The sleek corporate jet carrying Sandy Weill streaked eastward high over the Atlantic, bound for the lush island nation of Bermuda. Sandy was heading for another of his beloved corporate retreats. But this wasn’t a routine meeting of his long-standing planning group. This time he would rendezvous on Bermuda with John Reed. The two trailblazing executives would sit down with their highest-ranking deputies to secretly lay the groundwork for the astounding merger of Travelers Group with Citicorp, a deal they had announced only days earlier, on April 6, 1998. The task before them was critical: They had to decide who among the many ambitious and talented executives at each company would run the various units of the merged company, the world’s largest financial conglomerate. Although the two companies had little overlap in their markets, the merger inevitably would mean the loss of positions and prominence for many high-ranking executives. Indeed, Sandy and Reed had taken extraordinary steps to keep this meeting secret, lest the politicking and lobbying for rank and power overwhelm them. As the jet swept low over Bermuda’s spectacularly pink beaches and turquoise waters, Sandy knew he would see little of the island’s charms. This was going to be a heavy-duty working session.
At the luxurious Fairmont Princess Resort, Sandy met Reed. The two CEOs were joined by their chosen subordinates. Jamie Dimon and Bob Lipp represented Travelers. Reed had chosen Paul Collins, Citicorp’s vice chairman, and Bill Campbell, head of the retail bank, to join him. When the absence of all six men was noted that weekend, the four subordinates were quickly dubbed “the Untouchables,” on the assumption that their attendance at the session guaranteed them some of the highest posts in the merged company. Without ever asking Sandy, the Citicorp officials assumed that the bright and seasoned Dimon would emerge in the highest post under the co-CEOs. While Reed admired Sandy’s business acumen and his relentless drive, he was much more drawn to the young, thoughtful Dimon, with whom he felt intellectually simpatico. Certainly Reed envisioned Dimon as the successor to the CEO title in the not-too-distant future. Beyond that, the slate was clean, a consequence of the haste in which Sandy and Reed had reached their agreement.
Hunkered down in one of the Princess’s penthouse suites, the six men labored for a day and a half, subsisting on room service food and breaking only once for naps and to return important phone calls. Filling up white boards and paper charts with diagrams and names, the six men found their work going amazingly smoothly. At the highest levels, Jamie Dimon would be the chief executive officer of Citigroup’s global corporate unit, including Salomon Smith Barney’s investment-banking and securities operations, as well as Citibank’s corporate-banking business. Reporting to Dimon would be Citibank’s Victor Menezes, who would oversee the commercial-banking side of the business, and Deryck Maughan, who would be responsible for Salomon Smith Barney. Bob Lipp and Bill Campbell would become co-CEOs of all consumer operations: Citibank, Commercial Credit, Primerica Financial Services, and Citi credit cards. The pair got along very well and agreed that Lipp would actually run domestic operations while Campbell would head international, which consisted almost entirely of Citibank branches abroad. Nearing retirement, Paul Collins wanted to help Sandy and Reed without taking direct line responsibility and eventually would spend more time in England. Below those levels more than two dozen executives were selected to head key components of each operation, while another two dozen were passed over for the top spots, to be offered less prestigious and powerful posts. While there would be a management committee, consisting of some thirty executives, that met quarterly, Sandy also insisted on forming his favorite management tool—a “planning group”—that would meet monthly.
Pleased with the decisions they had made, the senior executives returned to New York and began informing the most senior executives about their futures. When Sandy told Deryck Maughan he would soon be working for Jamie Dimon rather than with him, Maughan voiced no objection.
The next day, when the Bermuda team gathered to review the internal reactions they were getting as word of the pending changes spread, Sandy told the group that Maughan shouldn’t be placed below Dimon in the corporate hierarchy.
“Why not?” asked Reed, who had never considered people more important than process in running a company.
“I don’t want to upset Deryck,” Sandy explained. “I don’t want to lose him.”
“You have to make the right decision for the company,” Reed countered.
“If it’s the right thing to do to have him report to Jamie, let’s do it. So what if Deryck leaves?”
The Citicorp executives couldn’t understand Sandy’s allegiance to Maughan, who had joined Travelers only a few months earlier when it acquired Salomon. Since then, Salomon had caused Travelers nothing but trouble. As far as Reed was concerned, Salomon was the least attractive part of the merger.
But Sandy wouldn’t be deterred. “We have to find a different solution,” he insisted. Clearly, Sandy enjoyed being around Maughan. In contrast to Dimon, who had no compunction about criticizing his boss openly, Maughan went to great lengths to praise and flatter Sandy. In addition, Maughan’s worldly background and debonair manner were qualities Sandy admired but did not possess.
Suddenly all that hard work in Bermuda became virtually worthless. A new plan had to be devised, and fast. Executives at both companies, as well as the analysts and the press, were clamoring to know how the combined company would be run. Pushing for Maughan, Sandy proposed that the ex–Salomon chief and Dimon keep their co-CEO status as heads of the global corporate and investment-banking division. In other words, their relationship wouldn’t change, but their joint responsibilities would increase.
“Get the machine guns ready,” Dimon shot back. “Co-CEOs will set up an obsession with who’s winning, and factions will discredit each other and destroy careers.”
Sandy pointed out that he and Reed were willing to be co-CEOs.
“Honestly, it’s okay for you two to be co-CEOs because you want to be a true partnership,” Dimon responded. “But for line jobs over operations, co-CEOs are absolutely unworkable.”
When the Travelers chairman tried to move on to a review of proposed positions for other executives, Dimon kept harping on the job sharing with Maughan. Reed finally felt compelled to weigh in on Sandy’s side, mostly to support his new “partner.” But Dimon persisted in challenging their decision. The Citibank executives were shocked at the intensity of the fighting between Sandy and Dimon.
Despite Reed’s vote in favor of Sandy’s solution, the other Citibank executives were troubled. Sandy’s proposal put two Travelers executives in the highest positions over the corporate-and investment-banking operations. Citibank executives would naturally feel left out. So a new proposal was offered: tri-CEOs. Victor Menezes, who under the Bermuda plan would have served on equal footing with Maughan while reporting to Dimon, would now be named as a third CEO over corporate and investment banking.
Dimon was flabbergasted. “We’ll never get anything done if we have three heads,” he retorted. But before he could launch into a tirade against such an unwieldy management structure, Sandy returned Reed’s favor. “Three co-CEOs it is,” he said. When he spied Dimon about to lash out, he glared directly at him and ordered: “Shut up.”
Despite the brief clash, Reed was still very impressed with Dimon and wanted to distinguish the young executive from the rest of the pack. He proposed that Dimon be named Citigroup president, a position that implied Dimon had more authority than anyone else under Sandy and Reed, and that would set him up, at least nominally, as the heir apparent to Sandy and Reed. Sandy agreed but pointedly didn’t offer the additional title of chief operating officer. Just as Sandy had been deprived of the chief operating officer title he so desperately sought at American Express, he was depriving Dimon of it. And Sandy went further to ensure that the president’s title was little more than just a title: Only the company’s chief financial officer—Heidi Miller had been selected for that post—would report to Dimon. All the other top managers would report directly to Sandy and Reed.
The outcome hit Dimon hard. He sensed that deep down Sandy was very, very angry with him. He had noticed, too, that Joan Weill seemed colder toward him since Jessica had left the company. Still, Dimon was confident that his relationships with the two Weills would soon improve. After all, he and Sandy had worked together hand in hand for fifteen years to reach this point in their careers, and the Weills remained the best of friends with Dimon’s parents. Any relationship has its ups and downs, Dimon reasoned, and they would work it out for the common goal of taking over Citicorp.
Reed, on the other hand, was eager to nurture a relationship with Dimon. He and his wife invited Jamie and Judy Dimon to dinner in their Greenwich Village apartment, where Reed cooked. Reed also invited the new Citigroup president to travel abroad with him on his next business trip. It would be an opportunity for them to get to know each other better and to discuss a wide range of issues involved in such a mammoth merger. Dimon was flattered and knew he would enjoy a closer relationship with the cerebral Reed. Yet Dimon also remembered Sandy’s deep anger when Peter Cohen had cultivated a special relationship with Jim Robinson at American Express. Dimon didn’t want to make the same mistake. If I go on the trip with Reed, Sandy will be paranoid, he’ll think I’m a turncoat, Dimon thought. Reluctantly, he turned down Reed’s offer.
Before announcing the new management slate, Sandy and Reed wanted to be sure the managers knew one another. At the end of April, about one hundred top executives from the two companies gathered for dinner at Travelers’ Armonk conference center. Small slips of paper, each bearing one of their names, were put in a pot and drawn to determine who would sit with whom at dinner. The random drawing forced Travelers and Citibank executives to mingle.
Marge Magner, the chief operating officer of Commercial Credit, laughed at what she dubbed the “mating game” that forced the executives to get to know one another. But she got more serious after spending several hours sitting at a table with top Citibank officials Brian Ruder and Norman Selby. She was shocked at their lack of financial-services experience. In Reed’s effort to bring in unorthodox talent to shake up Citibank, he had recruited Ruder from a top retailing post at H. J. Heinz, the ketchup-and-pickle company, to head Citi’s global marketing effort, and lured Selby from the consulting firm of McKenzie & Co. to become chief auditor. “They know nothing about the business,” she whispered to her colleague Bob Willumstad later in the evening. Magner and Willumstad had thirty-five years of combined experience at financial institutions; between them, Ruder and Selby had two.
Yet Citibank did have some veterans who knew banking intimately and were proud of their company’s heritage. Charles Long, Citicorp’s longtime corporate secretary, buttonholed his Travelers counterpart, Chuck Prince, and pressed on him a copy of a book entitled The First Billion: The Still-mans and the National City Bank, a history of the forerunner of Citibank written during the Depression. “I’m going to make you read this old book on Citibank,” he told Prince.
On May 16, 1998, Sandy and Reed announced the new management structure that would go into place as soon as regulators approved the proposed merger. At the top were Sandy and Reed as co-CEOs. Below them would be two co-CEOs running the consumer bank and three co-CEOs running the corporate business. The top-heavy structure was instantly dubbed “the Noah’s Ark School of Management.” Noah and pairs of all the animals were on the ark for a limited time to survive the flood. Most managers regarded the various pairs and trios of CEOs as a transitional tool to get the merged company off to a fast start. It would also provide some continuity while both sides struggled with the inevitable “social issues” involved in any merger.
Sandy’s next task was particularly onerous for the gregarious CEO: He had to pare the Travelers board down to nine from fifteen members, the result of early negotiations in which he and Reed agreed that each of the two companies would have equal representation on the combined board. For the most part Travelers board members were people Sandy liked and admired. Firing them would be difficult, but Sandy figured out a way to avoid the worst aspects of it: make Arthur Zankel and Ken Bialkin, his oldest friends and longest-serving directors, do the job. Their solution was to have the board vote on which nine members would be invited to join the new Citigroup board. Ballots would be secret so that no single director would know who had voted for whom. Zankel and Bialkin took the results to their old friend to be sure he approved. Among those with the fewest votes were Linda Wachner, the controversial head of Warnaco Group, a giant clothing manufacturer; Joe Califano, the former Carter administration official; and Joe Wright, the former Reagan administration official and one of Sandy’s longtime friends. The decision to remove Wachner was easy: She was routinely late to board meetings, contributed little to the discussions, showed up at one emergency meeting in an aerobic exercise getup, and was constantly enmeshed in trying to save her ailing company. Dropping the other two, however, would be more difficult. Both had made valuable contributions to the company and were social friends of the Weills.
“I have to tell you,” Sandy said in a call to Califano, “you aren’t one of the guys who’s going to survive.”
“That’s fine. I enjoyed my years on the board,” Califano graciously responded. “I still have all my stock. Sandy, you’re my retirement.”
Joe Wright’s removal didn’t go as smoothly. Joe and Ellen Wright had been friends with Sandy and Joan since the late 1970s, long before Sandy had achieved power or, indeed, even basic social graces. At dinner one night early in their relationship, Sandy had paused next to the piano in the Wrights’ living room to grab a handful of what he thought an appetizer in a dish on top of the piano. Instantly he gagged and began spitting out the concoction. “What the hell is this stuff?” he demanded. “It tastes horrible.”
“Well, Sandy, you’re not supposed to eat the potpourri,” Joan informed him amid the Wrights’ delighted laughter.
But there was no laughter this time. Joe Wright had known Sandy long enough to surmise that he was hiding behind the “vote” to pare the board. Long ago Wright had worked at Citicorp and hadn’t gotten along well with Reed. But even if Sandy had good reason to dump Wright to stay in good stead with his new partner, Wright thought he shouldn’t have had his cronies handle the chore, and he told Sandy as much in a phone call. “You’re the CEO,” Wright said. “The board serves at your pleasure.” Uncomfortable at being lectured, Sandy hastily ended the call.
Joan Weill, attempting to smooth over the situation, soon phoned Ellen Wright, with whom she had long shared confidences about their children and their lives. Ellen Wright, convinced that no move would be taken without Sandy’s approval, didn’t buy the official explanation of her husband’s removal from the board. She let Joan know the move seriously damaged their friendship.
Certainly Sandy could be ruthless, even to his old friends, but his relationship with his new partner was as generous and solicitous as it could possibly be, and Reed responded in kind. At one early meeting with the new planning group, both the Travelers and Citicorp executives were surprised at how deferential the two men were to each other. Chuck Prince deemed the meeting a “love fest.”
“John, what do you think?” Sandy asked at one point in the meeting.
“You’re so good at strategy.”
Later Reed returned the compliment. “Sandy, what do you think? You’re so good at operations.”
The astonishing rapport between the volatile Sandy and the coldly calculating Reed set the tone for the first few weeks as the executives on each side of the merger squared off to assess their counterparts. The lesson for these power-hungry and aggressive men and women was clear: Play nice!
Yet it was also clear that there were going to be problems. After all, any big corporate merger is a difficult adjustment process for all involved, and this was one of the biggest, with 200,000 employees around the world. Further, each company had a distinctive operating style: Travelers managers were lean and mean and willing to get their hands dirty; Citicorp management preferred a think-tank atmosphere free of constant bottom-line pressures.
Confident that the Federal Reserve would approve their merger, Sandy and Reed moved quickly to create an aura of togetherness. Sandy happily abandoned his downtown office in Tribeca to move into the landmark Citicorp tower that occupied a block of Lexington Avenue and East Fifty-third Street in midtown Manhattan. The dramatic silvery skyscraper, with its distinctive angled roof, would be the corporate headquarters. Construction began immediately for a working fireplace as the centerpiece of a sitting room that divided Sandy’s office from Reed’s. The Travelers CEO was convinced that meeting with other clients, fellow executives, and employees in such comfortable surroundings defused tensions and made for more relaxed discussions.
But the finished product didn’t turn out quite as Sandy had hoped. The cozy, comfortable library that Sandy had envisioned was nothing like the almost sterile room that resulted. In keeping with the rest of the executive floor, the cream-and-beige décor was modern to the point of being cold. Even the bookshelves and tabletops were bare. Unlike Sandy, who had filled his previous libraries with scrapbooks, photos, awards, and trinkets, Reed disdained knickknacks and memorabilia. Moreover, Reed preferred to work in isolation in his office, while Sandy delighted in talking with others while propping his feet up on a coffee table. Sandy had used his libraries as convivial watering holes for after-hours cocktails with his top executives; Reed neither drank nor mingled.
Eager to better understand how to work with Sandy, Citi executives asked their Travelers counterparts to brief them on Travelers’ “policies and procedures.” “We don’t have any” was the typical response. If the Citicorp executives wanted to know more or to get a decision on some issue, they were repeatedly told to “ask Sandy.” And Sandy thrived on making nearly all the important—and many of the not-so-important—decisions. He promptly named himself and Chuck Prince to the charitable board of what would be the new Citigroup Foundation, joining Reed and Citi’s philanthropy professional, Paul Ostergaard. Before the merger was proposed, Ostergaard had the authority to make grants of up to $250,000, involving Reed only in decisions on larger sums. Sandy drastically lowered the threshold, setting $25,000 as the limit before a grant had to receive his approval.
The Citi managers, accustomed to Reed’s hands-off management style, quickly dubbed Sandy’s top deputies the “Sandy Sez” guys. They were amazed at the adoration and deference even the most senior Travelers executives had for their boss, who seemed to rule more as an emperor than a CEO. The whole place reflected Sandy’s mood and thinking, changing almost daily. No wonder Sandy’s office sported a flashing sign that signaled either THE CHAIRMAN IS HAPPY or THE CHAIRMAN IS NOT HAPPY, they observed.
Reed clearly noted the difference in style and remarked on it in an interview with Fortune magazine. “Travelers is a company that was built by an individual. The role Sandy plays is perceptible. People work for Sandy. I don’t think it’s the same thing at Citibank. I happen now to be chairman, but Wriston was before, and somebody else will be afterward. So I don’t think it’s quite as personalized a company.”
Chuck Prince put it more succinctly to a Citi executive seeking guidance on how to work with Sandy: “What you have to learn about Sandy is that he wants to be the captain of the ship, ring the bell, blow the whistle, and navigate by the seat of his pants.”
Under their captain, the Travelers executives—most of whom had been together since the beginning of Sandy’s comeback, if not from his first triumphs—knew one another intimately and had worked together in planning-group sessions or cross-selling efforts. But many of the senior Citicorp executives had little history with their company and didn’t know one another or even Reed very well. Jack Morris, who handled press relations for Reed, saw more of Sandy in the first few months of planning the merger than he had seen of Reed in ten years. “Jack, do we need to talk?” Sandy would call out to Morris if he saw him down the hall. In contrast, Citi officials had trouble getting appointments to see Reed.
The frustrations began to set in toward the end of June. The Federal Reserve still hadn’t approved the merger. Under Travelers’ novel strategy, the financial giant was converting to a bank holding company in order to purchase Citicorp. The Fed, which would regulate the new entity, didn’t want to take any chances. It wanted to examine all aspects of the transaction and expose and analyze all the risks that might affect the combined company. In essence, the Fed was performing its own due diligence with an eye toward protecting the public’s interest. To that end it demanded reams and reams of paperwork from both Travelers and Citicorp. Chuck Prince and Heidi Miller worked overtime providing the Fed with detailed explanations and information to reassure the regulators that the new company would be governable and easily monitored after the deal was approved.
Sandy, of course, had never before acquired a highly regulated company, and the delay was irritating him. That irritation was evident in more than the usual screaming. When Travelers tax executive Irwin Ettinger sought guidance from the Securities and Exchange Commission on a complicated accounting issue, Sandy went through the roof.
“If you hadn’t raised the question, maybe it would have been ignored!” he yelled at Ettinger. “You better not derail this deal!”
The Fed’s hearing in June on the proposed deal attracted protesters waving red umbrellas. They urged the regulators to reject the deal on the grounds that neither company had done enough business in minority and low-income communities. “By definition, the proposed entity is too big to address local community needs,” declared Sarah Ludwig, attorney with the New York City Community Reinvestment Task Force.
Prince, representing Travelers at the hearing, tried to make light of the protesters and their red umbrellas. “That shows we have a powerful brand,” the attorney quipped. “Even our opponents are using it.”
Sandy wasn’t amused. By August, he was livid at the lack of progress. He pestered Miller to set up meetings with regulatory officials to nudge them along. “We can’t,” she responded. “It’s August, and no one is in Washington. They’re on vacation.”
“What do you mean, they’re on vacation?” Sandy growled.
“No one’s around,” Miller said, “and the point person on our application is in Alaska for the month.”
That touched off another rant. “Why is this guy in Alaska when we have a deal to do?” Sandy screamed.
Even as the Fed was considering whether to allow the merger, Travelers and Citicorp executives were pushing ahead on the assumption it would be okayed. One day Citi’s retail banking chief Bill Campbell phoned Bob Willumstad, who was visiting his daughter in California. Campbell told the Commercial Credit head that a giant state-owned bank in Poland was being put up for sale.
“What the hell do you want me for?” Willumstad asked.
“Well, it’s a bank with a lot of branches,” Campbell replied, “and we don’t have anybody in Citicorp who has any experience with large branch systems.”
Willumstad was floored. For years at Chemical Bank he had fought Citicorp to establish the biggest and best branch banking system in the country. Now here was the head of retail banking at his former competitor confessing that they didn’t know what they were doing.
“If that’s the case, then maybe we shouldn’t do this merger,” Willumstad said.
Campbell ignored the remark. “Don’t worry, I’m sending the G-4 to pick you up,” he said.
When Willumstad met the corporate jet at the airport, he knew Sandy hadn’t approved this particular trip. The expensive jet had flown to California “deadhead,” with no passengers aboard. Sandy would never have approved such an extravagance. Come to think of it, Willumstad said to himself, Sandy would have told me to fly back coach class. In New York the jet stopped long enough to pick up two Citicorp executives and then flew on to Warsaw. The trio met with the Polish finance minister, then spent three days studying the state-owned Pekao Group, which had 700 branch offices.
Back in New York, Willumstad met with Bob Lipp, John Reed, and Bill Campbell.
“This bank is a great opportunity,” Willumstad told them. “We just need to install strong management and strong technology to run it.”
“That’s a problem,” Campbell replied.
“Why?” asked Willumstad.
“We have lousy systems, and nobody at Citi has run anything that big,” Campbell explained.
Again Willumstad was shocked to find that the mega-bank known as a technology pioneer couldn’t easily absorb the much smaller Polish bank. “Then why the hell are we merging with you?” he shot back.
As Willumstad and Marge Magner, working under their old boss Bob Lipp, delved into Citibank’s retail operation, they realized that Campbell wasn’t exaggerating the problem. The two Chemical Bank veterans found they knew far more about running a branch bank system than their Citi counterparts. Moreover, behind Citi’s renowned international branch was a network of mini-fiefdoms that didn’t have uniform standards, technology, or accountability. “Citibank doesn’t run as a whole, but as parts that don’t work together,” Willumstad informed Magner and Lipp.
That didn’t daunt the trio. They had long ago whipped Commercial Credit’s branch system of loan offices into shape, and they could do it again at Citibank. They quickly began setting up systems to apply the same discipline and training around the globe and began merging the bank’s consumer operations into Travelers’. Willumstad would manage all consumer lending and Citibank credit cards, while Magner ran not only Commercial Credit, but also risk management for the entire consumer group. Just as she had years earlier in Baltimore, Magner set up data-driven processes to monitor credit risk and performance. The two kept Lipp and Campbell, their co-CEOs, apprised of their progress and were gratified that Campbell, a former tobacco executive, didn’t interfere but instead concentrated on his own strong suits, marketing and branding.
But other aspects of the merger revealed the strong cultural differences that marked the two companies. Joseph Plumeri, a veteran brokerage executive who had been with Sandy since the early days, had finally turned around Primerica’s insurance operations in the wake of Art Williams’s ouster. He had been successful in no small part because he used many of Williams’s methods, including huge revival-style stadium gatherings where he made inspirational speeches. At one meeting he spoke for five hours straight, pausing only long enough midway through to change his sweat-soaked shirt. Now appointed head of North American branch banking for the combined companies, he immediately brought to his new post the same zeal and inspirational tactics. He invited Citibank branch managers to a raucous cheerleading event in Madison Square Garden, where he promised to “transform” Citibank branches and employees. He ordered everyone in the branches to become licensed to sell insurance and securities. Tellers were renamed “financial associates,” and if they successfully completed the licensing requirements they would become “client financial analysts.” Branches would be called “financial centers.” Bill Campbell attended the meeting and was amazed at Plumeri’s evangelistic style, especially when he urged his audience to reply loudly and repeatedly to his exhortations.
“Crazy Lord Jesus, this is one of the most incredible things my eyes have ever seen,” Campbell muttered to himself—and he didn’t mean that as a compliment. Many of the branch managers in attendance found Plumeri’s display offensive and demeaning.
Soon afterward Plumeri pushed the branch managers to improve sales. His relentless pressure began to annoy, then antagonize the managers, many of whom at first complained about his tactics, pointing out that theirs was a customer-relations job, not a sales job. Brokers and insurance salesmen were paid lucrative commissions, they argued, but bank managers received nothing but their customers’ ire if they tried to push too many products and services down their throats. Then they began resigning. Reed badly wanted to see improved sales and profits from his branches, but he couldn’t stomach this sort of radical shift in how business was done. He took his branch managers’ complaints to Sandy, who eventually agreed that Plumeri’s tactics weren’t working.
At the same time Plumeri was trying to impose his high-pressure salesmanship on Citibank branch managers, Citicorp executives were trying to convince their Travelers colleagues to become more analytical and thoughtful. Their favorite tool was Six Sigma, a system for improving the quality of processes and products to achieve extraordinary customer satisfaction. Named for a statistical concept, the system measures every process in a business with an aim toward reducing errors to the smallest possible number. John Reed, along with such notable executives as Jack Welch at General Electric and Larry Bossidy at AlliedSignal, was a strong advocate of Six Sigma. After much cajoling, James Bailey, a Citi veteran who was the corporate Six Sigma quality director, persuaded Sandy to visit AlliedSignal in New Jersey to learn more about the system’s perfect-performance objectives. After listening to the AlliedSignal executives explain the process and the benefits of Six Sigma, the group sat down for lunch. Sandy began probing to discover the direct benefits of Six Sigma.
“How does it increase revenue?” he asked.
Well, it improves performance, which will eventually result in improved revenue.
“Does it help cut expenses, in technology or people?” he asked.
Bailey ventured that Six Sigma could produce an estimated $500 million in savings.
“I don’t see it anywhere,” Sandy retorted.
“This guy is making this stuff up,” added Lipp, who knew a thing or two about cost cutting.
Sandy made one last attempt to find a benefit in Six Sigma: “Does it help the stock price?”
When Sandy didn’t get a definite answer on that, Bailey knew Sandy would never become a dedicated follower of Six Sigma. Soon thereafter Bailey went to Reed and asked to be reassigned. “I can see Sandy’s not going to buy into Six Sigma,” Bailey told Reed. “Sandy has to have immediate impact.”
Other tensions between Citi’s and Travelers’ consumer operations arose over the credit-card business. Citicorp, the nation’s top issuer of credit cards, had purchased AT&T’s Universal Card portfolio for $3.5 billion in cash earlier in 1998. Just as the Citibank branches operated in independent territories, Citicorp’s pervasive credit-card business comprised twenty-four different systems. With the addition of the AT&T card portfolio, Citicorp’s card business was far and away the largest, 50 percent larger than its closest rival, MBNA. As Willumstad reviewed the new portfolio, he realized that no one at Citicorp had taken steps to integrate the Universal Card into the existing credit-card business, a step that would produce immense cost savings. Angry and baffled, he started asking questions. He found that the credit-card managers and the technology staffs refused to work together. Keeping their separate territories was costing about $150 million annually, Willumstad figured.
“This is real money being thrown away,” Willumstad told Bill Campbell in a meeting at Citicorp Center. “We’ve been screwed by this transaction.”
Campbell, normally an easygoing executive, blew up at the Travelers executive. “You guys keep criticizing us. You weren’t here. You don’t know what we’ve dealt with,” Campbell yelled, then stormed out of the meeting. He apologized for the outburst the next day.
If occasional tensions marred the integration of the various consumer operations, they still looked idyllic compared to the problems arising as Travelers and Citicorp executives tried to mesh the corporate operations. Travelers had acquired Salomon Brothers only months before the merger with Citicorp was negotiated. Travelers had been struggling to meld the risk-hungry traders and investment bankers from Salomon with the more staid Smith Barney brokers. Now a new source of potential friction—Citicorp’s global corporate bankers—was being thrown into the volatile mix. Dimon and Maughan had been openly warring before the merger, and now they had to deal with yet a third “co-CEO,” Citi’s Victor Menezes.
The mission was straighforward enough: create a corporate banking colossus that could do any financial transaction anywhere in the world for any company. In theory, the combination had much promise. Each side could bring to the party not only new products and services unfamiliar to the other side, but also a new list of clients to whom both sides could sell their various products and services. Citibank prided itself on its Global Relationship Bank, which provided loans, cash management, and other financial services to 1,700 of the world’s largest companies. Salomon viewed itself as having a leading global franchise in bond underwriting, specializing in companies with less-than-stellar credit records that paid high rates for bonds and loans.
In practice, the combination simply wasn’t working. The Citi bankers wanted to preserve their reputation as globe-trotting bankers to the world’s elite corporations, customers that demanded the highest levels of service from conservative financial experts. They wanted a work environment heavy on staff and bureaucracy to ensure that their customers never wanted for anything and that Citicorp’s name was as recognizable around the world as that of Coca-Cola or Gillette. Salomon Smith Barney’s culture was more entrepreneurial, focused on taking advantage of developing situations. It was an environment in which any executive would jump in to clinch a deal, and they resented Citicorp’s obsession with its brand name. “I used to be an investment banker, now I’m a brand manager,” Maughan joked to his Salomon colleagues.
Turf battles erupted over who would get the first shot at a new client and over who would manage the relationships with existing clients. One of the most serious rifts developed abroad, where Citibank had a strong presence in corporate banking but was weak in securities underwriting. Salomon was exactly the opposite: strong in securities underwriting but without an extensive foreign presence. What on paper seemed a good fit that made sense for both clients and the new company in practice dissolved in a heated battle over who would serve which clients.
The three co-CEOs tried to resolve some of the problems in “integration meetings.” But too often the meetings became mired in Citibank’s quantitative, chart-laden presentations, after which Salomon executives would joke that they had been “Citibanked.” The commercial bankers came away worried that the investment bankers weren’t taking the problems seriously enough and were looking for ways to evade their responsibilities to the overall organization.
Then in late summer disaster struck. Russia repudiated much of its international debt, sending financial markets into a tailspin. The resulting meltdown in world credit markets in turn triggered the collapse of a big hedge fund called Long-Term Capital Management. Citicorp suffered enormous losses in the credit markets. Salomon, too, was hit hard by the credit markets’ plunge, but it took a big hit as well from its dealings with Long-Term Capital.
Amid the financial carnage the three heads of the corporate-banking operations became even more protective of their individual turf. Dimon, especially, seemed to make it his mission to save Salomon Smith Barney at the expense of everything else. He became so entrenched in fighting for his “baby” that he rarely made appearances in his president’s office at Citicorp Center headquarters. That made it easier to avoid Sandy, too.
At the same time, Dimon became openly derisive of Maughan’s management capabilities and his obvious talent for “sucking up” to both Reed and Sandy. Dimon’s behavior became disruptive enough that Bob Lipp, his longtime friend, warned him to tone it down. Arthur Zankel, a Travelers director, told Dimon, “I have the greatest regard for your abilities, but you’re treating Deryck, an enormous asset, like an enormous liability.” Many Citi insiders had high regard for Maughan’s skills; he was a great “customer’s man” with the polish and stature to impress clients. With his extensive experience in Japan and in Europe, the dapper Brit had excellent international contacts and credentials.
Maughan also was far from happy with the corporate bank’s ruling triumvirate. Citi’s Menezes, a native of India, was Citibank’s chief financial officer and hadn’t run a commercial-banking operation in years. He was struggling to catch up with Dimon and Maughan, which only increased Maughan’s frustration with the power-sharing arrangement. He began openly making wisecracks about the “hydra.” “We have so many heads around here, it just spins,” he started saying to anyone who would listen.
Lacking clear lines of authority, the corporate bank was in disarray. The three-headed executive team couldn’t reach agreements, their troops were squabbling, and the integration of the two companies was effectively stalled. By September, Dimon, Maughan, and Menezes agreed on one thing: The triumvirate wasn’t working. In a rare display of unity, the trio wrote a two-page memo asking Sandy and Reed to kill the hydra. They set up a meeting with the two co-CEOs at which they planned to plead that one person be named for the job while the other two were reassigned.
“Deryck, you make the pitch,” Dimon said. “You’re excellent at making presentations.”
At the meeting, Maughan acted as the hydra’s spokesman. “We’re doing the best we can, but it’s not optimal for us individually and certainly not for the people who work for us,” he began. “This is a very tough, hugely competitive business against very capable firms. The hydra is slowing us down and is confusing. It’s unreasonable to force this on the three of us.”
“We want the three of you to work it out,” Reed responded.
Having the problem thrown back at them wasn’t what Maughan, Dimon, and Menezes expected. They looked at one another helplessly. What are they hoping we’ll do? Maughan thought to himself. Do they expect one of us to withdraw? he wondered as he prepared to answer.
“We’re saying we can’t work it out. That’s why you’re paid gazillions,” Maughan said. “Go ahead, we offer ourselves for you to choose.”
“Well, I guess we need to do something,” Sandy said.
“Okay,” Reed added.
Then dead silence. If Sandy’s office sign had been in the meeting, it would have been flashing THE CHAIRMAN IS NOT HAPPY. The mounting losses and the internal chaos were driving down the stock of both Travelers and Citicorp, erasing billions of dollars of market value. Even worse, the Federal Reserve still hadn’t approved the merger, punishing the stock prices. The meeting adjourned with no further comment.
Finally, on October 8, 1998, the Federal Reserve Board approved Travelers’ application to merge with Citicorp. Citigroup was born. But the Fed cautioned that without legislation overturning longtime banking laws, Citigroup would be required in a few years to divest itself of certain operations.
At the first meeting of the new company’s board of directors, Sandy and Reed appeared confident that their plan would work, despite the pall of the sagging stock price hanging over the new company. The board consisted of eighteen directors, nine from each of the two companies; for the most part, they were older executives. For the first time in years, the youthful Jamie Dimon wasn’t a director. When, early in the meeting, Sandy cracked, “It’s nice to have adult supervision,” some directors took the comment as a jab at Dimon. As the meeting progressed, Sandy seemed poised to place the blame for the merger’s troubles on the president. Andrall Pearson, one of the directors, tried to cut off that line of reasoning before it could be extended. “Sandy, you can’t blame Jamie or any other one guy when you have hydra-headed monsters running everything,” the former Harvard Business School professor said. “Three guys are reporting to two CEOs—for Christ’s sake, that’s an organization design that won’t work.”
When the new company’s management group assembled at Armonk for its next meeting, Jamie Dimon seemed angry and isolated, as did the executives dubbed “Team Jamie” for their loyalty to him. They talked to one another but to hardly anyone else in the group. When Dimon reviewed the corporate group’s problems, he acted as if questions from anyone, even Sandy or Reed, were inappropriate or ill formed. At a break in the meeting, Citi’s Bill Campbell, who liked Dimon, warned the younger man, “You don’t talk down to Sandy Weill or John Reed.”
Nevertheless, Dimon didn’t change his condescending, almost belligerent, behavior when the meeting resumed. Some Citi executives found his attitude disrespectful. Everyone in this room is a type A personality, Citi’s technology expert Ed Horowitz thought. But Dimon isn’t adapting to the new environment. On the other side of the room, Chuck Prince, who had probably spent more time with Sandy and Dimon than his own family since 1986, also watched Dimon’s strident behavior and concluded that Dimon wanted to run his own show. Dodge City isn’t big enough for both Sandy and Jamie anymore, Prince thought to himself.
Sandy and Reed, who were trying hard to work together, shared their thoughts about Dimon after the management meeting. As much as Reed liked Dimon and respected his enormous talents, he found the personal dynamics between the mentor and his protégé unacceptable and strange. For Sandy, bringing Reed into Travelers was like bringing a new spouse to meet one’s family. All of a sudden, Sandy saw his increasingly difficult relationship with a family member from an outsider’s perspective, and it looked terribly dysfunctional.
To celebrate the unprecedented merger, Citigroup planned a lavish weekend getaway for the top one hundred forty executives and their spouses at the grand Greenbrier Resort in the West Virginia mountains. It was classic Sandy—bringing managers into the “family” in a relaxed social setting, mixing business with pleasure. Citi had never invited spouses to a corporate retreat.
At the business session during the day, Sandy and Reed asked their top executives to make presentations to the group on the merger’s progress. When it was Dimon’s turn, he gave an obligatory summation without seeking input or discussion. He clearly viewed the presentations as inconsequential.
Then Michael Carpenter, who ran Travelers Life & Annuity, stood up and shocked the room when he bluntly said, “There’s too much infighting.” The managers broke into small groups to devise recommendations for smoothing the merger process. Various solutions were suggested, but every group had a similar plea: “Fix the management of the corporate business.”
That evening, on October 24, 1998, Citigroup threw a black-tie dinner and dance. After the tense meetings earlier, the executives enjoyed drinking and dancing. Dimon, his wife, Judy, and his closest Smith Barney colleagues, Steve Black and Charlie Scharf, with their wives, sat by themselves at a table off to the side. The tuxedo ties were off, their shirts open, the alcohol flowing.
Around midnight, many of the couples were trading dancing partners as the band played rock-and-roll tunes from the 1970s—when many of the forty-something executives had come of age. Black, who had never gotten along with Maughan, told his wife, Deborah, they should switch partners with the Maughans, dancing nearby.
“Why?” she asked, knowing that Maughan had been dismissive of her husband since coming in as co-CEO with Dimon.
“Come on, it’s not a slow dance,” Black said playfully. “It’s the right thing to do.”
Black then offered to dance with Maughan’s wife, Va, as a peace overture. Maughan didn’t return the gesture. He looked down at Black’s wife, then turned and walked away. Deborah was left stranded on the dance floor. Black immediately dropped Va Maughan and went to rescue his humiliated wife. He escorted her off the floor, then stormed over to Maughan.
Unleashing a torrent of expletives, Black seized Maughan’s arm, squeezing it hard. “It’s bad enough how you treat me,” Black yelled, as the music stopped. “But you’re not going to treat my wife like that!” Maughan said nothing. But Va came charging across the ballroom floor to confront Black herself. Poking her finger in his chest, she yelled, “Don’t you ever talk to my husband like that again! He’s the CEO of this company!”
The melee caught Dimon’s attention. He rushed over and pulled Black aside to see what was happening. “I’m going to kill him,” Black fumed to his close friend.
Shocked at Maughan’s rude behavior, Dimon confronted him as Maughan was about to leave the ballroom. He grabbed the taller Maughan and yelled, “I want to ask you a simple question. Either you intended to snub Blackie’s wife or you didn’t. Which is it?”
Maughan didn’t answer and pulled back to turn away. Dimon spun him around, popping a button off Maughan’s shirt, and shouted, “Don’t you ever turn your back on me when I’m talking!”
Va Maughan started screaming, “This man is attacking my husband!” When the two men separated, Maughan’s wife fled to the Weills’ suite, interrupting their late-night drinks with the Lipps.
The next morning all the gossip was about the confrontation. Eduardo Mestre, Citi’s investment banking head, and his wife had left the dance before midnight. They were eating breakfast when Jim Boshart, another Salomon Smith Barney official, ran up to their table. “You’re not going to believe what happened last night! Jamie and Deryck had a fight!”
“What?” Mestre gasped. As Boshart described the attempted blows, Mestre kept repeating, “Oh my god.”
Minutes later, two vans pulled in front of the Greenbrier to take two groups of executives to the Citigroup jets. The group returning in Dimon’s plane stood on one side; the other group included Maughan. No one said a word as Dimon approached Maughan.
“Sorry,” Dimon said. “I shouldn’t have done that.”
Maughan harrumphed, saying nothing. As it had on the dance floor the night before, Maughan’s silence came off as pompous and condescending. But shrewd corporate politician that he was, he had carefully weighed the risks and refused to be drawn into the fray.
Reed and Sandy talked later on Sunday about the fracas.
“Jamie’s the problem,” Sandy told Reed.
Reed acknowledged that Dimon hadn’t done his part to smooth the difficult management transition. “Maybe you’re right,” he told Sandy. The Citibank chief, a decorous executive with a strict moral code, found Dimon’s confrontation with Maughan totally unacceptable.
“Jamie’s got to go,” Sandy said.
“We’re co-CEOs, so if that’s your opinion, I’ll support you,” Reed replied.
On Monday morning, the Citigroup chieftains called Chuck Prince into their library and asked him to conduct an investigation of the incident and report to them at the end of the week.
Arthur Zankel stopped by on Wednesday to see Sandy. As a director and friend, he knew that Sandy was weighing whether to dump his once-beloved protégé.
“You tried A, you tried B, you tried C,” Zankel said. “Everybody is calling for something to happen. This is impeding the progress of the company. It is enough. You tried.”
“We haven’t been getting along for a long time,” Sandy offered. “But something like this is so final.” He also wondered aloud what firing Dimon would do to his and Joan’s longtime friendship with Ted and Themis Dimon. But he added, “John is ready to fire Jamie.”
“Well, you know how John is about firing people,” Zankel replied. “It’s as easy as belching to him.”
Indeed, in the last decade Reed had forced out several possible successors: Former president Richard Braddock left in 1992; Christopher Steffen came from Kodak in 1992 and left in 1995; and Pei-yuan Chia, who had spent twenty-two years at the bank and had risen to lead Citibank’s consumer businesses, suddenly retired in 1996.
When Prince reported to Sandy and Reed on Friday, he found them in shirtsleeves and acting very much like a team. The general counsel recounted the recollections from fifteen individuals who witnessed the event, described by some as a “ballroom brawl” or “a heated round of pushing and shoving.” At the suggestion of physical contact, Reed flinched as if there had been violence. Sandy, the street fighter, took it in stride; Dimon was a virile, dominant man who had a tendency to get excited.
“You have to do it for the good of the organization,” said Reed, looking pained. “I always thought Jamie would succeed the two of us. I thought it would be great, but Jamie’s behavior was totally inappropriate, especially for someone who’s going to be the next CEO.”
The co-CEOs also discussed Maughan’s involvement and decided he shouldn’t escape unscathed.
“Let’s sleep on it,” Sandy said, dismissing Prince.
On Saturday, Sandy called Prince at home. “We have to ask Jamie to leave the company. Get everything ready for tomorrow.” The general counsel knew this Saturday would not be one for relaxing. As he sped toward Citigroup’s Manhattan headquarters from his home in Weston, Connecticut, Prince mentally reviewed what he had to do in the next twenty-four hours: Firing Dimon would be a material event that would require board approval, legal documentation, and press releases. Citigroup’s global corporate unit had already planned a meeting for Sunday at 4:00 P.M. to discuss the managers’ pleas for change at the top. They wanted change, they were going to get change.
On Sunday, November 1, 1998, Dimon relaxed in a Smith Barney sweatshirt at his large Park Avenue apartment. He believed that the afternoon meeting at Armonk would finally answer his and his colleagues’ request to change the corporate group’s leadership. For a while he had assumed he would be selected as the sole survivor to run the operation. But something didn’t feel right. Normally he would have been consulted during the week about his opinion of possible changes. Well, maybe Sandy and John just want me to move to headquarters and work full-time as president, he mused.
Dimon didn’t have time to worry about it; he was hosting a brunch for about one hundred investment bankers and recruits, and the doorbell was starting to ring. As guests chatted in his living room and on the terrace, Dimon was summoned to take a phone call from Sandy.
“Can you come up to Armonk a little bit earlier?” Sandy asked.
“Around one or two?”
“I have people here,” Dimon answered. “I’ll come up early, but I can’t leave so soon.”
Sandy, Reed, and Prince were in Armonk by early afternoon. They had briefed the board about recent events justifying Dimon’s removal as president. As the director most knowledgeable about recent events, Zankel explained, “Greenbrier isn’t the deciding factor. It only serves to make the hot griddle hotter. You can’t sit around with this thing anymore.” With Reed and Weill in agreement, the board approved, even though many of the Travelers directors did so with a heavy heart. They had watched the young and talented Dimon blossom into a powerful leader they would have supported to lead Citigroup one day.
When Sandy and Reed placed a confidential call to Bob Lipp to inform him of the action they were about to take, he was aghast. “You guys are crazy,” he said. “Don’t do that.”
Next, Prince presented Sandy and Reed with two press releases he had prepared. One announced, in effect, Jamie Dimon Resigns as Citigroup President; the other, Jamie Dimon Is Fired as Citigroup President. If Dimon wouldn’t resign when asked, they were prepared to fire him.
Dimon arrived at the Armonk planning center after two o’clock that afternoon. He casually followed Sandy and Reed into one of the small meeting rooms, and they sat down in comfortable armchairs. On the drive up, Dimon had figured the co-CEOs would ask him to work more closely with them. He was excited to have the tri-heads out of the way, so the corporate group could get down to working out the merger. Even though he sensed that Sandy was fed up with him, Dimon believed he would be a vital force in Citigroup’s future.
“We’ve made our decisions, which we want to share with you,” Sandy began. “Deryck is going to leave the corporate group and become vice chairman of strategy and Japan. We’ve decided Victor Menezes and Mike Carpenter will be co-heads of the corporate bank.”
Dimon was puzzled. Great, let’s move out Maughan, but Carpenter? What a shocker, he thought. His tenure at Kidder Peabody had been criticized and he hasn’t been involved in the securities business since then. But Dimon’s mind stopped racing when he heard Sandy’s next words.
“And we want you to resign.”
Dimon froze. “Okay,” he gulped, in a complete state of shock. Never in a million years did he expect this. He expected heads to roll, but definitely not his.
“The board understands this is happening and believes it’s in the best interest of Citigroup,” Sandy continued.
“If that’s what you want,” Dimon said calmly, stoically, still in utter disbelief.
“Is that all you have to say?” Reed spoke up. “Boy, you’re sure taking this well.”
“What do you expect me to do?” Dimon asked, sensing that Reed anticipated he would come out swinging. “John, you’ve obviously thought this through, and there’s nothing I can do about it.”
“Would you like to see the press release?” Reed asked.
“Yes,” said Dimon. They’ve got this whole thing orchestrated, he realized, a fait accompli.
“Would you like to talk to the press with us in a conference call?” Reed continued.
“Yes, I would be happy to do that. But first I’ll want to tell my wife and family,” Dimon replied. “I’ll do the call from home.”
“Would you like to speak to the management committee when they arrive?” Reed queried. Dimon nodded.
“Do you want us to explain our decision?” Reed inquired.
“You don’t have to explain it,” said the newly unemployed forty-two-year-old, as Reed and Sandy walked out.
That was Prince’s cue to enter. He shut the door and sat down. “Well, here we are,” the general counsel said. For the first time since he had known Dimon for twelve years, the talkative Dimon was speechless. He looked as if he’d just been run over by a truck, completely blindsided. “Jamie, I’m sorry,” Prince offered.
“Chuck, I understand,” Dimon finally said. “It’s not your fault.”
Prince then reviewed with the former company president the press release about his resignation. “It’s absolutely fine,” Dimon said without requesting a single change.
Then Reed came back into the small room to wish Dimon “the best.” He added, “Don’t worry about severance. We’ll be generous.”
Dimon hadn’t even thought about money. He felt as if his own family had just thrown him out. It was his company, too, and he still wanted to build a great business.
By now, it was only three o’clock, so Dimon had to wait a long, painful hour until the management team arrived. Alone in the meeting room, he called his wife.
“Judy, I’m going to tell you something and please, please, don’t tell me I’m making a joke,” Dimon said. The agonized tone of his voice made it clear he wasn’t joking. “They asked me to resign, and I resigned.” Before she had a chance to respond, Dimon promised to be home in a couple of hours after meeting some senior executives.
Bob Lipp and Mike Carpenter, who knew what had just happened, came in to see Dimon privately. Lipp simply hugged his good friend and colleague. “Mike, whatever you need, I’m at your service,” Dimon told Carpenter. When Dimon left his meeting room, he crossed paths with Maughan, who was also leaving an adjoining room. Maughan had just been informed of his demotion—being kicked upstairs and taken out of operational authority. Dimon’s and Maughan’s failure to get along had cost both men their jobs, but Maughan was still with the company.
“Best of luck to you,” Dimon said.
“And to you,” Maughan replied.
As the twenty top corporate banking executives began arriving, they immediately knew something serious was about to happen. The public-relations managers were standing by, and the two most animated and funny executives among them—Dimon and Maughan—were eerily silent, almost beaten. The managers took their seats in the down-filled armchairs, anxious to find out what was happening. After several minutes of uncomfortable chatter, Reed announced, “Jamie is resigning.”
Before anyone could gasp, Dimon stood up. “Look, I’ve been with this company for fifteen years. I put my heart and soul into it. I want to tell you it’s a fabulous place. Keep on making yourself proud.”
Dimon caught his breath; every executive in the room was motionless. Then in his typical rapid-fire manner, Dimon continued: “I am sorry it didn’t work out. I know that I have some blame for it. If I can help anybody, that’s what I’m here to do. I still love this company. It has an incredibly fantastic future. You are all friends of mine, and I wish you the best.”
The executives, many of whom had been at Dimon’s house hours before, jumped up to give him a standing ovation. Dimon walked out; Sandy followed.
“You’ve been very gracious and very nice,” the onetime mentor said. “I still respect you and love you.”
Dimon tensed at the sudden show of affection. “Look, Sandy, I don’t know what to say.”
“I’m sorry it had to come to this,” Sandy said, moving to embrace Dimon.
Dimon recoiled. “No hugs, please.”
With Armonk an hour north of Manhattan, Dimon had time during the drive home to think about what to tell his three daughters: Julia, thirteen; Laura, eleven; and Kara, nine. They were young, but they were certain to hear about his firing. They attended a prestigious private girls’ school where many parents worked on Wall Street. Besides, starting tomorrow, they would see their father home and not working. Dimon arrived at his apartment around 5:30 P.M. The conference call with the press was scheduled for thirty minutes later.
With tears in her eyes, Judy met her husband at the door. She gave him a hug and a kiss, clearly stunned. “What did you do that was so bad?” she asked in bewilderment. Like Joan Weill, Judy Dimon—a smart, attractive woman—had worked tirelessly to get to know the families of Dimon’s colleagues, especially at Smith Barney.
“Judy, get the girls,” Dimon said, knowing he had to tell them before the press call came. They gathered at the kitchen table.
“Girls, I was the president of Citigroup and Travelers before that. I resigned today,” Dimon said, looking into their blue eyes like his. “What that means is that I’ve given up my positions and titles. I was asked to resign, but…” He hesitated, but he wanted them to hear it from him. “I was fired.”
“You were fired, Dad?” Julia blurted out.
“Yes,” Dimon said.
“Who did that? Who fired you?” the other two continued.
“Sandy and John,” their father said.
“But isn’t Sandy your partner, your friend?” another asked.
“Sometimes things go bad and you don’t see eye to eye. Some of your friends’ parents have gotten divorced. It doesn’t make either side bad.”
Dimon then turned to the conference call. Sandy, Reed, and Dimon spoke amiably of one another and of their optimism about Citigroup’s prospects. The co-CEOs explained that Dimon had trouble integrating the corporate businesses of Salomon Smith Barney and Citicorp, and that employees voiced concerns at a retreat at the Greenbrier Resort. No mention was made of any brawl. The chieftains decided it was time to institute a clearer chain of command, they explained, with a new hierarchy that would have given Dimon less authority than he wanted. That decision ultimately led to his departure, they told the press. Dimon confirmed that the decision was “mutual.”
A reporter on the call asked Sandy if his daughter Jessica’s departure was a factor. “Absolutely not,” Sandy said. “That happened a long time ago.”
After the press call ended, Sandy called the top executives who weren’t part of the corporate group meeting that afternoon, such as consumer banking head Willumstad and CFO Miller. As one of the few high-ranking women on Wall Street, Miller had gotten a lot of favorable attention, even being named Fortune’s number-two most important woman in business. She originally had joined Travelers as Dimon’s assistant.
“John let Jamie go,” Sandy told her.
Miller thought for a minute. She had seen Sandy distance himself from her close friend Dimon, but Sandy seemed to be pinning the decision on Reed.
“I understand,” Miller said matter-of-factly. “Then we will go forward.” She hung up and began frantically trying to reach Dimon. His line was busy past midnight, when she finally gave up.
The firing of Citigroup’s heir apparent stunned Wall Street Monday morning. Worried about the loss of a leading industry star and likely successor, important analysts rushed to downgrade Citigroup stock, as they raised questions about the viability of the financial-services mega-merger. The stock, which had already declined 36 percent from its high reached not long after the merger’s announcement in April, tumbled nearly 5 percent on the news of Dimon’s abrupt departure.
A heartsick Dimon went to his downtown office at Salomon Smith Barney to say his good-byes. After he bid farewell to the hundreds of employees on the huge trading floor, he turned to leave. First there was one clap, then another, then ten, then twenty until the floor erupted in applause. Dimon felt like he was in a movie. He blew a kiss and left.
As he walked out the front door under the metal umbrella sculpture, a tearful executive assistant, Jennifer Bush, hugged him. “I’m so sorry you’re leaving. It will never be the same without your leadership.” Dimon spread his arms toward the office tower. “Look what we’ve all built together. It still goes on, and I’m proud of that.”
That night, at a nearby Italian restaurant, about one hundred senior managers stopped by to join Jamie for drinks. After the rounds of toasting, Dimon groaned, “Guys, I feel like I’m laid out at my own wake.”
After the stock market’s pummeling, Citigroup management called an employee meeting that was broadcast throughout the company. Instead of a rousing pep rally that played down the loss of Dimon and played up Citigroup’s exciting future as the biggest financial empire in the world, the downbeat executives issued a sober call to arms to turn around the troubled company. Over the public-address system, Carpenter, their new boss, urged the corporate group to put “the tribes to one side,” a reference to the many different firms that Sandy had cobbled together in the past decade to create this huge new company. “The Shearson tribe, the EF Hutton tribe, the Citi tribe, the Salomon tribe, the Smith Barney tribe—I don’t belong to any one of those tribes,” he proclaimed. “I belong to the tribe of shareholders. I would hope we could all put aside these individual tribal issues and form a new tribe.”
When someone asked if Dimon’s ejection was similar to Sandy’s own ouster from American Express, the Citigroup co-CEO tried to make light of the comparison: “Jamie is going to end up getting a heck of a lot more calls than I did.”
Those colleagues closest to Dimon were in a quandary about whether to stay at the firm. Steve Black, a Salomon Smith Barney vice chairman, was particularly angry—not only at Dimon’s treatment, but also at the elevation of Carpenter and Menezes, who had much less experience in the securities industry than he did.
Sandy didn’t want to hear it. “I’ll be damned if you’re going to benefit from the changes,” he told Black, a handsome man with a moustache. “I blame you, too, for what happened.” Then Sandy gave him a choice: “You must get behind the new heads, or—”
But before Sandy could finish, Black interrupted. “You just blew Jamie’s brains out for all the wrong reasons—I can’t condone that.”
“Then it’s time for you to go,” Sandy said briskly. “I need everybody on the same team.”
“Fine, I’m out. I’m done,” Black responded angrily. After leaving Salomon Smith Barney, he accompanied his wife, Deborah, and three children on a safari in Zimbabwe and took race-car driving lessons in Italy. When he returned, he joined Citigroup’s rival, Chase Bank, as its head of global equities.
In the following weeks, Citigroup and Dimon worked out a severance package worth $30 million in cash and stock. A key point: The forty-two-year-old was barred from poaching ex-colleagues for three years.
Dimon, until then the prototypical Wall Street Mr. Big, didn’t have a clue what to do, except that he wanted to get back into fighting shape. He began taking boxing lessons. After missing family dinners for fifteen years, he insisted the family eat together every night. He also saw more of his parents, who no longer would have anything to do with their old friends Sandy and Joan.
For the first time in his life, Dimon had to decide what he wanted to be when he grew up. He took out the proverbial white pad and wrote: investor, teacher, author, stay-at-home dad. He decided his “craft” was financial services. Until the right opportunity came along, he set up an office in the Seagram Building, the same place to which Sandy had retreated with Dimon during his own corporate exile. Like the old days, Dimon occasionally lunched downstairs at the “company cafeteria,” the elegant Four Seasons.
Within days of moving into his new office, Dimon was noshing with an old friend when Sandy strode into the Four Seasons. Nearly everyone in the restaurant’s celebrity-filled Grill Room, many of whom had watched Dimon grow up at Sandy’s side, knew what had happened between the two men only a few weeks earlier. Dimon sat directly in his former boss’s path. Neither man made a move toward the other. Sandy, his gaze straight ahead, walked to his regular power table. Dimon, jaw clenched, looked down at his table as a chill settled over the room.