Former Merrill Lynch CEO John Thain, who brokered the investment bank’s controversial sale to Bank of America, is taking over as chairman and CEO of CIT Group as the commercial lender continues to restructure its business following a brief stay in bankruptcy protection last year
CIT, one of the largest lenders to small and mid-sized U.S. businesses, is betting Thain can repair his and the company’s image after a difficult 2009. CIT was forced into bankruptcy protection late last year after it was unsuccessful in trying to restructure its debt.
Thain, 54, takes over immediately. He will replace interim CEO Peter Tobin, who will remain on CIT’s board of directors. Tobin had been serving as CEO since Jeffrey Peek retired on Jan. 15.
CIT will pay Thain an annual cash salary of $500,000. He will also receive $5.5 million in stock annually, of which $2.5 million will be subject to a one-year holding period. The remaining $3 million cannot be sold for three years.
Thain could also receive up to $1.5 million in bonuses based on the performance of the company. The board of directors will determine whether to award the performance-based bonuses.
As chairman and CEO of Merrill Lynch, Thain’s deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.
Thain resigned as head of global wealth management of the combined company in January 2009, at the same time news of the bonus payments first surfaced. Bank of America Corp. last week agreed to settle a case with the Securities and Exchange Commission over claims it misled shareholders about the bonuses and more than $15 billion in fourth-quarter losses at Merrill to ensure the deal would be approved.
Thain will try to revitalize a commercial lender that was among the hardest hit by the recession and credit crisis. CIT Group, which lends to more than 3,000 businesses including supermarkets and department stores, was forced into bankruptcy after failing to raise cash to pay off outstanding debt. The more than 100-year-old company also was hammered by mounting loan losses as more customers fell behind on repaying loans during the recession.
“Much has been accomplished in recent months to position CIT for renewed success,” Thain said in a statement. “We will build upon this progress and work even harder to support small and mid-market businesses. CIT can and will serve an important role in the recovery of the U.S. economy and the creation of jobs.”
Thain has also served as CEO of the New York Stock Exchange and as president and chief operating officer at Goldman Sachs Group Inc.