trading big business for teaching.
I say bottom-up because regulators tend to run from issues like this. In any other form of business, the owners would handle it. The only reason for the high level of scrutiny/outrage now is that we are all owners (through the government’s investment) of these struggling firms. Prior to this, people would ask why the government should regulate how companies compensate their executives. Now people are asking why hasn’t the government regulated how companies compensate their executives. The big before and after difference is the change of ownership.
I think a lot of this stems from people forgetting or not knowing what buying stock really represents. When you buy stock you become an owner. You are entitled to participate in certain decision making processes and you share in times of profit and times of loss. Many people don’t participate until there is a time of loss because those times generate the most publicity. When people ignore the ownership aspect and buy/sell stocks without doing research or knowing what they’re getting into the result is that people with the large, stable stakes in the firm retain power.
With public companies the link between the shareholders and upper management should be the board of directors. Many people don’t know of (or care about) the board members of the companies they own. Many companies have the same board members.
I agree entrepreneurs should have access to more wealth than others. Ellison falls into this category. Like you said, his comp came mostly from stock gains. It was the size of his stake in the company (>20%) that jumped out at me as rather large. That high stake led to his $192mil total.
Packages like Mozilo’s (Countrywide) are ones that don’t make sense to me. On top of the stock gains, he got a $20 mil bonus, that is about 7x his salary!
After looking all over the Web, I ahve yet to find one picture of the famous Thain office. I can find more picutres of the Citibank Jet, the F-22, the various secret aircraft and ships, b ut not one pic of John Thain ’s office. What does a $1 million office look like?
Thanks for the comment Willow. Unfortunately, I have not been able to find any pictures either. But here is a link to some of the items and their price tags. http://www.cnbc.com/id/28814830
According to CNBC some of the items are for sale on Craigslist!