Chuck Prince is the chairman and chief executive officer of Citigroup, one of the world's largest financial services companies, with operations in more than 100 countries. Prince began his career in 1975 as an attorney at US Steel Corporation, and in 1979 joined Commercial Credit Company, a predecessor company to Citigroup. After serving as chief administrative officer and then as chairman and chief executive officer of Citigroup's Corporate Investment Banking Group, he was named chief executive officer of Citigroup in 2003. Prince holds a bachelor’s degree, a master's degree in international relations, and a law degree from the University of Southern California in Los Angeles, as well as a Master of Laws degree from Georgetown University. Chuck Prince was interviewed by David Wighton, the US banking editor and New York bureau chief of the Financial Times.

 

NYU Stern Dean Thomas F. Cooley introduces Chuck Prince and David Wighton to an audience of Stern students and alumni at the CEO Series event in September.

David Wighton: When you became chief executive of Citigroup in October 2003, what were the key challenges you faced?

Chuck Prince: I thought the primary challenge we were facing was how to grow an organization that had topped out in the ability to use an M&A strategy as the primary vehicle for driving growth. But, it turned out, we took a detour based on a variety of regulatory issues.

DW: Did the regulatory issues stem partly from the nature of the group that had developed as a very acquisitive machine?

CP: Because our company was largely built through acquisitions, we ended up with not one corporate culture, but a wide variety of cultures inside one company. People would end up making decisions to maximize short-term returns without considering the long-term nature of the institution. We're about to celebrate our 200th anniversary as a company in 2012, and I am a big believer that we have to value the legacy of the institution. So in hindsight, not having a focus on a strong set of core values, which would balance everybody's desire for short-term results against the longer term nature of being in this business, was a mistake.

DW: Could you tell us how you've gone about the process of instilling a more uniform corporate culture and some of the lessons you learned from looking at other companies?

"I don't tend to look backwards and say, 'Gee, I made a mistake here, and gee, I made a mistake there.' I'm sure there were hundreds, maybe thousands of mistakes; things that didn't work out."

CP: During the course of 2004, we had a variety of regulatory issues that fell out of the sky and hurt us badly. They came from disparate parts of the business. Most people know about the private bank issue in Japan. Many people know about the MTS trade in London. And at that point, the regulators became so, I think the right word is – embarrassed by the problems that kept popping up, that they basically told us that we had to get our act in order. In the fall of 2004, the senior leadership of the company resolved to change things and to start the process of creating that culture. Now I emphasize the word start because you don't create a culture in six months or a year or two years.

We looked internally to the organization for the best practices. We also went and visited two dozen external companies. The first one we went to visit was Johnson & Johnson to learn how they sustain a solid core culture at the center of an organization of large, disparate organizations to prevent the centrifugal forces from spinning people out and away. We then boiled it down to something called the Five Point Plan. There were actually about 60 points. We rolled it out on March 1, 2005, simultaneously in 100 countries around the world. I did one event in New York, and I flew out to South Dakota and did the same event, trying to not shock, but to command the attention of the organization. And from there, over the course of the year, we had a rollout plan so that something happened every few weeks. It took us the entire year, all of 2005, to put all the bricks in the wall.

DW: You mentioned the need to shift from an organization that grows by acquisition to one that grows organically. How well has that gone?

Top: Chuck Prince is interviewed by David Wighton. Bottom: Chuck Prince with a group of NYU Stern MBA students who interned at Citigroup.

CP: We more or less had to take a year off. I think now we're back on that track, and I feel very good about the progress we're making. We've just rolled out a brand new client focus activity. We're investing a lot in technology. We're opening new branches for the first time.

DW: Given the stepped up investment on organic growth, some Wall Street observers question whether you're controlling expenses and whether you're going to get the returns that you hoped for in the time that you hoped for.

CP: In fact, a substantial amount of our investments are paying off. We had 10 percent revenue growth and about 2 or 2.5 percent of that came from investments we had made just last year. But many of the investments we make take a while to pay off. This year we're going to open 100 retail bank branches in the US. Last year we opened 20. It takes about three years for a retail bank branch to break even.

DW: Another concern expressed by Wall Street is that Citigroup is just too big, too difficult for it to be manageable.

CP: I don't hear that much anymore. We are manageable. We are in control. We have excellent regulatory relationships around the world. What I hear now is: "Are you too big to grow?" The issue for the organization is: Can we transform ourselves from a financial engineering kind of a company to an organic growth company? I think we can.

DW: Tell us a bit about what you look for in managers.

CP: What I look for are people who have a real passion for what they are involved in, which is an overused word but an important word. To have a sense of ownership of issues. To have a sense of responsibility. The most important thing I can get from a manager is somebody who will come in a constructive way and say, "I think you're on the wrong course here."

DW: How big can Citigroup get? You point out that actually you've got small market shares in most of your markets.

CP: When Sandy Weill first came to Commercial Credit, which is where I was in 1986, and I think we had 20,000 employees, and the notion that we would double in size was astonishing. And then we grew and grew. Travelers merged with Citicorp in 1998, and it was the biggest merger in the history of the universe. Then, we had 178,000 employees. Today we have 340,000 employees around the world. And I think that if we do it the right way, if we are focused on having core elemental values that translate into dozens of languages that are embraceable by people in different businesses, then I think we are not at, or even near, the practical constraints of our growth.

 

Audience Questions

Q: How do you manage to maintain any kind of balance between life and work?

CP: I'm going to give you a serious answer, because it's a very serious question. I have spent my entire life as a workaholic. I don't mince words about that. It really destroyed my first marriage. Happily, it did not impact the relationship with my two kids. So I'm not a good person to advise, even in hindsight, on how to do it differently. I'm remarried, and my wife and I try to carve out private time together. So this last weekend was our anniversary, and we went off to California, and I turned off my Blackberry. It's very important to do that.

"I think we're going to see a diffusion away from New York as a center of financial activity. New York will not be unimportant, but the rise of London, Hong Kong, Dubai, and other places is going to be quite significant."

Q: As you advanced in your career, what were some risks that you took that didn't turn out so well and what was learned from those?

CP: I don't tend to look backwards and say, "Gee, I made a mistake here, and gee, I made a mistake there." I'm sure there were hundreds, maybe thousands of mistakes; things that didn't work out. There's a great book last year about Franklin Roosevelt's efforts to change the economy during The Depression. He tried a whole bunch of things, almost all of which failed. And he would just hit it and bounce off and go to the next one. You've got to keep moving.

Q: More and more companies are going to Hong Kong and London to raise capital because of the high fees and because of growing, complex regulatory issues in the States. How are companies like yours dealing with this challenge?

CP: We're a US regulated bank, so wherever we get our capital, we're still regulated by the folks in Washington. We're also regulated by people in London and Hong Kong, and other countries in which we operate. We go around the world raising capital in lots of different places based on the economics of where we can raise capital more cheaply. I think we're going to see a diffusion away from New York as a center of financial activity. New York will not be unimportant, but the rise of London, Hong Kong, Dubai, and other places is going to be quite significant.

Q: There are obvious pros and cons of separating the positions of chief executive officer and chairman of the board. Given your recent assumption to both hats, what are your thoughts on how it's going?

CP: I think that the separation of chairman and CEO, to be quite candid, is a peculiarly British phenomenon. In the United States, we tend to have a lead director. And in our case, we have a lead director who is very active. Every time we have a board meeting, the outside directors meet privately without any insiders, including myself.