No one knows this better than Citigroup chief executive Sandy Weill, the quintessential Wall Street guy who clawed his way from delivery boy to head of the nation’s biggest financial company. Timing issues help explain why Weill, 70, announced last week that he’s stepping aside, sort of. He’ll give up his CEO title to Charles Prince at the end of the year but will stay chairman until the spring of 2006.
This announcement came two days after Citi reported strong second-quarter earnings and raised its dividend by 75 percent, and the day after it announced a deal to buy Sears’s credit-card operation, one of America’s iconic businesses. No coincidence: the confluence of all this good news lets Weill depart looking like a genius. “The company has the wind at its back,” Weill said, explaining his timing.
But not long ago, as you may recall, the wind was howling in Citi’s face. There was the scandal about how Citi’s Salomon Smith Barney brokerage operation sold investors overpriced stocks that its analysts touted in public and ridiculed in private. There was an uproar about Citi’s making a $1 million donation to supposedly help now disgraced telecom analyst Jack Grubman get his kids into an ultraselective nursery school. And Weill had been forced to give up a nomination as a public representative on the New York Stock Exchange board because New York Attorney General Eliot Spitzer, the scourge of Wall Street, protested. Weill’s reputation as an empire builder and wealth creator for shareholders was in dire peril.
But those problems have gone away, or at least receded. Citi bought its way out of trouble as part of the $1.4 billion Wall Street settlement. The name Salomon Smith Barney has disappeared. And the media scandal machine, briefly focused on Wall Street, has moved on. So before the next problem appears–and given the size and scope of Citigroup, you can bet there will be future problems–Weill has gotten out while his reputation is at its height.
Weill’s career is a testament not only to good timing, but to how a good gut and quick reflexes can trump PowerPoint presentations. For decades, people with fancy titles at blue-chip companies like Sears and American Express proclaimed the coming of the “financial supermarket.” It never arrived. But pragmatic Sandy Weill, shunned by the establishment, made it happen.
After losing control of his first empire in the early 1980s–he sold it to American Express but had no power at AmEx–he started all over again. His vehicle: Commercial Credit, a small-loan company that was being discarded by its corporate parent. After a dozen years of buying and successfully operating out-of-favor businesses–a suspect conglomerate called Primerica here, tattered Travelers Insurance there–Weill staged his coup. He got Citicorp’s John Reed to combine their firms to form Citigroup (even though laws at the time forbade such unions) and to become co-CEOs. The companies got a temporary waiver from the Federal Reserve Board and stayed together after Weill and Reed persuaded Congress to change the law. Then Weill ousted Reed to become sole CEO.
A final reminder from Weill’s career is that, although the United States isn’t free of prejudice, it’s a lot better than it used to be. When Weill started his Wall Street career in the 1950s, he had to be a delivery boy because he was a Jew, didn’t come from money and had a heavy Brooklyn accent and no social connections. Class, religious, ethnic and social prejudices reigned. Women and blacks needed not even bother to apply. This stuff is largely gone now.
–Whether Weill is largely gone remains to be seen. Sure, he’s saying all the right things about letting Chuck Prince be Citi’s king. But Weill’s 2006 departure date is a long way off. By then we’ll know if his self-control is as good as his timing.
