Citi Group Essay

4196 words - 17 pages

Restoring Ethics and Image Before Growth
Charles Prince, CEO of Citigroup, is facing a daunting challenge as the head of the largest financial services organization in world. He has joined a company that has experienced significant regulatory scrutiny and that has been linked to the biggest scandals in corporate history. Unfortunately for Prince, the problems are pervasive throughout most of Citigroup’s diverse service offerings. In March 2005, Prince announced his strategy to transform the financial giant and to provide a new direction for the future. He called it the “Five Point Ethics Plan” to: improve training, enhance focus on talent and development, balance performance ...view middle of the document...

Citigroup has a 200 year old legacy of innovation and achievement. The City Bank of New York is Citigroup’s earliest ancestor, establishing a credit union for merchant-owners in 1812. Many of the rest of Citigroup’s ancestors originated in the late 19th century, including Travelers, Smith Barney, Bank Hadlowly, and Banamex. In the 20th century, acquisitions included IBC, Salomon Brothers, and The Associates. Sandy Weill, former CEO, was recognized as bringing it all together under the one red umbrella of Citigroup in 1998.2 Sandy Weill: The Man Who Shattered the Glass-Steagall “Everything about Weill is big, including his ambition” Charles Gasparino, Blood on the Street Congress passed the Glass-Steagall Act in 1933, which established what was known as the Chinese Wall between commercial banking and investment banking. That same year, the man

who would influence the repeal of that act in 1999 was born. Sandy Weill later became one of Wall Street’s most influential men as the Citigroup CEO in 1998. He ran the one-stop financial supermarket until 2003.3 In the 1960s, Weill grew Shearson Loeb Rhodes brokerage from a mid-sized business into an empire that he sold to American Express Corporation in 1981. After being bounced from Amex, he had one of the most notable comebacks on Wall Street. He merged his insurance company, The Traveler’s Group, with the Salomon Smith Barney brokerage and the Citicorp banking empire. This merger made Weill a very rich and powerful man, but the fame also brought a lot of negative publicity. During Weill’s era as CEO, Citigroup was associated with numerous corporate scandals, regulatory investigations and legal settlements. In an interview with the New York Times on September 11, 2005, Weill still defended what he built, saying “I don’t think it’s too big to manage or govern at all. I’m sure there would have been things that would have been tweaked this way or that way, but when you look at the results of what happened, you have to say it was a great success.” Charles Prince became the next Citigroup CEO after Weill. His advice for Prince, “Don’t screw (the legacy) up.” 4 Charles Prince – Maintaining the Legacy Charles Prince became the chief executive officer with Citigroup in 2003 and has been an employee with the company for 24 years. He began his career in 1975 as an attorney with U.S. Steel Corporation. In 1979 he joined Commercial Credit Company, which Sandy Weill took over in 1986. At that point, Prince became what Fortune’s Carol Loomis called, “an absolute Weill loyalist, who has promptly accepted whatever assignments Sandy has wanted him to take on.”5 He served as main counsel until 2003, when Weill chose him as CEO. Since 2003, Prince has been a fireman, cleaning up the scandals and improprieties that have been building since the late 1990s. Much of that cleaning has meant removing companies and executives that helped build Weill’s legacy, including the sale of Traveler’s Insurance. Prince has been...

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