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John Reed, The Ceo Who Never Sleeps


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JOHN REED, THE CEO WHO NEVER SLEEPS

Succession questions at Reed's restless Citi

The early 1990s were dark indeed for Citicorp. Low on capital and contending with mounting loan losses, Citi faced almost daily rumors that Chairman and Chief Executive Officer John S. Reed was about to step down, either at the behest of Citi's board or of regulators. As part of the struggle to get the bank back on track, Reed abandoned Citi's traditional hierarchical structure. He made 15 business heads around the world report directly to him, flying into New York for monthly reviews of their progress toward tough performance goals.

Slowly, and with major assistance from low interest rates, Reed and his team have righted Citicorp. On Jan. 16, it reported record earnings of $3.46 billion for 1995. Citi has amassed some $18.9 billion in equity capital, up from $8.5 billion, using the same standards, in 1991.

HOUSECLEANING? Now, Reed's management structure is being dismantled. On Jan. 12, Vice-Chairman Pei-yuan Chia, 56, head of global consumer banking, announced his impending retirement, just a month after Vice-Chairman and turnaround expert Christopher J. Steffen, 53, head of finance and administration, abruptly resigned amid differences with Reed. Meanwhile, Reed has promoted a crop of business chiefs and hired William Campbell, former head of Philip Morris USA, to run branch banking.

Was it a housecleaning by Reed, or a flight of top-notch hands? A Citi spokesman says Chia is "retiring on his own terms." Reed, who told analysts on Jan. 16 that Chia will stand for board reelection this spring, also said that he and Chia had discussed the vice-chairman's retirement for several years. One source close to Citi, though, says Chia told him he was urged to resign. And a Citi insider says that the departure of Steffen was unexpected.

The suddenness of the announced changes surprised and disconcerted many Citi-watchers. Some wonder whether Reed, 56, is pushing some of his best executives out to ensure that no strong second-in-command emerges. "Whenever [Reed] gets someone with the potential to be a voice from below, those people have not lasted that long," says an analyst who was unwilling to be named. For example, in 1992, President Richard S. Braddock abruptly left the bank, and many believe Reed was defensively ousting his only credible potential successor as CEO. Reed refused interview requests, and a spokesman declined to comment.

The question now: Are any of the newly promoted executives capable of running Citi? Reed professes confidence. He told analysts on Jan. 16 that "very consciously, we are continuing to put emphasis on building the next generation of management." Accordingly, Rana Talwar, 47, formerly head of Asia/Pacific consumer banking, will run retail banking in Europe and North America. Victor J. Menezes, 46, former head of European and North American consumer banking, became chief financial officer when Steffen left. And Roberta J. Arena, 48, head of credit cards in North America and Europe, now reports directly to Reed. These executives are very well regarded--but it will take time for them to develop the broad managerial experience Reed seeks.

"LEADERSHIP VOID." Meanwhile, the departure of Chia will leave a gap. Along with Reed, he made Citi the preeminent global consumer bank. Says Merrill Lynch & Co. analyst Judah Kraushaar: "To lose somebody [at that level] potentially creates a leadership void." In addition to Chia, David E. Gibson, 55, head of emerging-markets global finance, will retire in March.

Reed told analysts that more changes are in the offing, particularly in consumer banking. And the shifts, which seem to be endemic to Reed's restless management style, may continue for some time. Reed is unlikely to step down any time soon, says David S. Berry, director of research at bank specialists Keefe, Bruyette & Woods Inc. "Why would he leave? It's got to be more fun than it was four years ago." Particularly when, instead of listening to rumors about his own departure, he can shuffle other executives around.By Kelley Holland in New YorkReturn to top


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