Sandy Weill's Monster

It's called Citigroup, and it's really big and complicated. Even its deal-addicted boss hasn't quite figured out how to manage it.

You can make a case that running Citigroup, with all its size and complexity and merger barnacles, is the most difficult business-management job in the world. In fact, it used to take two men to do it ...

No, kill that thought. In those days--the era of Travelers' Sanford Weill and Citicorp's John Reed as co-CEOs--decision-making was hamstrung and the whole task of managing impeded. If the tales are to be believed, it's a wonder that anything got done.

Then, in early 2000, Reed exited after a messy power struggle, and the responsibilities settled on Weill. The victor is feeling some of the weight keenly these days, such as how to deal with today's economic downturn and how to get Citi into the right e-business spots without ruining its bottom line. And Weill has another problem that's both huge and deeply embedded: how, exactly, to run this globe-girdling, product-packed, merger-made monster, with its 240,000 employees and striking propensity for landing in hot water. Think of money-laundering, for example, as the type of crisis news that is forever putting Citi on page one. Or, for another issue, "predatory lending," which is the charge the Federal Trade Commission has levied at First Associates Capital, the small-loan company Citi just bought.

Still, if you're Sandy Weill, and you've only recently stopped struggling with a really big problem--the psychology of sharing power--these burdens seem bearable. Just over a year ago, with Reed still a force, Weill remembers himself as "not a happy camper." Today he's got the look of someone thoroughly relishing his job. The picture, by the way, presents a paradox: "There are some guys who look like a CEO," said an acquaintance of Weill's recently, "but do a terrible job. Sandy doesn't look like a CEO. He's short and fat"--a description that may cause Weill to double his time with his personal trainer--"but you sure can't quarrel with what he's accomplished."

We certainly can't. There's a powerful display of his accomplishments in this year's FORTUNE 500. From its $112 billion in 2000 revenues--that ranks Citi sixth on the list--the company pulled in a huge $13.5 billion in profits, second only to Exxon Mobil's $17.7 billion. In the list's ten-year performance rankings (in which Weill's onetime business buggy, Primerica, is the base-year company) Weill is a star: His shareholders earned an average annual total return of 40.8%, a stunning result that only 15 other companies in the list--all of them smaller--beat.

Beyond money, Weill and company have gained respect, which this big-ego boss craves almost as much as he does a good price for his stock. Wall Street competitors acknowledge today that the combination of Salomon Smith Barney's investment bankers and Citi's commercial bankers is actually working. FORTUNE's ranking of the Most Admired U.S. companies establishes Citigroup as a winner among its peers as well. In our last poll (of executives, directors, and securities analysts), it outshone all other commercial banks. What's more, among the 600 companies judged, it ranked first for using its assets wisely and for long-term investment value.

With these triumphs behind him, shouldn't Weill, just turned 68, go home and rest on his laurels? Sure, and right behind him, Senator Strom Thurmond. Weill has zero interest in retirement, and no visible interest in designating an heir apparent. When Reed bit the dust, the company issued a fuzzily phrased statement about the board's forming a committee to work with Weill on coming up with a succession plan within two years. Reportedly, the committee was to be headed by board members Frank Thomas, ex-president of the Ford Foundation, and Andrall Pearson, chairman of Tricon Global. That was just over a year ago. To date, no committee has been formed, and neither Thomas nor Pearson would comment as to why not. Weill himself, fencing with us in February about the subject, said he thinks the formation of the committee "is moving at the speed it should," which appears to mean about one inch a year.

Trying to advance the topic a yard, FORTUNE recently asked a dozen experts on Citi--insiders, ex-insiders, and Wall Street analysts--this question: "Assume you're a Citi director and that tonight Sandy Weill gets hit by a truck. When the board meets tomorrow, who gets your vote to be CEO?" The answers included a few of Weill's direct reports, though no one got mentioned more than once. Neither John Reed nor the heir apparent who got fired, Jamie Dimon, was nominated. Well over half the respondents said they'd buy time by naming one of two 62-year-old Citi directors to be interim CEO: either former Secretary of the Treasury Robert Rubin, who serves with Weill in Citi's office of the chairman (and who has repeatedly said he doesn't want to be CEO), or Robert Lipp, who formerly ran Citi's consumer business and served as well in the office of the chairman. Rubin and Lipp themselves reacted to the question identically: The board, they said, must work at "keeping Sandy away from trucks."

That answer's funny, but the fact that the board lacks a fail-safe succession plan is no joke. Citigroup is not only a mammoth company whose leadership is important, but it also happens to own some very large custodians of the public's funds, most particularly Citibank. Bank examiners like to see that there's a succession plan in place when public funds--in Citibank's case, $270 billion in deposits--are at stake. So why, you wonder, isn't some attention being paid to the top of Citigroup?

If it weren't for the truck problem, and the senior-citizen angle as well, no board could be faulted for just putting all its bets on Weill. As he sits in his Park Avenue office lolling on a couch, his eyes flicking reflexively toward a screen displaying stock prices, he doesn't look like a heroic empire builder. But this Brooklyn-born fellow has for sure put together an extraordinary record. In his remote past Weill assembled the brokerage firm Shearson, and then sold it to American Express. In his more immediate past he took over an insignificant company, Commercial Credit, and, within 12 years, parlayed it into Citigroup. That was done by acquisitions, one after another: Primerica, Shearson (recaptured!), Travelers, part of Aetna, Salomon, and finally Citicorp, in 1998. Along the way, Weill has had a declared goal of doubling earnings every five years--which is an annual rate of almost 15%--and he has kept on making it, time after time. Only now, with Citi's earnings so big, is he lowering his ambitions to simply a "double-digit" rate.

Through it all, Weill has been a focused, risk-averse manager who has made sure he got compensated extremely well and who has paid undying attention to bottom-line performance and the price of his stock (recently battered down from well over $50 a share to $45). He likes to manage by walking around and chatting, not by huddling over detailed reports in his office. He believes deeply in letting his managers run their own show, yet he's insistent about making sure there are people keeping him in touch with what's going on. Surprises make him fume. In calmer moments he speaks blandly, overemploying the 500 most-used words in the English language and giving little impression of the skill he's demonstrated. But he's got a sense of what works. A man who serves with Weill on AT&T's board says in that role Weill is a particularly shrewd judge of issues, coming across as a "savvy businessman." That's the gist of a longtime friend's assessment also: "Sandy's not a rocket scientist. But if you put 100 people in a room and give them a problem, Sandy will have the most practical solution, and he'll have it fast."

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