Business Blog: Hoover’s Business Insight Zone

Clark Kent John Thain joins Merrill Lynch as its new CEO:

• MarketWatch
• Bloomberg
• NYT DealBook

I joke that Thain is Clark Kent because he looks like him (square jaw, black hair, glasses) and because he shares his quiet and strait-laced demeanor. But as CEO of NYSE Euronext, Thain was more like Superman, overhauling the Big Board (and merging it with Euronext) in the wake of the pay scandal around the previous CEO, Richard Grasso. The Bloomberg story linked above sums it up nicely:

During his almost four-year tenure at the NYSE, Thain, 52, orchestrated one of the biggest transformations in its 215-year history.

Thain took over amid controversy in January 2004 after Grasso was ousted when the exchange disclosed his pay package. In his first year, Thain unveiled plans for one of the most sweeping overhauls of the Big Board’s trading system in three decades.

By April 2005, he had hammered out an agreement to purchase Archipelago Holdings Inc., transforming the exchange into a for- profit company. A year later he was negotiating the $14.4 billion purchase of Paris-based Euronext NV, a deal that created the first trans-Atlantic stock exchange.

Not long after he had taken the reins at the NYSE, I got to hear Thain give a speech to an audience of business journalists. He came off as smart and sincere, but I wondered if there was “any there there” under that tax-accountant’s facade. Obviously, there is.

This represents Merrill’s first-ever outside hire for the CEO role. As my previous comments would indicate, I think that internal succession planning is far more important than the treatment it sometimes gets these days, but in this case I don’t know that Merrill could have done any better. Ex-CEO Stan O’Neal drove away just about anyone who might have succeeded him — another blot on his record as CEO, in my book. Given the situation, the Merrill board has done the best thing it could.

Thain is also making all the right noises, at least here in the early going. This comes from the MarketWatch story linked above:

Thain said his first job at Merrill will be to get to know the firm’s executives and other employees, while also dealing with near-term issues such as subprime mortgage-related exposures.

Merrill unveiled a write-down of roughly $8 billion when it reported third-quarter results, mostly from securities backed by subprime mortgages, including complex products known as collateralized debt obligations. Since O’Neal stepped down, investors and analysts have been worried that more losses may be disclosed.

Thain declined to comment on future Merrill write-downs, but he did say that there will likely be more losses for the banking industry from subprime mortgages and collateralized debt obligations over the next three to six months.

“I don’t think we’ve seen the bottom,” he told CNBC.

Precisely. Underpromise and overdeliver. Stress how important it is to get to know everyone and right the ship for the short term. It’s as cliched as when athletes say “I’m just in here trying to help the team win,” but the cliches can still comfort the markets and the troops inside Merrill, who are looking for signs of a level head. From what I’ve seen of him, Thain’s head is as level as heads get.

The DealBook piece linked above talks about how Thain is yet one more Goldman Sachs alumnus — along with Treasury Secretary Hank Paulson, his Cabinet predecessor (and the current Citigroup chairman) Bob Rubin, and New Jersey governor Jon Corzine, among others — to hold prominent positions in the outside of Goldman. Here’s the key bit:

What is it about the investment bank at 85 Broad St.? The firm apparently avoided the woes besetting its rivals by deftly betting against subprime mortgages. It is a perennial leader across the board of investment banking products and services. And it has earned handsome profits year after year, with current chairman and C.E.O. Lloyd C. Blankfein reportedly set to earn at least $75 million this year.

What is it about Goldman? They’re better than everybody else.

Now let’s see if John Thain can work that same kind of magic with Merrill.