As a new century began, Citigroup was a highly successful but very miserable place. Jamie Dimon was only the most visible casualty of the merger. Hundreds of other smart, talented, and experienced executives had left in the past year. Nearly 80 percent of Citicorp’s most senior executives were gone, and 60 percent of the Travelers management had departed. The turnover was dramatically higher than normal attrition after a merger, and it signaled how difficult and costly in human terms the transaction had been.
The remaining executives were tired, troubled, and tempted to leave as well. The unusual and unhappy alliance between Sandy and Reed was hurting not only the two at the top but also those many layers beneath them. Even Sandy’s most loyal lieutenant, Bob Lipp, told him in January that he would leave later that year.
At the annual management conference in February, the mood was gloomy, even as business was booming along with the economy and stock market. Citigroup’s top sixteen executives flew to The Boulders, a luxury resort complete with lush golf courses and spas north of Scottsdale, Arizona. Wrapped around giant twelve-million-year-old boulders, the resort was touted as a “legendary hideaway in the high Sonoran Desert foothills” where guests would experience “the healing serenity of the desert.”
Wrong!
After the first day of the usual agenda of strategy and analysis of operations, the executives gathered on the second day to find the meeting would be devoted to “management issues.” Sandy, Reed, and now Rubin individually had heard for months all the griping through separate channels. This meeting was designed to get everything on the table in front of their leaders.
“Let’s go around the room,” Sandy began, reminding his older executives of their collegial Baltimore dinners.
At first, the executives were tentative, pointing out only the most obvious symptom: Decision making had slowed down. But then it came to Bob Willumstad, the ultimate straight shooter. He looked directly at his two co-CEOs. “Your inability to get along affects how we run the business. It’s no longer just a distraction. You two guys are actually hurting this organization.”
Rubin, who was taking his new role as mediator very seriously, seized the opportunity: “Give me an example.”
Willumstad described how Reed was pushing him to install thousands of ATM machines across the country at a staggering price of $40 million. Reed already had the machines sitting in a warehouse and had begun a costly experiment to install them in Blockbuster video rental stores. “And Sandy’s telling me he expects x-amount of earnings from the branches, to go back and figure out where I need to cut expenses.”
Jay Fishman agreed. “Just tell us which hill, and we’ll take it,” the Travelers CEO said. “But we can’t go up two different hills at the same time.”
Victor Menezes was next. A savvy corporate politician, he rarely took a stand, which made his comment all the more startling: “A compass can have only one north pole. We don’t know which way you’re pointing.”
A newcomer to the management group, Sir Winfried Bischoff, the head of Britain’s Schroders banking division, which Citigroup had just bought as part of its European expansion, found the meeting depressing and surprising. Sandy told him he didn’t have to contribute, since he had just joined the company.
“For god’s sake, I just want to say something,” Bischoff interjected.
“You are in fact shortchanging yourself. What you have achieved in the last eighteen months is absolutely staggering. Looking from the outside, you’re being far too despondent about your difficulties.” He looked around the room, with gloom looking back at him. “It’s natural to have culture clashes,” he added, “but don’t get yourselves down.”
Reed took copious notes; both he and Sandy were mostly quiet. After everyone had spoken, one executive told the co-CEOs: “We have been real plain with you, and you owe us an answer about how you intend to address this. It’s in your court.”
“Okay, we’ve heard you,” Sandy said. Reed added, “We are taking it on as our assignment to think about this—and respond.”
The meeting ended and the executives moved on to the day’s next agenda item: free time and the order to “have fun.” Right, Miller thought to herself as she entered the spa. We’ve just had a brutal meeting—now let’s relax. The outspoken CFO had been particularly muted that day. She had already made up her mind to leave Citigroup, though she had told no one of her decision.
Willumstad considered the emotional session a “watershed event” for the new company as he headed to the golf course. He was put in a group with Reed and Fishman.
“John, are you sure you want to play?” Willumstad asked Reed, who clearly looked beaten.
“I’m fine,” Reed said coldly, showing no emotion. “I just have to be back by five o’clock.”
The trio played terribly, especially Reed.
When the executives returned to New York, the Citi directors got an earful. Board members from both sides of the merger transaction traded phone calls with one another about the “mess.” There was a lot of debating, maneuvering, and thrashing around for a solution.
Arthur Zankel wanted to do his own investigation. He invited Menezes, originally from Citicorp, to lunch at the exclusive Sky Club high above Manhattan. Zankel had a delightful wit; if he was in a room and people were laughing, Zankel was certain to be in the middle of it. But he struck out with Menezes. After the meeting, Zankel phoned a fellow director and grumbled, “All I got was name, rank, and serial number. Zippo.”
Then, in the middle of February, Heidi Miller sprang her surprise. At forty-six years old, she had decided to take on a new challenge—and to flee Citigroup. A year earlier, she had been named the number-two most powerful woman in business after Carly Fiorina, CEO of Hewlett-Packard. But life at the top at Citi brought the mother of two more pain than pleasure. She knew she couldn’t go home many more nights feeling this miserable. It wasn’t fair to her family or to herself. She had developed high blood pressure from the constant stress. After being seated at a dinner next to the chairman of Priceline.com, the high-flying Internet retailer, Miller began discussions and quickly agreed to become its CFO and strategic-planning head.
Now she needed to tell Sandy, who was traveling. Miller, who was slated to travel to India and Africa as well, had his secretary connect them by phone.
“Look, Sandy, I’m leaving,” Miller said.
“Goddammit, is this because of John?” Sandy screamed into the phone.
“I’ll drive a stake through his heart!”
Miller was so shocked by his violent reaction that she wrote the words down on the paper in front of her but didn’t answer the question.
“I don’t want to leave abruptly,” Miller said. “I’ll stay for a transition if you want.”
Sandy didn’t answer her directly either. His mind was on John Reed. “Don’t tell John,” Sandy ordered.
“But I have to tell John. I report to both of you,” Miller said.
“Are you sure you don’t want to stay?” asked Sandy, who had no logical candidate to replace the talented CFO.
“I can reinvent myself” at Priceline, Miller told him, expressing eagerness to go to the startup retailer known for its name-your-own-price system of selling airline tickets and other services.
Sandy quickly changed gears. If Miller was leaving, maybe he could use her resignation to his advantage. “Would you mind taking a few phone calls this weekend? I’ll have a couple directors call you,” he said. “Be honest and open and tell them how you feel.” Then he added, “But don’t tell John about the calls.”
As Miller hung up, she knew Sandy wanted her to point the finger at Reed. The John-and-Sandy show had been a nightmare, she thought, but she was leaving as much because of Sandy as Reed, although Sandy would never know that. She headed to Reed’s office to give him the news.
“What a wonderful opportunity,” enthused Reed, who was equally enamored of the prospect of Internet business. “And I know this isn’t a particularly fun place to be right now.”
Miller attempted to obliquely warn Reed that her resignation might become a political issue. “Now, John, I just want you to know I’m not leaving because of you—no matter what people will be saying,” said Miller, who liked Reed quite a bit. “You might be surprised that people will use this—”
“No, Heidi,” Reed said. “It’s fabulous for you.”
Miller walked out with one thought: John Reed is like a lamb. It’s so obvious that he’s going to be sacrificed, and he doesn’t even realize it.
That weekend, Miller took calls from board members. Reuben Mark, chairman and CEO of Colgate-Palmolive Co., asked, “What’s your attitude about Sandy and John? How much is that contributing to your decision to leave?” Miller acknowledged the turmoil had affected her negatively.
“Under what situation could both of them stay?” continued Mark, who was originally a Citicorp director.
“Probably none,” Miller replied.
When she returned to the office on Monday, Bob Rubin took time out from one of his trips to phone her. He pointedly asked which co-CEO had given her the most trouble.
“Sandy’s really difficult to work for,” Miller said, thinking back to all the times he undercut her authority.
“Who has more skills to manage this place?” Rubin queried.
“That’s not clear to me,” Miller replied. “Each of them has failings. Bottom line: This is a dysfunctional company.”
Rubin was about to end the call when Miller, always opinionated, tossed out another idea. “You have an obligation as a board member with insight to do what’s right. You should temporarily assume the helm and put a management team in place. Now is the time to do it.”
Rubin hung up. He was surprised at Miller’s strident tone and directness about the problems at Citi. Worried that she would go to the press, he called Chuck Prince, the general counsel.
“That’s not Heidi,” Prince said, but he immediately went to her to make certain.
“I was honest with Rubin, but I’m not going to talk to the press,” Miller assured him, sensing that the former Treasury secretary was concerned with his and Citi’s public image.
On February 23, 2000, Miller shocked Wall Street with her announcement that she would leave her high-profile post at the world’s largest financial institution for an Internet gamble that hadn’t turned a profit. Priceline’s stock jumped 9 percent on the news. All the coverage posed the same question: Is it impossible to work for both Sandy Weill and John Reed?
Bob Rubin began his own internal poll of the executive ranks. He dropped in on several, including Bob Willumstad, a strong leader of the consumer bank, and asked, “For this time in the company, if you had to pick one CEO, whom does this company need more?”
That week, Sandy asked Marge Magner to lunch for only the second time in their fourteen-year association, just as he had sought out the only other high-ranking woman, Heidi Miller, a few years earlier when the company experienced inner turmoil. At the Four Seasons, Sandy offered no chitchat but wanted Magner’s opinion of what was becoming a management crisis.
“I’ve always been straight with you,” Magner said. “It’s difficult, but I can only speak for myself.” She told him working in upper management at Citi felt like “having two parents who completely disagree about how to raise the children.”
Sandy returned to the office. He asked Reed: “Is it time we consider a single CEO?”
Reed agreed. Each man knew the impact of that decision: One or both of them might not survive. Yet each CEO seemed confident that the board would pick him as the sole leader.
They called an emergency board meeting. Chuck Prince, as the corporate secretary, told each director, “We have to have a board meeting about management issues this Sunday in our office at Citicorp Center. Please keep it as quiet as possible.”
Andrall Pearson was in China on business for Tricon, opening Pizza Hut and Kentucky Fried Chicken restaurants overseas. He refused to return to New York. Prince told Sandy, who called Pearson.
“I’m halfway around the world. I’m CEO of this company, and I can’t just cancel these meetings,” explained Pearson.
“The Citicorp guys insist you be there,” Sandy explained, knowing that many of them felt Pearson was the most objective Travelers director. “I want you there, too.”
“Well, we have a dilemma,” Pearson said.
“How about we charter a plane to fly you to our office in Singapore and put you on videophone?” Sandy suggested. “Then fly you back to your meetings.”
“Okay,” Pearson replied.
On Sunday, February 27, 2000, Citigroup directors gathered in the large boardroom around the contemporary light wood oval table. Orchids decorated the side tables. The largest art prominently hung on one wall was an ornately detailed ink drawing of a sturdy, overarching tree with scores of branches and limbs. The trunk was labeled “Citigroup” and the branches bore the names of the dozens of companies Citicorp and Travelers had brought together to build this mighty company. One of the sturdiest branches was the National City Bank; one of the smallest limbs was labeled “Carter, Berlind & Weill,” Sandy’s very first company begun in 1960. The art, commissioned shortly after Sandy and Reed had created Citigroup, represented their new “family tree.” After this day, one of the family patriarchs would be gone.
At ten o’clock in the morning, the emergency meeting of the Citigroup board was about to begin. As they took their seats, sixty-eight-year-old Arthur Zankel, Sandy’s friend since the 1960s, overheard a comment that gave him the distinct impression that the original Citicorp executives had already met to map out a plan. Hell, he thought, we haven’t coordinated anything among the original Travelers gang.
Zankel started to complain—this is a “put-up job”—and then it hit him: Sandy’s supporters have one less vote! Even though the original configuration had an even number of Citi and Travelers directors, one of Sandy’s directors, Judith Arron of Carnegie Hall, had died of cancer several months earlier. Sandy had never replaced her.
The Citigroup co-CEOs sat together, seeming almost collegial. The outside directors and Rubin, as the third inside director besides Sandy and Reed, sat down just as Pearson’s face appeared on the video screen from Singapore. Chuck Prince sat on the side as corporate secretary.
The co-CEOs were cordial and diplomatic. “This isn’t working,” Sandy said succinctly. “We need the board to decide what happens from here.”
“For Sandy and me to cohabitate any longer would be a mistake,” Reed agreed. “Our views as to what the company should do and how to run it are so divergent that it’s impossible for people in the company.” As usual, Reed’s presentation was much lengthier than Sandy’s. Ironically, the co-CEOs were now asking their board to do for them what Dimon, Maughan, and Menezes had requested the pair do for them more than a year before.
“Our people are scared; if they go to Sandy, I might get mad, or if they go to me, Sandy would get mad,” Reed continued.
The directors did not hide their anger and disgust.
“You put together the biggest financial company in the world. You got longtime banking laws knocked down,” one director snapped. “But you can’t get along? You can’t solve this yourselves?”
After sufficiently scolding the two most important financial CEOs in the world, the board sent them out of the room, along with Rubin and Prince. Then the directors called them back individually.
Reed, the architect of the modern consumer bank, was summoned to the boardroom first.
“The events in this business have reached a point where the two of us ought to leave together,” Reed proposed. “The board should take on the responsibility of going outside and picking a new chief executive.”
Reed’s solution to the management crisis wasn’t entirely unexpected. Early in the negotiations that formed Citigroup, he had understood that he and Sandy would retire together. He added that he had long told “my board” that he wanted to retire at sixty years old. He had just turned sixty-one earlier that month.
A board member wanted to know if there were not some executive in the huge and profitable company who could take over.
Reed said there was no one. “If I knew then what I know now, I wouldn’t have aided and abetted Sandy in getting rid of Jamie. He would be the logical successor,” Reed said. “If I had known Jamie better at the time all this happened, I think I could have saved him.”
The directors looked at one another. Nearly all of them had liked and admired Dimon but followed the will of the co-CEOs. Now one of them was saying it was a mistake. But Pearson, watching silently on the videophone, didn’t think Reed should be so quick to wash his hands of Dimon’s dismissal. It doesn’t take long with Dimon to realize how talented he is, Pearson thought to himself.
Reed, however, proposed that a completely new CEO might be better anyway. “I feel strongly we should bring in a successor from the outside who would be neither of Citi or Travelers—who could put the company together without any historic record or loyalty,” he said. He tossed out the names of Philip Purcell, the chief executive officer, and John Mack, the chief operating officer, both of Morgan Stanley Dean Witter & Co., as possible candidates. He suggested the board form a special committee to get a successor in place and operating within a year.
Then Reed took his shots at Sandy, albeit in the course of explaining what an ideal chief executive would possess.
“I believe the objective of a manager is evolutionary success—not maximizing shareholder value or pricing your stock or profits or market share,” Reed said. “Do you plant the seeds for the future of the company, or do you just exploit your current opportunity and you’re exhausted at the finish line?”
Finally, Reed left the board with a thought about his and Sandy’s original agreement to merge. “We agreed, after a period of time, we would leave for the good of the combined company. The time has come.”
The very point that had become an issue on the night before the deal was announced—whether the two co-CEOs would walk off into the sunset together—was still firmly in Reed’s mind. And he hoped the board would also remember how Sandy led them to believe he would leave with his co-chief.
Then Sandy was ushered in to the boardroom. His proposal was straightforward: make him the sole chief executive.
“What I think needs to be done is for one person to take over,” Sandy said. “I think it might well be me.”
Sandy was being diplomatic. Every director in the room knew Sandy desperately wanted the job. As one director had joked, “He needs to run Citigroup like you and I need to breathe.” Still, Sandy laid out his case for a single leader cogently and concisely. Even though he had been criticized in the past for his limited vocabulary, on this day his direct and statesman like approach helped his cause.
“There’s still too much to do,” Sandy concluded. “I’m ready to do it; I’m not ready to retire.” There was his counterpunch at Reed.
The directors then wanted to speak with Rubin, who had been asked to leave because he was an “inside” director. Every board member respected the former Treasury secretary, even though he had made no effort whatsoever to be more than an advisor at Citigroup. Naturally, the directors asked if he would take the top job.
“I will not be CEO,” Rubin said definitively.
“What would you do in our shoes?” one director followed up.
“If they could work it out, that’s the best solution,” said Rubin. “They complement each other with such different skill sets.” He noted that he and Stephen Friedman successfully split the highest job at Goldman Sachs between 1990 and 1992.
“The worst solution is for both of them to leave,” Rubin said, calling that scenario “nonsensical.”
The directors then posed to Rubin the same question he had been asking Citi executives in recent weeks: If he had to choose one man, who would it be?
“The most sensible solution is Sandy,” Rubin answered. “The group that reports to Sandy is the best management team I’ve seen in my business career.” That impressed several directors, because Rubin had seen some very able and experienced managers in his years on Wall Street.
Then Rubin was gone, and the directors were left to make their decision: Sandy, Reed, or someone entirely new. Without their cochairmen, they chose Franklin Thomas to lead the discussion. A lawyer and star Ivy League basketball player, the sixty-six-year-old was the retired president of the Ford Foundation, the first black to head a major philanthropic institution. As the directors began their deliberations, Sandy, Reed, Rubin, and Prince settled in for what they expected would be a few hours of waiting. In the four oversized armchairs outside the boardroom, the men began reading the Sunday newspapers. When noon passed, club sandwiches were brought in. Every so often a director would walk past the foursome in the waiting area and simply nod on the way to the bathroom.
Inside the boardroom, the directors took turns expressing their reactions to the unwelcome ultimatum given them by their co-CEOs. The opinions quickly divided between the original Citicorp directors and the original Travelers directors. It became clear that each side was sticking with his favored CEO’s proposal. If a vote were taken, Reed would win: eight to seven.
Zankel, fully aware of the likely outcome of a vote, urged that Rubin be asked to rejoin the deliberations. At least the vote would be tied, Zankel thought.
But Edgar Woolard, the ex–chairman and CEO of DuPont, steadfastly refused. Woolard was no stranger to boardroom hot seats—he had been on the IBM board when it replaced John Akers with Louis Gerstner.
“Rubin is a director,” Zankel fought back. “He should have a vote.” Woolard disagreed, because Rubin, as a company employee, was an “inside” director.
At this juncture, it became obvious to Pearson, sitting in front of a television camera in Singapore, that the Citi directors were prepared to support Reed’s proposal that the co-CEOs leave together. He leaned into his microphone and got the board’s attention.
“If we take a vote, it looks pretty clear, it’s going to be eight to seven for both to leave. I think that will be a disaster for the company,” the Tricon chairman said. “Two years ago, either man would have made anybody’s all-star list. To get rid of the two of them and hope for somebody better is crazy.”
Even the Citicorp directors listened carefully to Pearson, whom they regarded as shrewd and elite—much like themselves.
“So here’s what I think,” Pearson began. “Number one, we can’t go on the way we are. Number two, we need to pick one of these two guys. And number three, I think it ought to be Sandy.”
Then Pearson fired off three reasons for making Sandy the sole CEO. “He wants the job, all but one of the executives reporting to him is a Sandy person, and he brings more to the party in terms of leadership skills.”
But a Citicorp director quickly disagreed about handing over the reins to Sandy. “If we leave Sandy as the sole CEO, it would look like Travelers bought Citicorp. Then people would say Sandy ended up with the business.”
“Who gives a damn?” Zankel blurted out.
“The reputations of both John and Sandy will be preserved if they both leave together,” another Reed loyalist added. “The more gracious solution is for them to retire at the same time.”
“That’s outrageous!” Zankel sputtered. “You’re putting the interests of these two men before the interests of the shareholders. Throwing out both guys is not in the interest of millions of shareholders.” At this point, Zankel, one of Sandy’s closest friends, knew he was fighting for Sandy’s corporate life, but that wasn’t what really mattered. He was really fighting for the shareholders, the people for whom Sandy had spent his own life fighting.
“It’s risky enough to have an incomplete merger, but bringing in a new man is a risk that doesn’t need to be taken,” Zankel continued. “We have a competent leader before us. He has a real record.”
The hours dragged by as the debate continued behind closed doors. Sandy, Reed, Rubin, and Prince were getting antsy. They located two television sets in the vicinity. In one conference room, Sandy and Reed tuned in a big-screen TV to watch Tiger Woods battling for the lead of the Accenture Match Play Championship in Carlsbad, California. Rubin, who disdained golf, found a small TV in an office and turned on the New York Knicks basketball game at Madison Square Garden.
“Did you see that last shot?” Sandy asked his co-CEO.
“Unbelievable,” Reed answered.
Prince, returning from a visit to his own office, saw the two men, clearly in the final moments of the most momentous battle of their immensely successful careers, calmly discussing a golf game as if they were the best of friends. This is the most astonishing thing I’ve ever seen, Prince thought to himself.
During a commercial, the co-CEOs wandered over to the office where Rubin was watching the Knicks at a critical moment in the game. “Can you believe Patrick Ewing missed that layup?” Reed marveled to Sandy.
The co-executives might have been the model of calm, but behind the closed doors of the boardroom, tensions were growing hotter. Neither side was budging. Finally, as the meeting had stretched past seven hours, Franklin Thomas, who, like Sandy, grew up in Brooklyn, made a powerful point.
“We can’t have an eight-to-seven decision,” Thomas said. “That is impractical going forward. There would be a non-board.”
Yet Sandy and Reed had drawn a line in the sand about working as co-CEOs. Obviously, one of them had to go.
“But John wants to retire,” one Travelers director noted.
“But he’ll stay if he has to,” a Reed supporter countered.
“That’s a hard case to make for John to be the sole CEO,” Zankel argued. “He’s already given it up. The split duties, the management is all Sandy…”
A compromise was offered: Reed would become chairman, and Sandy would be named chief executive officer. No one liked it, but it passed unanimously.
Frank Thomas left the boardroom to tell Reed and Sandy. “We’re electing Sandy CEO and John chairman, a non-executive chairman.”
Both men were stunned. Each one had felt confident he would prevail.
“No,” Reed said. “I won’t do that.”
Sandy said nothing.
Thomas returned to a boardroom filled with angry, tired directors. “John said no,” he told them amid a chorus of groans. That left the board with Sandy as the only choice. But the Citicorp directors still worried about saving face for Reed and resolving his demand that a successor be found.
“We have to find some compromise that satisfies people who want to be sure Sandy doesn’t stay until he’s ninety years old,” Pearson offered over the video connection. “At the same time, we need to give Sandy a chance to function effectively until the company is welded together.”
Pearson’s solution: fudge the succession issue. Sandy would be named chairman and CEO, Reed would retire as per his wishes, and a “plan of succession is formulated within two years.”
A motion for that scenario was quickly made and ratified unanimously.
The directors asked Pearson and Thomas to head a new board “succession committee” to put pressure on Sandy to groom a successor.
Eight rancorous hours after they began, Frank Thomas emerged and found Reed, Sandy, and Prince in one of the offices near the boardroom. The director looked at Reed, who was propped on one hip on the desk. “We decided we’re going to go with Sandy.”
Sandy and Prince left the room immediately. Thomas closed the door and stayed in the room with Reed for five minutes. The new Citigroup CEO and his general counsel saw the open door of the boardroom and walked in. No one congratulated Sandy. The directors shuffled papers, stood up, and put on their jackets, all the while saying nothing.
Thomas returned to the boardroom and brought up the need to issue a press release. Suddenly Reed stuck his head in the door.
“I’m leaving now,” he said, waiting a beat. When no one moved, he turned to leave. Two Citicorp directors—Woolard and ex–CIA director Deutch—grabbed their papers and rushed after him but failed to catch Reed before he got on the elevator.
Reed rode the elevator down to the subway station under the Citicorp Tower. He boarded a subway car and rode underground alone for hours.
Upstairs, Sandy was physically and emotionally drained. His tie was askew, his shirt was drenched in sweat. No one noticed. The directors practically vanished; they wanted to leave as soon as the deed was done.
On Monday, February 28, 2000, Citigroup announced that John Reed would retire at the April annual meeting, ending his thirty-five-year career with the bank. The press release stated that Sandy would become the chairman and CEO and had “advised the board of directors that, in light of his own plans for retirement, intends to work with a committee of the board on a plan of succession with the objective of coming up with a successor within two years.”
The implications of the press release were clear: In a boardroom showdown Sandy Weill had emerged victorious over John Reed. Savvy insiders and analysts also found a lot of wiggle room in Sandy’s commitment on succession—sure, he had to come up with a plan, but he didn’t have to execute it. Citigroup stock rose 3 percent. Morgan Stanley upgraded Citigroup to a “strong buy” with Sandy in charge.
On a telephone news conference that afternoon, Reed said they talked about “various configurations, but it was pretty clear that I was the person who most wanted to retire.”
Sandy joked that with Reed’s 4.7 million shares of Citi stock, “John is going to be one of the biggest shareholders. We want to keep him happy so he doesn’t complain.”
He didn’t have to worry. Reed immediately began selling his Citigroup shares and laid plans with his second wife to buy a house on an island off the coast of France.
The next month, Sandy created a new Internet operating group, putting control of the technology unit under business groups. He slashed Reed’s beloved e-Citi from 1,600 to 150 people. By dismantling Reed’s organization, he obliterated his former partner’s fanciful dream. The new CEO put Bob Druskin, a savvy operations executive from his Shearson days who knew little about the Internet, in charge of the new group. “I will approach technology as a business issue,” Druskin told the group. “It’s a bad thing to have technology because you’re in love with it.”
On March 16, 2000, Sandy turned sixty-seven. In an annual ritual carried out by Prince, a “surprise” birthday party was held in his honor. As usual, Sandy pretended to be surprised. “Oh my god, a party!” he exclaimed. Prince dressed Sandy as Moses who delivered his people to the “promised land.”
A week later, Chicago-based Bank One, the nation’s fifth-largest bank, named Jamie Dimon as its new chairman and CEO. Bank One’s stock surged 12 percent. Taking a page from Sandy’s playbook, Dimon spent $58 million of his own money to buy two million Bank One shares. He moved his wife and three daughters to the Windy City, and the native New Yorker bought his first car. The youthful-looking Dimon wasted no time in shaking up the institution. He replaced managers throughout the ranks, demanded bottom-line accountability, slashed expenses, and wrote off bad loans by the billions of dollars. Asked who would be his model in turning around Bank One, he instantly answered: Sandy Weill.
In April, Citigroup held a retirement party to honor Reed, the banking wunderkind who had become Citicorp’s chief executive in 1984 when he was just forty-five years old. Sandy was out of town.
The Citigroup annual shareholders meeting was held the following week, where Sandy presided alone over the session at Carnegie Hall. A microphone descended from the decorative ceiling, ready for Sandy’s solo performance, one that he had been practicing for his whole life. After a lifetime of doing bigger and bigger deals, he alone was now running the world’s largest financial conglomerate, a company that was earning more each quarter than any other company. Sandy had envisioned and created the world’s first global financial firm of the twenty-first century.
Alone on the stage, Sandy praised Reed as “a great partner to me and a very good friend.” He noted that Reed was out of the country, to which a shareholder in the audience yelled out, “He didn’t know if he could get a seat.”
After the annual meeting, Arthur Zankel put his arm around his old friend. He knew how important this day was to Sandy, who had barely survived the boardroom showdown. “You told me on the beach forty years ago that you wanted to build a great company,” Zankel said. “Now you have.”
But the showdown had been bloody. Citibankers left in droves, including vice chairman Paul Collins and technology head Edward Horowitz.
That spring, about 170 of the remaining top Citigroup executives met in a hotel in Bal Harbour near Miami. At a breakfast meeting to get feedback on their feelings about the company, the message was clear: Travelers managers dominated most of the important jobs, and it was clear that now things would be one way—Sandy’s way. And that way meant an executive corps with unquestioned loyalty to Sandy, streamlined operations with lower costs, and a constant push to get better results—now, not later.
John Reed quickly became a nonentity. He was given an office in Citicorp Center, but Sandy moved the headquarters to the next block to be located on the more prestigious Park Avenue. Reed took away a $30-million retirement package plus $5 million a year for life, and lectured occasionally at the Massachusetts Institute of Technology, his alma mater, and at Princeton University, where he had a home. Clearly, he felt betrayed that Sandy had refused to honor what Reed thought was a commitment to retire together. Not long after his ouster, Reed was presented with the Lifetime Achievement Award by the American Banker newspaper. When asked about his crowning glory, Citigroup, the normally reserved Reed offered his take on the negotiations that had led to the merger and its aftermath.
“You should avoid lying during the courtship, if you can,” Reed said, “because the trouble is, you have to then live through the breakdown of the lies.”