Like many employees, Andrew Weill employs
The bank collector
Sandy Weill can be so humble. A few weeks ago, the 73-year-old informed Citigroup's supervisory board by letter that he was foregoing part of his pension. As agreed, the group does not have to provide him with a company jet at any time until his death. He only needs it for the next ten years. Just like his company limousine, the driver, the office and the secretary.
So is Sandford I. Weill. The legendary manager from the New York borough of Brooklyn has achieved a lot in his life - and he wants recognition for that. In six years as CEO, he shaped Citigroup into the largest financial group in the world and thus reshaped the banking and insurance industry worldwide. Weill, who is currently still at the head of the Board of Directors, will retire on April 18. He hands over the scepter to 56-year-old Charles Prince, who is already CEO and, with his mandate as Chairman of the Board of Directors, takes full control.
The end of the Weill era means much more than just a personnel change in a company with almost 300,000 employees: it heralds a change in time. "Prince steps out of the shadow of his predecessor and pursues his own strategy - and thus shows that he is more than just Weill's apparatchik," writes "Business Week". The new boss rigorously cuts off old braids. He has already reorganized the management level, put familiar Weills on the doorstep and most recently even sold the life insurance business of the Travelers Group division - the part of the group through which Sandy Weill joined Citigroup.
Does Prince willfully destroy Weill's life's work? No, say the industry experts. He saves it. "Prince had no choice but to turn the company inside out. The old way obviously no longer worked," says Standard & Poor's bank analyst Tanya Azarchs.
At the time of Weill's reign, Citigroup was the symbol of the dynamic growth group. When he became CEO in 1998 through the merger of Travelers Group and Citicorp, the newly created Citigroup was still relatively insignificant in a global comparison. But Weill had an ambitious goal. Citigroup should be "everything for everyone": house bank and insurance for private customers, financier and takeover advice for business customers.
The manager, who is called "the dealmaker" in banking circles, led the company like an obsessed collector - and with more and more new acquisitions formed a colossus with a market capitalization of around 240 billion dollars and an annual turnover of around 120 billion dollars - four times as much as Deutsche Bank.
But what Weill left behind the group through its aggressive growth strategy was a giant with big problems. Because he demanded profit growth of at least 15 percent per year from all business areas - and that promoted a mentality in which some brokers, stock analysts or investment bankers did not always take the truth very seriously.
In Germany, investment bankers are said to have polished their résumés in the past few years in order to impress potential customers. In Great Britain, the financial regulator humbled the group after controversial securities transactions on a million dollar fine. In Japan, Citigroup even lost its license for its private banking business in 2004 because the authorities discovered money laundering and price manipulation.
As a result of the series of scandals in March 2005, the US Federal Reserve restricted the possibility of acquisitions. Due to the management problems, a "significant expansion" of the group is currently undesirable, announced the supervisory authority. In other words: clean up your house first before you buy again. The Fed only lifted the ban last week.
So until now, Prince couldn't be a deal maker in the Weillian style. But the personality of the two managers also makes a difference. Weill was known for his emotional outbursts. Sometimes he kissed employees on the cheek for joy, sometimes he was loud to board members. "I'm angry with those who I respect the most. Because I know they could do better," he flirted in an interview.
Prince, on the other hand, is quiet, deliberate, reserved. So cautious that parts of the industry still deny him what it takes to become CEO. When Weill appointed the then head of the investment banking division as his successor in 2003, it was a correspondingly big surprise for the banking world.
For the first few months in office, he literally hid himself in his wood-paneled office on New York's Park Avenue. In order to protect himself against new bad news from the group, he set up the 28-member "Operating Committee" with which he coordinates all important decisions. And in order to strengthen control in all areas of the company even more, he hired numerous lawyers.
Too much bureaucracy, which is detrimental to the dynamism of the bank, criticized observers: "Legal thinking seems to dominate the company today," wrote Merrill Lynch analyst Guy Moszkowski in the late summer of 2005.
But then at some point it must have "clicked" in Charles Prince's head. Perhaps that had something to do with the pressure from the largest single shareholder, the Saudi Prince Alwaleed bin Tal Alsaud. Most recently, Prince and Prince met in Paris in March to discuss the future of the group. The Arab is said to have signaled quite clearly to the American: The closed season is over, now we need results.
Prince began to plow. In December, he gave an incendiary speech to investors and punched in the air. "I know where Citigroup is going!" His most important requirement: quality control. A debacle like the one in Japan should not be able to repeat itself.
Apparently, Prince has not yet had much success with his control system. The Australian Securities and Exchange Commission has been investigating a case of insider trading since the beginning of April. During a cigarette break, a Citigroup investment banker allegedly passed on confidential information about a company takeover he had advised on to a trader.
Fortunately for Citigroup, Prince has a plan that goes beyond a corporate culture renewal. After all, shareholders expect strong growth like in Weill's time. By 2009, net income is expected to rise from $ 17.9 billion to nearly $ 50 billion. In 2005 he brought the company to $ 24.6 billion - but the sale of the life insurance division had an impact.
Like Weill, who made Citigroup the largest corporation in the United States, Prince also has a vision: The corporation should be represented all over the world. The colossus already serves 25 percent of the Mexican market, took over a Korean money house in 2005 and most recently gained a foothold in Turkey. Foreign business now accounts for 43 percent of sales.
Prince wants more. In 2005 the group opened 784 branches worldwide, which could already contribute to profit from this year on. The CEO thinks long-term, that is, towards Asia. Citibank opened its first Chinese branch outside Hong Kong at the end of March. It targets the wealthy Chinese. According to a study, China will have 100,000 rich people in 2009 - the year Prince claims Citigroup's sales almost tripled - with a combined net worth of $ 1.73 trillion.
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