Last Man Standing

by Duff McDonald

Despite his shock, Dimon agreed to stick around, and sat down in a larger conference room with Prince to finalize the press release announcing his departure. (Prince would also negotiate his severance agreement.) While they were waiting for the other executives to show up, Bob Lipp came into the room with tears in his eyes and gave Dimon a hug. Dimon also took a moment to call his wife. “Judy, I’m going to tell you something and please, please, don’t tell me I’m making a joke,” he said. “They asked me to resign, and I resigned.” He then told her he’d be home as soon as he could. Leaving the conference room, according to Tearing Down the Walls, Dimon bumped into Maughan, who had just been told of his own fate. “Best of luck to you,” Dimon said. “And to you,” Maughan replied.

  At about 2:00 that afternoon, Theresa Sweeney’s home telephone rang while she was mowing the lawn. Her husband told her that Judy Dimon was on the phone. When Sweeney said hello, Judy Dimon said gravely, “Theresa, they’ve gotten rid of him.” Sweeney’s response: “Well, Deryck Maughan really needed to go.” When Judy Dimon corrected Sweeney, her face went white, and her husband had just enough time to shove a chair beneath her to prevent her from falling to the floor.

  Back in Armonk, once the entire executive team had gathered, Reed got to the point. “Jamie is resigning,” he said. Sandy Weill didn’t say a single word. (Dimon interpreted this as Weill’s attempt to have former Travelers executives think it was Reed’s decision and not his own. If so, it was not successful.)

  Monica Langley writes that Dimon then addressed the assembled group. “Look, I’ve been with this company for fifteen years,” he said. “I put my heart and soul into it. I want to tell you it’s a fabulous place. Keep on making yourself proud.” No one knew what to say, and so no one said anything. “I am sorry it didn’t work out,” Dimon continued. “I know that I have some blame for it. If I can help anybody, that’s what I’m here to do. I still love this company. It has an incredibly fantastic future. You are all friends of mine, and I wish you the best.” He was given a standing ovation.

  He then walked out of the room. Weill followed. “You’ve been very gracious and nice,” he said. “I still respect and love you.” To which Dimon replied, “Look, Sandy, I don’t know what to say.”

  “I’m sorry it had to come to this,” Weill said, and moved to hug him.

  “No hugs, please,” said Dimon, recoiling. He walked from the room and went home.

  After pulling off one of the largest mergers in history with Weill, Dimon set a dubious record of his own. His was, quite possibly, the shortest tenure on record of a president at a Fortune 500 company. He’d held the title for less than a month. He was only 42 years old. (In 2009, a questioner at a presentation to investors referred to Dimon’s having “been present at the gluing together of Citigroup.” His response: “I’m not sure that was glue. Maybe it was gum and paper clips. And I should remind you that I was fired 30 days after that deal was completed.”)

  For the first time in his career, Dimon had lost a power struggle. In an article the previous year—“How Long Can These Two Tango?”—Business Week’s writers had said that in the event of conflict, “the betting is that Dimon will ultimately prevail.” This conclusion was based on his historical ability to remove those he felt were holding the company back—Zarb, Plumeri, Greenhill. But the journalists at Business Week, like almost everyone else at the time, had failed to understand the complexities of Dimon’s and Weill’s relationship. For all his deal-making prowess, Weill was a deeply insecure man who was not ready to share his moment at the top, not even with his most trusted soldier.

  • • •

  According to a later story in Fortune magazine, Dimon arrived home about 5:30 P.M. Judy, in tears and in a state of shock, met him at the door. “What did you do that was so bad?” she asked.

  The couple gathered the girls in the kitchen. “Girls, I resigned today,” Dimon told them. Then he corrected himself. “I was fired.”

  Kara, then nine, the youngest, asked the first important question: “Will we have to move?”

  “No,” her father said.

  Laura, 11, the middle daughter, was next: “Will we be able to go to college?”

  “Yes,” her father said.

  Then Julia, 13, cut to brass tacks: “Can I have your cell phone?”

  At 6:00 P.M., Dimon participated with Weill and Reed in a conference call with the press. The three men explained that problems integrating the corporate businesses at Salomon Smith Barney and Citicorp had resulted in a need for a new management structure. It was one, however, that didn’t give Dimon the authority he desired, and so it was mutually agreed that he would leave the firm. Even in defeat, Dimon loved the company he had helped build so much that he allowed its officers to lie about his reasons for leaving.

  • • •

  The stock market didn’t take the news well. Whether because of concern that the merger wasn’t going well or merely as an affirmation of Dimon’s value to the firm, the stock price fell 2 percent that day, even though the Dow Jones industrial average climbed 114 points. At $46.13, the stock now sat 36 percent below its summer peak of $72.63. (Shares of J.P. Morgan jumped 10 percent that Wednesday, owing to rumors that Dimon was about to join the company.) By December, the value of the combined Citigroup had fallen from $165 billion to $108 billion.

  Equity analysts were shocked by Dimon’s ouster. Thomas Hanley of Warburg Dillon Read downgraded Citigroup’s shares to “hold” from “buy” because of “increased organizational risks.” Two other analysts also downgraded the stock, and still others voiced concern while maintaining their existing ratings.

  The brokerage force at Salomon Smith Barney wasn’t happy about the outcome, either. Weill anticipated this, and had buttonholed Jay Mandelbaum the next morning and asked for his advice on how to break the news to the company’s brokers.

  Weill was right to be concerned. After giving Dimon a standing ovation as he walked off the trading floor on November 2, brokers soon started leaving the firm in droves. In the immediate aftermath of the merger, there had been more departures on Citi’s side than on Travelers’ side, but after Dimon left, that switched. For all his brusqueness, Dimon engendered a fierce loyalty among those who worked for him. (Dimon’s father, curiously, stayed on at Citigroup for several more years. But he laughs at the idea that he continued reporting to Sandy Weill even after Weill had fired his son. Ted Dimon Sr. reported to no one.)

  The most prominent departure following Dimon’s was that of Steve Black. In addition to being angry with Weill over the treatment of Dimon, Black was also steamed that he hadn’t been given Carpenter’s job. The very afternoon Dimon was fired, Carpenter informed Black that unless he got on board with the decision, he might as well start packing his bags as well. But Weill had a much subtler message for the 25-year veteran. Unless Black was prepared to tell colleagues that he agreed with the decision, he was no longer a welcome member of the team. “I’m not going to be disruptive,” Black told Weill. “But if you’re telling me that in order to stay here, I have to stand up in front of a large group of people and lie, I’m not going to do it. So maybe it’s time for me to go as well.” Realizing that Black was serious, Carpenter backtracked and spent the next several days trying to convince Weill that even though he had the knife out, he didn’t have to get more blood on it. Maybe it was best to keep Black around. But Weill was adamant. A notorious worrier, he called Black late in the afternoon on Friday, November 6, clearly hoping to settle the matter so that it wouldn’t ruin the weekend. “Twenty-five years is a long time, but if you can’t get fully behind everything we’re doing I think its time for you to go,” he told Black.

  Black replied that he thought Weill had fired Dimon for all the wrong reasons, and that he couldn’t possibly stand in front of his colleagues and condone the move. Weill didn’t budge. “Then it’s time for you to go.”

  “Fine, I’m out. I’m done,” Black retorted. On November 10, he resigned. Once again, Chuck Prince oversa
w the severance negotiations.

  On Monday, November 2, nearly 100 Salomon Smith Barney employees had gathered in a Tribeca establishment known as “Ponte’s”—the Italian restaurant F. Illi Ponte, which called itself the “home of the angry lobster”—to bid Dimon adieu. The night of November 10, the same people reconvened for Black’s good-bye. When the owner of the restaurant asked Theresa Sweeney how things were going at Salomon Smith Barney, she replied, “If you see us here next Monday, it’s not going very well.” (Sweeney chose to leave the firm along with Dimon.)

  Dimon felt horrible that Black was in some sense collateral damage of his own battle with Weill. “I respect Steve’s loyalty, but I told him to do what was right for himself,” he recalls. “I felt terrible for him. I didn’t want him to lose his job and career out of thinking he was protecting me, because there wasn’t anything I could do anymore.”

  On December 29, the financial website TheStreet.com awarded Dimon third place in its list “Top 10 Bad Byes of 1998.” His award was called “The Son I Never Had.”

  • • •

  Speculation erupted all over Wall Street about just what exactly had led Weill to make such a monumental choice, one that has, over the years, come to seem ever more rash and ill-conceived.

  Weill ultimately came to view the conflict in very simple terms: Dimon was ready to be CEO, and Weill wasn’t ready to retire. Weill’s wife, Joan, said much the same thing in Weill’s autobiography. “The problem was that Sandy was too young to step aside, so the mentoree couldn’t get past the mentor,” she told Weill’s collaborator, Judah Kraushaar. Unable to resist another twist of the knife, she went on to say, “There’s a reason that people like Frank Zarb and Bob Greenhill left the company. They all complained about Jamie being headstrong.” Asked whether that was a fair assessment, Zarb responds, “Not true at all.”

  Dimon also saw the conflict between him and Weill in uncomplicated terms. “I stuck my finger in Sandy’s eye,” he told the New York Times Magazine in 2000. More than a few colleagues see the situation as resulting from an escalation of a certain pattern. Jamie did the work, Zarb got the glory; Jamie did the work, Greenhill got the glory; then along comes Deryck Maughan, and Dimon is asked to share once again, not only with Maughan but also Victor Menezes of Citicorp. “I don’t know how many times you can go to that well before the well rebels,” says one executive.

  In his autobiography, Weill tries to argue that Jamie Dimon was never his heir apparent. Most knowledgeable sources consider that revisionist history. “He should have been a Soviet,” one said after reading the passage. “You sit there and go, ‘What? Are you kidding?’ But Sandy says some things enough times that he actually starts to believe them.”

  Weill steadfastly maintained that the fallout over his daughter’s departure had nothing to do with Dimon’s firing. But he also suggested that Dimon had lost Joan’s backing as a result of the way Jessica had been treated. In the end, though, Weill maintains that he simply could no longer put up with Dimon’s flagrant displays of disrespect. “Jamie had annoyed me to no end over the last three years, and our relationship had gotten so dysfunctional that it plainly was hurting others in our company,” he wrote in The Real Deal. “Still, I felt sick given all that we had accomplished together. Jamie had wanted me to treat him as an equal partner, a desire for recognition [that] I understood but was unwilling to satisfy. I was nearly twenty-five years his senior and … his demands for equal treatment were disproportionate with what he deserved.”

  Weill went on to chide himself for nothing more than a failure to teach. “I brought Jamie along quickly and in doing so probably gave him a sense of entitlement which discouraged him from building a consensual management style,” he wrote. “My real mistake, though, was that I repeatedly missed the chance in our early years together to curtail his aggressive behavior and mentor him into becoming a team player.” Weill was not alone in that sentiment. There were many who thought that Dimon might not have what it took to be a true leader, in large part because of his temper. (Dimon would suggest that his problem was not that he was not a team player—he worked extremely well with the likes of Bob Lipp, Bob Willumstad, Marge Magner, and even Chuck Prince—but that the relationship between him and Weill was the issue.)

  Eight years later, in late 2008, Weill had begun to voice regret. “I had no doubt what Jamie could achieve,” he said. “I loved working with him. I loved the relationship we had and I feel terrible that it’s not what it could’ve been. I am very proud of what he’s doing.”

  Mary McDermott, Citi’s communications chief, was on vacation in Italy when she heard of the firing. Sitting in the Grand Hotel in Florence, she found herself crying her eyes out. Weill later asked her to call Fortune magazine’s influential columnist, Carol Loomis, to say that it was the hardest thing he’d ever done in his life. Loomis’s blunt reply: “But he did it, didn’t he?”

  Both men should have faced up to their issues earlier. Weill might have stood up to Dimon more forcefully earlier than he did. Having been unclear about succession, he must have known the frustration he was causing his protégé. It was entirely reasonable that some loyalists fed Dimon’s ego, in hopes of plum roles when the succession actually came to pass. Dimon might also have come to terms with Weill’s inability to let go and perhaps left the firm to strike out on his own before he was forced out.

  To some colleagues, it seemed as if to Dimon it was all about Dimon, and nothing more. “When we got to the point of how Citigroup was going to be organized, the whole process was put on hold for three weeks because of Jamie,” said one Travelers executive. “He wanted to be president. He wanted to run the corporate investment bank. He could be one or the other, but not both. And he held out for both. It had a lot to do with his ego, and his relationship with Deryck. ‘I want this job! I want that job!’ Everybody was thinking, ‘Jesus Christ, man, we have just done this huge merger and all you are focused on is you?’ It ground on him so much because he thought he’d made Sandy, so he didn’t understand how this was happening to him.” (Dimon categorically denies this account, and insists that he didn’t even want the title of president of the parent; he thought it a dumb title, especially when he had a real one running Salomon Smith Barney.)

  In retrospect, what happened is simple enough. Dimon was endangering Weill’s ability to successfully integrate the two companies and to add to his ever-growing reputation. And when it came to the short strokes, Sandy Weill was always about himself—all the way back to Cogan, Berlind, Weill & Levitt—and no one, not even Jamie Dimon, was going to stand in his way. Dimon was only the latest, and most prominent, in a long line of Sandy Weill casualties. The only differences were that Dimon had more talent and capability than anyone Sandy had ever roughed up before, and that they had shared the longest and deepest relationship. In the process, Weill lost the last person who worked for him who stood up to him, costs be damned. “I always think of Jamie at Citigroup,” recalls Bob Willumstad, “as being the guy who would say what everyone else was thinking.”

  From Dimon’s perspective, it’s important to understand that his confidence in his own instincts made it nearly a given that he wasn’t going to be satisfied with being a great assistant coach. Yes, Sandy Weill did have the vision. And yes, Jamie Dimon was the operations guy. After the Citicorp merger, though, there was nothing left to do but integrate the two companies. Dimon could be forgiven for coming to the conclusion that the company was no longer in need of Weill’s particular skills but desperately in need of his own. And if that had been the case, why shouldn’t the title have come along with the job?

  Richard Bookstaber, author of A Demon of Our Own Design, considers the move one for the history books. “If somebody were to list the most costly single business decisions in the history of time, one would be the purchase of AOL by Time Warner,” he says. “That destroyed more value than anything else. Another thing was Sandy firing Jamie. I can’t envision that Citi would be in the problem it was in righ
t now if Jamie had stayed there. That probably cost $200 to $300 billion. It’s pretty amazing.”

  • • •

  What lessons Jamie Dimon took from Sandy Weill is a question that has preoccupied a lot of market commentators since Dimon’s exit from Citigroup. Even though more than a decade has passed since they worked together, the business press never tires of rehashing the issue. It’s an obsession best characterized by a post on the website Marketwatch.com in 2006: “Before Brad and Jen, there was Sandy and Jamie.”

  There has never been much debate as to whether Weill or Dimon possesses more raw intellectual firepower; it is Dimon, no question. Sandy Weill, on the other hand, is proof that you should never underestimate the man who overestimates himself—at least not when all the stars are aligned in his favor: cheap financing, a rising market, and a fawning business press.

  That said, Weill surely passed on a number of crucial rules of running a business. The first: when you’re doing M&A, do it quickly and efficiently, with no uncertainty. Weill could be ruthless in starting to clean house virtually the instant a deal was done, but it was an effective way to get everyone moving forward at once. “That’s Sandy’s drill,” says Marge Magner, who stayed on at Citigroup until 2005. “It comes out almost automatically.”

  Weill also showed Dimon the benefits of taking the long view. As Weill showed in both phases of his career, when you worked with him it was almost impossible to view something as a stopping point. He was always thinking about what things could be. “Sandy gave him that whole concept of looking out and being opportunistic and knowing where you’re going,” recalls Joe Wright. Dimon, too, remains in awe of Weill’s audacity. “To do the deals that we did?” he recalls. “I look back at those and think, ‘God, Sandy, you had guts.’”

  Weill also impressed upon Dimon the importance of getting your entire house in order, not just the shopwindow that customers see. When you’re in a commodity business, the only way to thrive is to be a low-cost producer. And when you’re selling money, you’re in a commodity business.