Weill's Waltz Down Wall Street

Sandy Weill, CEO of Citigroup, is revered and feared, but few would argue that long ago he secured the title of “Wall Street’s Dealmaker”.

His tenure at Citigroup has not only incorporated a long history of large and successful mergers and acquisitions, but has also resulted in tremendous profits for Citigroup shareholders. In the last five years Citigroup’s net revenue has grown from $45 billion to $78 billion and its net income exploded from $7 billion to over $17 billion. Weill’s impressive record however, has come under increased scrutiny in recent years, most notably exemplified by this year’s reported $400 million settlement with Attorney General Eliot Spitzer as part of a broader settlement that would end investigations into past conflicts of interest among stock analysts. Classic Weill has responded on the offensive, paving the way for what he believes is a renewed Citigroup that will lead the charge on corporate governance, rather than just meet the minimum bar.

Weill recently surprised the street by announcing that he would soon be stepping down as Chairman of Citigroup and passing the reins to his long-time associate Charles O. Prince, prompting many to pause and reflect on Weill’s remarkable career. Rumored to be considering a second career as a Cornell Football coach following his retirement from Citigroup, Weill sat down last week with the Harbus and a number of other leading graduate business school newspapers to share his insights and lessons at the helm of the world’s largest financial institution.

Question: There are many examples of mergers that haven’t worked, yet you’ve created many that have been very successful. What is your secret?

Weill: It’s having a team that really knows what they’re doing and think about what business they are in and what really makes sense as a business model. If you can achieve more of your goal within a certain business model by doing an acquisition rather than trying to do it internally – you get the advantage of time without blowing yourself up. I think that’s important. People are also key. In every merger, there are people who work in both companies that will be a part of that merger.

They’re not stupid, and they know when management is not doing the right thing. It’s important to consolidate the organizations in a prompt way and move forward with a shared vision and not say, “This is my vision for this part of the business or that part of the business.” Rather, it’s one business.

Question: When you have a big deal on the table, obviously, you have a lot of analyses to consider. To what extent do you rely on your gut? Is it more about the feel for the deal and the people you’ve met? Or do you focus on the numbers?

Weill: You have to look at everything. The most important thing is to be a student of the business that you’re in so that you really have some kind of feel directionally of what might happen.

Question: You’ve hired many people who’ve stayed with you and been part of your journey for a long time. What are you looking for when hiring a member of your team?

Weill: I love people that don’t tell me what I want to hear, that are not afraid to challenge a thought process, that are bright, flexible, willing to learn and are risk takers. And somebody that is a decent, ethical person.

Question: You mentioned several things that have happened in the past five years – which of these have hurt you, have affected the company, and affected you personally the most?

Weill: What affected me personally the most was obviously the investigation which came from some spurious E-mails that got me involved. It became obvious that I had bought AT&T five times in the open market and still had owned the stock at the end of the process. I was as bad an investor as a lot of other people. It affected me a lot. I had to live through getting shot at every single day in the paper. And I kept telling myself, “I’m going to have some good memories come out of this thing.” So, I put myself on what I call the Spitzer diet where I said, “Until we resolve this thing, I’m not going to have any martinis. I’m not going to eat bread. I’m not going to have pasta. I’m going to work out five or six days a week.” And I ended up losing 35 pounds. I’m in much better shape, and every time I see Eliot Spitzer, I thank him very much.

But you know, there was a tough period for our company. Since then, we have repositioned our company so that we could come out of this process as a leader in what companies are doing in corporate governance. I think we’ve done a very good job with that. We’ve, I think, separated research from investment banking more than anybody else. We brought in Sallie Krawcheck to head up that process and this week’s issue of Fortune Magazine, she’s sitting there as the most important person in the United States under the age of 40, including men and women, including some of Murdoch’s sons, which I think is great.

When ISS, Institutional Shareholder Services, that evaluates corporate governance and stuff, looked at that, they ranked us well at the top of companies in any industry not just the financial industry as a company that’s got the message on corporate governance and ethics. It’s very, very important.

Question: With regard to corporate governance, do you think governance across the board in our institutions today is adequate? Or is there a role for something more formal and not leaving it up to the market to set their own governance standards?

Weill: I think it’s not really being left up to the market. The SEC is coming out with new rules. Sarbanes-Oxley has come out with rules on corporate governance. The Stock Exchange has its own rules on corporate governance. But I think that we’re going to end up with better businesses. When you see the kinds of foul-ups that we had, there’s a reason for looking at it and saying, “This has got to change.” And we’ll go too far. And then we’ll bring it back a little bit.

Question: You have recently announced that you are going to relinquish control to help the firm, essentially, before the end of the year. Why do you think the business press is being a little bit skeptical as to whether or not you’re going to do that?

Weill: I don’t think the business press knows me at all. But the business press is paid to be skeptical. People like to read skeptical things.

Unfortunately, maybe more people like bad stories than good stories, because they seem to write many more bad stories – good stories don’t make news.

I do think my timing surprised everybody. A lot of people thought I’d stay on forever or was too close to the investigation. Introducing the element of surprise didn’t give people a chance to posture and position themselves. This was a great team while I have been CEO, and I felt there was no reason why it shouldn’t continue to be a great team working together in the future, and so far, that seems to be the case.

Question: As you look back on that early part of your career, is there any particular person, any piece of advice that has had a particularly lasting or persistent effect on you?

Weill: We had a small investment banking company in the 60s and one of my partners came up with this thought that insurance companies in those days, especially property/casualty insurance companies, had way too many reserves for what they needed. They had what we called a surplus and we ended up with the idea of selling that concept which eventually led to us buying Reliance Insurance which was a pretty highly regarded company in Philadelphia. We got paid a fee of $750,000 which is a lot of money in 1967. But the next day we had to look for the next client and the next transaction, and he (our client) had this big business with all of these assets, which in theory he could have grown to be something significant. In the end that is not what hap
pened. That’s when I started thinking about how do we grow our own company through acquisitions.

From then on, we ended up doing a whole series of mergers so that, from starting in 1970 as a company with one little office, by 1980, we were the second-largest retail brokerage company. We were finally sold to American Express and then I ended up buying most of it back in ’93.

Question: Is there anything, if you could now, or could have at one time tried any other occupation, what would have it been? And might you do it now at some of the responsibilities?

Weill: When I graduated college and got married about a week later, and that was 48 years ago, I got married on the basis that I was going to go into the U.S. Air Force as a fighter pilot and make $6,000 a year. Had I been successful in doing that, I probably would not be around today, because I subsequently learned that I’m not very good with computers and dials. I panicked one time in a Link trainer. The plane was upside down, and I forgot I was upside down. I pulled back on the stick and the plane went.

So, I had lots of nightmares about that. I got into this business, really, as a fluke and started in 1955 in September in the operations part, the back office part of a little business and before really things were done completely by computer and so I learned a lot of it from the bottom up.

The average volume on the New York Stock Exchange when I went into the business was like a 1.2 million shares a day, and today it’s a 1.1 billion shares a day. I had the advantage of being able to see something from when it was small, and watch it grow, little by little by little.

Question:Is there anything you would have changed that has happened to you in the last 30, 40 years – one or two incidents that you wish you could have changed?

Weill: I would say that I have been so fantastically lucky that I don’t think I would ever want to try again. Twenty or 30 years ago, I used to think that, you know, if you took all the people in the world and tossed them up in the air, the same people would end up being winners ten years later. But I’m not sure I would do as well. I’ve just been incredibly fortunate. Fortunate enough to have a wife with whom we have been partners the whole way – we grew and did it together. And to be young enough to now have the opportunity to give something back is terrific.

Question: How did you manage to bring the Philharmonic to Carnegie Hall and how do you think it might affect the future of Carnegie Hall as an arts institution? (Note: Weill is the Chairman of Carnegie Hall)

Weill: I think if that comes to fruition, it would be fantastic. If you look around the United States and, indeed, the world, there are many more orchestral presentations than there are people that want to go see them, so that most of the better orchestras in the world, or a lot of them, are having financial difficulty. In some of the small cities there’s bigger problems. What that means is that the job is going to fall to somebody to do much more in education, especially if you’re thinking U.S. Music education has been affected by the cutbacks in total education and it has taken a back seat. We think at Carnegie Hall with our brand name, and with the technology that we just put into our new Zankel Hall, which opens tonight, will help us relate a lot more to younger people.

Question: Do you have any advice for MBA students?

Weill: The education you receive from the schools that you attend is very important. Try and enjoy what you do because it’s a big part of your life. Get into something where you enjoy the people you work with and try to find an environment where the people you’re working with aren’t your enemies, but where they are your friends and supportive, and where you can find mentors that you can look up to. Try to make it fun and don’t take yourself too seriously.

September 22, 2003
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