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John Thain's Leadership Do's And Don’ts
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OK, so John Thain's not exactly your average, run-of-the-mill executive, and he wasn't exactly in charge of your average, run-of-the-mill company, and he definitely didn't get or leave his job in an average, run-of-the-mill kind of a way.
But that doesn't mean there aren’t a few things we can all learn about the fine art of management from the recently deposed head of Merrill Lynch, right?
To that end, I've compiled a short list of do's and don'ts for current or wannabe execs to follow, gleaned from careful observation of Thain's tenure at the famed investment house (now a unit of Bank of America)[BAC
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DO: Take over a legendary company at its lowest ebb, right after it's fired an expensive, high-profile CEO who's brought it to its knees. Surely the only way to take such a firm is up, right? That's a career-defining no-brainer that only an idiot would pass up.
DON'T: Run the company further into the ground, forcing you to sell it in a last minute deal rather than face the prospect of bankruptcy.
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DO: Negotiate a salary that makes you one of the best-paid executives in the country (and therefore the world), regardless of your performance. Rule of thumb: the bigger the previous quarter's losses, the more you're entitled to ask for. For example, should your predecessor meet his demise after announcing the company's worst quarter in its history (losing, say, $9.8 billion following a $16.7 billion write-down of "assets"), then anything less than $50 million is an insult. Feel free to justify what seem to be exorbitant demands by claiming "best in breed" status—it takes a special talent to do what you're about to, so you should be compensated accordingly.
DON'T: Negotiate a salary that includes stock options or awards. Not only are they passé, they're likely to lose a bunch of value should your reign happen to be a calamitous train-wreck that sees the firm get sold off in a fire-sale that also destroys the share price of the company that buys your firm.
DO: Lay off underperforming staff members in a bid to improve performance. No business can afford to have people around who are wasting the firm's resources, especially in a time of crisis.
DON'T: Spend $1.2 million redecorating your office while the ink's still drying on the pink slips of those you've let go. Sure, that kind of money's a drop in the ocean in your world, but try to keep a sense of perspective. To help, maybe a framed picture of the national average salary (a little over $40,000 according to the Bureau of Labor Statistics, or approximately one thirtieth of Thain's decoration expenses) could have found its way onto the wall above the now-infamous $35,000 commode.
DO: Blame your predecessor for all the ills that continue to afflict the firm under your stewardship—especially if he lost a fortune in the sub-prime mortgage derivatives market. It's important to remind people from time to time that the mess you're working to clear up isn’t one of your own making.
DON'T: Double-down in the same markets that pushed the firm to the brink in the first place.
DO: Reward staff for great performance. Like, say, if they make a profit.
DON'T: Rush out billions of dollars of bonus checks to your employees right before the official handover of your firm. Especially when the acquiring firm's employees aren't getting bonuses on account of their employer receiving government funds to keep them afloat. And, uh, definitely don't do it a month earlier than usual, and right after losing $15 billion in a single quarter. Whatever your motivation, you can't help but look like you're behaving underhandedly and, given the circumstances, like you're looting the federal government for one last payday before you go.
Is there a moral somewhere in all of this?
Sure.
A CEO is the most visible representative of his or her firm to the public, and as such, they have a responsibility not only to act in the best interests of their business, but to do so ethically and responsibly. A CEO behaving in a manner that's completely out of touch with the real world sends a message that things like humility, common sense and respect for one's colleagues and shareholders aren't necessary within that organization. Not only that, but as Vault's CEO pointed out here recently, it gives all CEO's—even the good ones—a bad name.
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Phil Stott is a staff writer at Vault.com. Originally from Scotland, he now lives in New York, and has also lived and worked in Japan, South Korea and Eastern Europe.
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