Reed's Exit Spurs Search For Successor, Identity

If John S. Reed's retirement pushes Citigroup Inc. into establishing a succession plan for the sole chief executive Sanford I. Weill, its main effect may be in establishing the identity of the unified financial conglomerate, some two years into its existence.

Mr. Reed, 61, on Monday announced his plans to retire on the date of the company's annual shareholder meeting, sparking immediate speculation on who might step into the job. Clouding the issue is that - as even Citigroup has acknowledged - the job's qualifications are still being defined.

"It is a new kind of company that requires a new kind of leader," said Scott Birnbaum, a vice president at Mercer Management Consulting in New York. "It is not only an internally complex job, but it redefines the industry."

The one thing the job will not be is a typical banking chief executive post.

"What this confirms is that Citi does not want to be perceived as a bank anymore," said Jacob Berman, president of Commercial Bank of New York and a former Citi executive. "They've become a financial services company. That's what Sandy [Weill] had in mind, and that's the new paradigm."

Mr. Weill, 66, will become sole chairman and chief executive officer and will work with the company's board of directors to anoint a successor within a two year timeframe. By then, Mr. Weill said, he also would be ready for retirement.

At a press conference Monday morning, the two executives acknowledged that they had not drawn up a plan to identify the next leader of the $718 billion-asset company, though the two said the company had "enormous bench strength."

"We will explain the qualifications once we name the person," Mr. Weill said.

Mr. Reed's plan to retire did not catch many by surprise. He had been hinting since April 1998, when Citicorp and Travelers Group announced their merger, that he would stay on for a transition period, after which he would probably leave the company to pursue other interests, perhaps in the Internet world. Mr. Reed said Monday that he intended to "really" retire.

His plans perhaps were solidified last summer, when Mr. Reed and Mr. Weill split the management of the company in an arrangement that put Mr. Reed in charge of technology initiatives and other administrative functions and handed Mr. Weill control over all of the company's business units. Robert E. Rubin, 61, former secretary of the Treasury, joined the company last fall as part of a new three-member office of the chairman.

Now that the biggest hurdles of the merger integration are over, "there was a need to enter the next phase, where the company would benefit from unified management," Mr. Reed said at the press conference Monday. "It's a good evolution."

Observers said the tag team of Mr. Reed and Mr. Weill would be a tough act for a new CEO to follow, given the unique position of Citigroup. The company has a presence in 100 countries and business groups that span the worlds of insurance, commercial and consumer banking, investment banking, and asset management.

One potential successor was eliminated in the fall of 1998 with the ouster of James Dimon, a longtime protege of Mr. Weill at Travelers who was named president of Citigroup after the merger. Another highly regarded executive, Heidi Miller, said last week that she would step down as chief financial officer to take up a similar job at Priceline.com, a Norwalk, Conn., Internet company.

Many observers - including former and current Citigroup employees, consultants, and analysts - say the search for Citigroup's next leader will be conducted within the existing executive ranks as well as outside the company.

Internally, two executives are frequently mentioned as the most obvious candidates.

Victor Menezes, co-head of global corporate and investment banking, has a vast resume that includes management experience in emerging markets, corporate, and consumer banking, as well as a stint as chief financial officer at the former Citicorp.

Michael A. Carpenter, also co-head of global corporate and investment banking, has management experience in insurance and investment banking, including a stint as chief executive of now-defunct Kidder Peabody & Co.

But, observers said, the two have their weaknesses. Mr. Menezes has little experience managing investment bankers - now a big part of the Citigroup empire - and his position as a longtime lieutenant of Mr. Reed could weaken his chances of moving up in a company increasingly dominated by executives of the former Travelers Group. Mr. Carpenter, on the other hand, lacks a wealth of international management experience that many observers said could be essential to running the Citigroup of the future.

Another contender, Robert I. Lipp, has strong experience in consumer banking and insurance, but at 61 he may be considered too old to take the helm for the long term.

"Ever since Jamie Dimon left, there has not been anything remotely resembling a clear-cut successor," said Lawrence Cohn, an analyst at Ryan Beck & Co. "It introduces a period of uncertainty."

Market watchers speculated Monday that Mr. Rubin could be persuaded by the board to step in as chief executive or even as chairman for a period, even though Mr. Rubin has repeatedly said he has no intentions of taking on such a role at the company. "I would like to remain very actively involved as I have been," Mr. Rubin said Monday. "I will not be a CEO."

This leaves many observers to speculate that Citigroup would look outside for a candidate, perhaps even acquiring a new chief executive in one of Mr. Weill's seemingly endless deals. "I would not be surprised to see Citigroup make a major acquisition and the chief executive officer of the acquired company be a likely successor to Sandy Weill," said Thomas K. Brown, head of Second Curve Capital, a New York money management firm.

Some are even suggesting that Mr. Dimon could be coaxed back to the company despite a highly public falling out with Mr. Weill two years ago. Mr. Dimon declined to comment.

Though Mr. Reed and Mr. Weill were at pains Monday to portray the changes positively, former and current Citigroup employees said the two executives had a contentious relationship and often disagreed.

Mr. Reed said Monday that his decision was based on a long-held desire to retire at age 60. "There was no disagreement," he said. Talk of his possible retirement began in January, and the two executives formally presented the idea to the company's board of directors on Sunday. "We had talked about various configurations," Mr. Reed said at the press conference. "But it was pretty clear that I was the person who most wanted to retire."

James R. Kraus and Tania Padgett contributed to this report.

John S. Reed
Age: 61
1998 Compensation - $9.5 million (Citigroup)
Scheduled to retire from Citigroup Inc. on April 18, 2000