Sandy Weill, pragmatic dreamer: Travelers Group CEO Sanford Weill talks about his approach to dealmaking, governance, and life in and out of the spotlight.

• Author: Kaback, Hoffer
• Position: Cover Story - Interview

Travelers Group CEO Sanford Weill talks about his approach to dealmaking, governance, and life in and out of the spotlight.

At approximately 7 a.m. on April 6, 1998, Sanford I. Weill, chairman and CEO of Travelers Group Inc., and John S. Reed, chairman and CEO of Citicorp, stunned the world. They announced that their two companies, each separately a financial services behemoth, had agreed to merge. The two CEOs revealed at a press conference later that day that the deal - the largest proposed merger in history at roughly $70 billion - had been proposed by Weill to Reed on February 25. Amazingly, it took only six weeks for the companies to agree to terms.

Sandy Weill was interviewed by me on March 4 - literally one week after his momentous discussion with Reed. Thus, that interview placed DIRECTORS & BOARDS virtually "present at the creation."

Several twists flow from this chronological fortuity. Since Weill on March 4 knew of his proposal to Reed one week before but DIRECTORS & BOARDS did not, Weill's answers to my questions can be analyzed on several different levels.

An example: As presented at the end of the interview below, Weill and I discussed his experience at American Express in the 1980s, where he had not succeeded in creating a "financial supermarket." Weill noted that "what I had hoped to happen at American Express didn't happen at that particular location, but it didn't mean that my concept was wrong. It was just that the people together weren't able to make it happen. Here we go again, right?"

At the time, I took these comments to mean both that (a) given Travelers' late- 1997 acquisition of Salomon Brothers, Weill had already created, in significant part, what he had tried to do at American Express, and (b) notwithstanding the $9 billion Salomon acquisition, Weill intended to take further steps in the future to expand Travelers' reach globally. Thus, two levels of meaning. However, the fact that one week earlier Weill had commenced negotiating the Citicorp merger plainly infuses his "Here we go again" with a third tranche of significance.

Another example: During the interview, Weill predicted further consolidation within the financial services industry. He referred to banks, brokerages, and insurance. But his remarks are laden with ambiguity: Did he mean that he foresaw more banks consolidating with banks, brokerages with brokerages, and insurers with insurers? Did he mean a continuation of some of the bank/brokerage acquisitions we have seen in the past year or so (e.g., BankAmerica's acquisition of Robertson Stephens)? Or, was he instead thinking about his own gargantuan, ground-breaking deal with Citicorp?

These and other ambiguities are present throughout the interview. It provides a rare opportunity for DIRECTORS & BOARDS readers to gain insight into the personality and thinking of a CEO one week after the secret initiation of a deal that alters forever the financial services global landscape.

Sandy Weill started out in 1955 as a "runner" (i.e., a messenger) for Bear Stearns. In 1960, when in his late 20s, he borrowed heavily to start a brokerage firm with three friends. Throughout the 1970s, that firm - originally Carter, Berlind, Potoma & Weill but renamed CBWL to reflect the participation of Arthur Levitt, currently SEC Chairman - absorbed several substantially larger brokerages, including the well-known firms Shearson Hamill and Loeb Rhoades Hornblower. The resulting enterprise was sold to American Express in 1981 for almost $1 billion; Weill personally received about $30 million. In 1983, he became number-two man at American Express to CEO James Robinson III.

Things did not work out for Sandy Weill at American Express as well as they had in his earlier endeavors. After having unsuccessfully tried to convince American Express to sell him its Fireman's Fund subsidiary (which he had taken a principal role in turning around), he left. It was summer 1985. Weill was just 53. And he was unemployed. Come September, most of his friends would return, post-vacation, to jobs in large organizations where they held positions of power and influence. Weill would not. Indeed, when asked as late as spring 1986 by Carol Loomis of Fortune for an interview appointment, Weill replied: "Name your time. I'm free."

Weill's "wilderness" period post American Express involved working alone in a small office with young associate James Dimon, trying to do deals. But Weill was publicly rebuffed in early 1986 when he offered to recapitalize (and become the CEO of) BankAmerica. He seemed stalled. Yet his touch soon returned. He bought Commercial Credit (after it had been spun-off from Control Data), and he turned it around. Later, Primerica (including its Smith Barney brokerage subsidiary) was acquired - an action which, importantly, put Sandy Weill back in the brokerage business.

He subsequently acquired an interest in then-ailing insurer Travelers. In addition, Shearson was acquired from American Express (for Weill, of course, a reacquisition) and, in a $4 billion deal, bought Aetna's property and casualty business. Then, at the end of 1997, Weill closed Travelers' purchase of a major marquee name: Salomon Brothers, tarnished years earlier by a Treasury securities bid-rigging debacle, was purchased for $9 billion in Travelers common stock.

"You have to understand his psyche," said an unnamed Wall Streeter quoted in Business Week late last year. "The guy lives to do deals. That's what he does. It means no endgame." The copy for full-page Salomon Smith Barney ads appearing in March 1998 was consistent with that theme. Trumpeting the brokerage's already substantial market penetration, it concluded with the line"And we're just getting started." The anonymous Wall Streeter's assessment, and the copy for the Salomon Smith Barney print ads, could both be viewed as signposts towards the Travelers/Citicorp merger.

Sandy Weill and I met for an hour in his office on March 4. The conversation was tape-recorded. With the exception of two short followups asked and answered in writing, all Q&A in the interview was in real time. We talked about his approach to doing deals, his management style, his views on corporate governance, how he felt after leaving American Express and becoming "president of nothing" - and his dreams.

Doing Deals

Sandy, let's separate doing a deal from day-to-day Travelers' stuff. A deal has a life of its own.

That's right.

Everybody has highs and lows during the deal process, but do you feel you maybe have more than others?

I'm not a shrink. I think when you're doing a deal things do get pretty compressed. There are very few deals that move in a straight line from Point A to Point B. Lots of them have plenty of bumps along the way and I react to those bumps positively and negatively. And I would guess that my emotions do move more in both directions during the course of the deal. Whether it's more or less than somebody else, I don't know.

But, whatever it is, it hasn't hurt our ability to do deals. And God knows that in the last 28 years I've participated in a lot of them. And I would think that if you went and spoke to the people that we did our deals with, 99% of them, or maybe 100%, would think that they were treated very well, that it was fair, that we always kept our word, and they would do another deal with us. And I think that if you don't leave that kind of impression, the next deal is not going to be there.

Does it happen that you may waiver in the process of doing a deal and say, "Hey, look, I'm not going to do this. I'm going to blow this deal away"?

That's happened sometimes, where I'm pushed beyond where I think I should be pushed at a particular time. Sometimes I change my mind, regroup, and come back. Sometimes I don't.

Deals are dynamic things. The only thing I can tell you is, whatever I do do and whatever my emotions create, I hope they keep on doing the same kind of thing because so far it's worked.

A lot of it is instinct and feeling and looking people in the eye. And you can't do deals by figuring that this deal is going to work or not work by what the lawyers put on a piece of paper or [from] the due diligence process. A lot of it has to be the trust in what people are saying to each other.

Would you say that more than a few times you told the other side, "Look, you pushed me...