Online Extra: NYSE's Steady Pilot

Thus far, CEO John Thain has shown a deft touch in leading the New York Stock Exchange. He'll need it even more to deal with looming challenges

John Thain has one of the most visible jobs in global business as chief executive officer of the New York Stock Exchange, but he's surprisingly reserved, even shy, around people he doesn't know well. When he was working at Goldman Sachs (GS ) -- as president, one of the firm's top three executives -- aides had to prod him at cocktail parties to strike up conversations with business associates. Still, the slight, slender 50-year-old Midwesterner has always made a lasting impression.

Back in his tiny public high school in the semirural village of Antioch, Ill., one teacher was so struck by a test Thain devised for a chemical reaction that he christened it "The Thain Method" in a chemistry textbook. Alumni officials of his fraternity at the Massachusetts Institute of Technology (class of '77) still talk of how he was the most efficient treasurer in decades. He later became the frat's president.


  And at Goldman's headquarters, staffers say Thain's cool and disciplined leadership after the September 11 attacks on the World Trade Center, only six blocks away, kept the firm running smoothly -- even as the southern tip of Manhattan was largely shut down. Thain ingeniously chartered ferries to get workers around shutdown roads to their offices.

As the NYSE shakes off recent memories of scandal on the floor and greed in the executive suite, and it recasts itself as a publicly traded company with a global growth strategy, Thain may be exactly what the exchange needs.

Where his predecessor, Richard Grasso, was known for his tight-fisted control over even the smallest NYSE matters, the Harvard Business School-trained Thain delegates. While Grasso, who quit college to work his way up at the NYSE, would have been out of his depth with international political and economic leaders, Thain can appear on panels at gatherings such as the annual leadership conference at Davos.

And where Grasso roiled regulators by taking a $140 million pay package out of the nonprofit NYSE, Thain took the job two years ago for $4 million a year, a fifth of his annual pay at Goldman. The draw for Thain, "the opportunity to really make a difference."


  More than a chance to altruistically "give back," as Thain puts it, the NYSE job represents a legacy-creating challenge for him. If he can successfully modernize the NYSE, equipping it to go toe-to-toe with Nasdaq and superfast, technologically-savvy upstart markets as well as growing foreign exchanges, Thain will make a name for himself that will top anything he did at Goldman.

"It sounds like he's righting the ship of state," says David Latham, a professor at the Harvard-Smithsonian Center for Astrophysics. As president of the alumni corporation at MIT's Delta Upsilon fraternity, he's someone who has known Thain for more than 30 years. He, for one, was not surprised at Thain's appointment at the NYSE.

Few who have known him long have been surprised by his successes. Paul Boardman, a retired physics teacher from Thain's Illinois high school, remembers how practical he was. When Thain and another student were stumped by a problem involving the energy of a moving bowling ball, they stopped at the local bowling alley to take elaborate measurements.


  "They made the conversion the hard way," recalls Boardman. "That's a good example of John's work."

Likewise, his passion for technology -- which led to an electrical engineering degree at MIT -- is deeply rooted. Thain's mother, Sophey, still treasures a radio that Thain built from a kit when he was in grade school. "It had a million pieces," she recalls.

Where others might have thrown up their hands in impatience, Thain was fascinated by how the gizmo worked. At Goldman, Thain's staffers were the first to get word processors when others were still using typewriters.


  For all of his interest in technology and his reserved style, Thain has never been a recluse. He wrestled in high school and college, and he's a passionate skier who volunteered on the Ski Patrol. Even now, he can handle the toughest slopes, though a mishap two years ago -- leading to a fractured and dislocated shoulder -- keeps him off snowboards.

He grew up hunting pheasant and other small game and still wields a shotgun occasionally, shooting at clay pigeons instead of live ones. Back at MIT, he was mostly known for being "just a regular guy," recalls George Hays, a fraternity buddy who later helped Thain get an internship at the E.F. Hutton brokerage firm that launched Thain's Wall Street career. "He wasn't pompous and he wasn't wild. He was a good student, but he wasn't a nerd," says Hays.

Thain's diligence, ease in working in teams, and knack for mastering new challenges helped him up the ladder at Goldman. He rose fast through investment banking and made a big mark by playing a key role in an expansion into mortgage financing in the 1980s, virgin territory for the firm. He later oversaw technology and operations as the firm underwent a modernization effort, toiled overseas as a European business leader for a while, and served as Goldman's chief financial officer before rising to president and chief operating officer.


  Though Thain first opposed a plan to abandon Goldman's partnership structure and go public, he rallied behind the move when partners approved it and helped sell the idea to investors in the late 1990s. "He's a simplifier," says Goldman Chief Executive Officer Henry Paulson, Jr. "He's very smart, but he's able to cut though complex issues."

Of course, brilliance and technical savvy alone won't make him a winner at the NYSE. The job tests his ability to balance the needs of various constituencies, particularly floor brokers and specialists, the middlemen who stand to lose as trading grows increasingly electronic.

He will also have to please regulators, executives at companies whose shares trade on the NYSE or whose shares he'd like to list and, once the merger with the all-electronic Archipelago Exchange (AX ) is finalized, public shareholders.


  Already, though, Thain has brought the exchange surprisingly far. Its members accepted the Archipelago deal and are taking to a switch to more electronic trading. They're also keen to see how he will bring them more business -- both in higher volumes and new products, such as options, fixed-income products, and futures, and a bigger profile in exchange-traded funds. If the money starts rolling in in new ways, the discomfiting changes he has championed won't matter quite so much.

Thain, whose inveterate optimism may spring from his Midwestern roots, isn't at all worried about the big challenges looming before him. For a self-styled problem-solver who isn't stumped too often, they amount to just another fascinating puzzle.

By Joseph Weber in Chicago

Edited by Patricia O'Connell

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