Awards for excellence - Best at cash management
STANDING ON THE stage at Carnegie Hall, Sandy Weill has heard just about enough. From the floor at Citigroup's shareholder meeting, the tall, elderly man has been complaining in a loud, German accent that it was the shareholders who paid all Citigroup's huge financial penalties in 2004; top executives just went on paying themselves handsome bonuses.
Weill, who took home a mere $10 million last year compared with the $30 million he pocketed in 2003, eases back slightly on his heels, compressing his lips and pushing his jaw forward. "In 17 years, from 1986 to 2003, our stock price grew better than an average 20% a year compounded," he lectures. He keeps his temper in check but his previously jovial tone has given way to something harsher. His face set, Weill sums up in brook-no-argument manner: "So I think management did a pretty good job for shareholders through many markets."
If this is meant to crush the questioner, to put him in his place like a junior employee who has displeased the big boss, it fails utterly. Without missing a beat, the speaker spits back: "The stock's gone nowhere. It's where it was five years ago."
On this fine morning in April 2005 does Weill think back to his last shareholder meeting as head of Travelers in spring 1998, just before the career-defining merger with John Reed's Citibank? Back then, gushing stockholders, fawning employees, a small Sandy-fan army, lined up at the microphones in the aisles of Carnegie Hall to thank their hero for enriching them through his spectacular deal making. On stage to his left, seated side-on and facing Weill, his board of directors – among them former US president Gerald Ford – offered up its own mute devotion.
Those were the good times; how very different things are today. The firm's senior executives – among them the quiet former US Treasury secretary Robert Rubin – and its non-executive directors sit together on the front row, close enough to their leaders to offer moral support but safely out of the limelight. Throughout the meeting, as individual stockholders rake over the firm's regulatory problems, representatives of small institutions propose doomed resolutions curbing executive pay and the cranks that dog US shareholder meetings seize the microphone to air absurdities, Weill often glances down to the front row as if for reassurance, or to share with his peers a rueful half smile at this nonsense that has to be endured once a year.
At least he manages not to roll his eyes.
New star with a new plan
There is another big change. Weill is now the warm-up act for the new star, Charles (Chuck) Prince, CEO of Citigroup since 2003. That Prince would become so eminent had not been widely forecast at the outset. He had been Weill's long-serving consigliere – chief counsel at Commercial Credit, Weill's building block for Travelers, since the early 1980s, rising to chief administrative officer of Citigroup in 2000. It was only in 2002 that he took his first front-line role, as head of the scandal-hit corporate and investment bank. So when he was first appointed CEO, speculation pinned him as a mere front man for Sandy, who would occupy the CEO's office but follow his mentor's instructions obediently.
This appears to be a mistaken assessment.
Prince walks, talks and acts like a real CEO. A big bear of a man, he has the gift of speaking softly but with sufficient edge to convey true authority. He performs well on the big stage and hits most of the right notes. He comes across as calm and thoughtful but capable of dismissing an unwelcome suggestion or question with little more than a raised eyebrow. As the three-hour shareholder meeting drifts towards its conclusion, one frequent speaker suggests the Citigroup family should get together to air their grievances more often – say after each quarter's results. Prince pauses just long enough. "Well, we'll think about that," he deadpans. The audience laps it up. They know he has not the slightest intention of submitting to this, but his tone lets them all in on the joke. He dismisses the idea without even demeaning the questioner.
More important than his stage presence, Prince has a plan. The public version lays out four goals: to make Citigroup the world's most respected financial institution, to grow the consumer business, to grow the international business, and to make the corporate and investment bank the best in its class.
The first of these is the most important and is Prince's response to the unearthing of a string of misdeeds at Citigroup in recent years that have cost shareholders dear in financial penalties and opportunities missed while the firm's leaders were distracted.
Bob Druskin, CEO of Citigroup's corporate and investment bank, lays out some of these missed opportunities during a presentation at the end of May 2005. He says that by the end of 2003 the firm had come to depend on fewer corporate clients than it had at the time of the Travelers/Citibank merger in 1998. The firm had concentrated on increasing its share of wallet among the largest, most international companies, but failed to build its client roster among the next tier of large public companies. He admits Citigroup has been slow to respond to the emergence of hedge funds, to grow in prime brokerage and commodities and to achieve sufficient size in commercial real estate finance. "We have a lot of catching up to do," he says.
Druskin's admission carries a challenge to Citigroup's shareholders and, by extension, to his own CEO, who must strive to satisfy those shareholders. Investors are annoyed by Citigroup's negative operating leverage. Put simply, expenses have been growing faster than earnings. Shareholders, of course, want it the other way around. Prince has promised positive operating leverage for the full year 2005, having taken the windfall of releases from unneeded loan-loss reserves last year and invested them in hundreds of new branch openings around the world, in marketing and other initiatives. The payoff can't come soon enough.