On the evening of July 8, 11 Wall Street buzzed-not with the tumult of frenzied floor traders buying and selling securities, but with the clinking of glasses and casual banter of some 200 CEOs and their guests. It hadn’t been an easy day for America’s business leaders, who hours earlier watched the market slide 127 points, nor had there been much to celebrate over the past several months. But at Chief Executive‘s annual black-tie event, co-sponsored with the New York Stock Exchange, CEOs took a few hours out to celebrate free enterprise and the U.S. capital markets and to toast the 2002 Chief Executive of the Year, Sandy Weill.
Not everybody was relaxing, however. The guest of honor, even as he shook hands, exchanged jibes and accepted well wishes from peers, seemed to grow anxious as the evening wore on. During dinner, between hasty bites of his ketchup-doused filet mignon, the chairman of Citigroup checked and rechecked the time, impatient to be called to the podium to deliver his acceptance speech. “It’s getting late, isn’t it?” Weill finally asked at 9:30.
The CEO of the Year had reason to be anxious. That very day, Jack Grubman, star telecommunications analyst with Citigroup’s Salomon Smith Barney, had testified before the House Financial Services Committee, which was investigating WorldCom’s massive earnings overstatement. Citigroup had already come under the scrutiny of congressional committees and the National Association of Securities Dealers, investigating possible foul play among the country’s biggest investment banks and their clients, including ties to Enron. Despite record earnings in Citigroup’s most recent quarter-$4.1 billion-news of the investigation had sunk its stock price by 25 percent, eroding some $45 billion of market value. And though the recent stumble can’t efface the strong average annual return Weill has produced for shareholders-33 percent per year over the past 10-it has put his reputation on the line.
In keeping with the gravity of the times, Weill rejected the safe, rhetoric-filled thank-you address in favor of a carefully prepared call-to-arms to corporate chiefs, urging them to take responsibility for their companies’ practices and recognize their roles as moral compasses for corporate America.
When he finally took the stage, Weill allowed himself only a few moments of levity as he accepted the award from outgoing CEO of the Year Michael Dell and CE‘s CEO Ed Kopko (who is also CEO of Butler International), raising the crystal trophy above his head in a victory salute and joking about the age disparity between himself and Dell. Then he got down to business. “Tonight is a time to be serious,” he began, his face perspiring under the lights as he ticked off the extraordinary challenges companies have faced in the past year, including the global recession, terrorism, the meltdown in Argentina and the largest bankruptcy in history. “These corporate scandals have shaken our faith in America’s financial system,” he said. “They have also called into question the integrity of our corporate executives.”
The job of restoring that faith will have to start at the top, he added. “We must begin asking what we, as CEOs, have to do, however challenging and uncomfortable it may be,” Weill said. “There have been too many examples of corporate executives pumping up the value of their companies and then dumping their holdings just before the companies crash. Investors and employees are left holding the bag.” (In response to the recent drop in Citigroup’s stock, Weill initiated a corporate buyback program and sent an apology letter to every Citi employee.)
Noting that Citigroup has long held a long-term buy-and-hold investment strategy-which includes imposing strict thresholds for how much stock senior managers must own before they can sell options or restricted stock, and then requiring them to hold onto 75 percent until they retire-Weill sharply criticized short-term thinking. “When companies reprice options, a big alarm should go off. Our board has never done that, and we never will,” he said.
In addition to suggesting expensing options for top officers (which Coca-Cola, General Electric and other companies have since announced they are voluntarily imposing) and reiterating the need for CEOs to be “completely committed to transparency,” Weill stated that a “bullet-proof audit process” was essential. He proposed that it include the creation of an independent authority to oversee the conduct of auditors, “in effect, an SEC for the accounting industry.” Congress agreed, voting recently in favor of a bill that would establish just such an oversight board.
But while legislators can strengthen the system, Weill added, CEOs may play an even greater role in restoring the public’s faith. “It starts within our own organizations, by the example we set for honest, professional and ethical behavior.”
That includes giving back to the community, according to Weill. “We must be conscious of a broader purpose than simply delivering profits,” he noted. “What separates good from great companies is the commitment we make to the communities in which we do business.” As examples of corporate giving, Weill offered the National Academy Foundation, which Weill founded in 1982 and which today has 32,000 students in 38 states and the U.K.; the Citigroup foundation, which gave more than $67 million to organizations around the world; and the Citigroup Relief Fund, which has raised $20 million for a scholarship fund to grant education to the children of the victims of September 11.
After thanking Citigroup’s 270,000 employees, and Joan, his wife of 47 years, Weill accepted a toast in his honor and stepped down from the podium, visibly relieved. “That felt good,” he said in a brief interview with CE. “I talked about a lot of the things I really believe in.” His new title won’t just be for show either; Weill takes the position seriously and aims to be a role model for the CEOs who selected him. “My biggest responsibility [as CEO of the Year] is to work on restoring public confidence in the markets and in our companies.”
That speaks for them all. – C.J. Prince
A Jury of His Peers:
EACH YEAR Chief Executive solicits nominations from its C-suite-level readers for the CEO of the Year and submits the 10 most frequently mentioned candidates to a panel of CEO judges. The selection committee reviews the finalists, looking both at external benchmarks-such as outstanding and sustained financial performance and significant return to shareholders-and at less tangible leadership qualities, such as the ability to inspire loyalty and to adapt to change. This year’s panel also cited Sandy Weill’s commitment to community, demonstrated through personal and corporate philanthropy.
Michael Dell, Golden Boy
In a low-key champagne ceremony in a boardroom of the NYSE, last year’s honoree, Michael Dell, yanked away a royal blue drape from an honorary bust bearing his likeness. Face to bust, he peered at it from the front, crouched down, and then stepped around to look at it from the side.
“It looks just like me, only golden,” he finally remarked, as photographers crowded in.
Sandy Weill brushed a deferential palm across the gleaming brow. “Where are you going to put it?” he murmured. “That’s going in the kid’s room,” laughed Michael’s younger brother Adam, a managing general partner with Impact Venture Partners in New York who once worked for Michael at Dell Computer. “You can hang baseball hats on it,” someone else quipped.
Wherever it ultimately comes to rest, it will join a crowded collection. Only Dick Clark has rung in as many new years as Michael Dell. Recognition has poured in from magazines like Inc., Financial World and Worth. When he’s not “CEO of the Year,” he’s “Man of the Year” or “Entrepreneur of the Year.” And that’s not even mentioning the Top 25 lists he’s graced.
All told, Dell doesn’t need a layer of enamel to be golden. A special glimmer has tinged his career since he began selling PCs out of his dorm room at age 17. When the 37-year-old, “baby-faced billionaire” took the stage to introduce Weill, he resembled Weill’s son more than his predecessor. Weill acknowledged as much with a humble opening remark, “For Chief Executive magazine to move from the youngest winner to, maybe, someone who’s not the youngest winner, is a pretty good move.”
Earlier, after the unveiling of the bust, as guests poured into the Stock Exchange from Broad Street, Dell eluded camera crews seeking to question him and other CEO guests about the crisis of confidence in American business, telling a CBS reporter, “This is Sandy’s night.”
But Dell paused at one point to consider the moral burden of being CEO of the Year-or any CEO any day of the year: “There’s a responsibility that comes with leading a company and with the success that comes with having the opportunities we have,” Dell explained during an interview on the stock exchange floor. “There’s a responsibility in how we contribute to society. I don’t think large numbers of companies have engaged in bad behavior. But even a few is enough to tarnish the view of a lot of companies, and that distrust is hard to earn back. Some things are being done already-there’s more transparency facing companies to explain themselves; regulation and guidelines have been proposed.”
And should CEOs be held personally accountable? That’s a non sequitur, in Dell’s opinion. “I thought we already were,” he answered, speaking for upstanding CEOs everywhere, “and we believe we are.” – Sonja Sherwood