By Amey Stone
Poetic justice, perhaps? Or maybe just "what goes around comes around." On Sept. 30, John Reed, former co-chief executive of Citigroup, will step onto the finance world's center stage when he assumes his new post as interim head of the New York Stock Exchange. The next day, in an unrelated event, Sandy Weill, who shared the CEO spot with Reed before Weill ousted him in an epic boardroom battle, will relinquish the chief executive job at Citigroup (C ), remaining on as chairman.
In a sense, the juxtaposition of career moves by these one-time rivals is more than an amusing coincidence. The truth is, many of the qualities that made Reed lose the top job at Citigroup to Weill three years ago now make him the perfect choice to reform the NYSE.
The exchange has been embroiled in controversy for weeks over the excessive compensation package afforded former Chairman Dick Grasso, who was forced to resign on Sept. 24 (see BW Cover Story, 9/15/03, "The $140,000,000 Man"). It also faces growing scrutiny over the trading practices of some of the Big Board's specialist firms and a mounting public outcry over its conflicting roles as both regulator and operator of the exchange.
What's needed is a vision for the exchange's future -- for which the 64-year-old Reed is ideally suited. He carved out just such a role at Citigroup as a big strategic thinker, less interested in the daily nuts and bolts of running a company (and details like how to make quarterly earnings forecasts) than Weill. For example, Reed saw early on that automatic teller machines and credit cards would revolutionize consumer banking -- two calls that paid off handsomely for Citibank.
It's not just ATMs that excite Reed. He's a techie to the core, believing on many levels that technological changes can be crucial to corporate success and prosperity. And at the NYSE, seeing how technology can make the exchange function better promises to be a big part of his job.
While Reed can be cool and aloof as a manager, he comes to his new job with an academic's love of research, which could also bear fruit in reforming the 211-year-old exchange. Indeed, he has been teaching in the ivy halls of Princeton University since leaving Citigroup. And although he's cerebral, Reed is no slouch when it comes to political infighting. He reshaped Citigroup's board once he became CEO, says Dick Bove, a long-time banking analyst now with the research boutique Hoefer & Arnett. "That's why it was a little shocking when Sandy outmaneuvered him. This guy knows how to get control of an organization."
Most important, he's considered scrupulously honest. Many see in him the same bearing that Laurence Fink, who chaired the NYSE's search committee, repeatedly cited in the Sept. 21 press conference announcing Reed's appointment. "I've watched him for 14 years and am convinced he would be outraged by anyone suggesting to him that he do anything improper," says Bove. "He has all the right characteristics to do the job and is probably one of the best picks that one could come up with."
For all the laudatory tone of such remarks, Reed also may be a tad lucky. Unlike Weill, he was far removed from the financial scandals of the past two years, notes Peter Cohan, a management consultant and author of Value Leadership: The 7 Principles That Drive Corporate Value in Any Economy. Although Cohan regards Reed as a safe choice for the transition, he also sees a Wall Street outsider -- one who likely won't have the clout to reshape the exchange. Says Cohan: "It's good they made him temporary."
Nonetheless, during the press conference, it was Reed who stressed the fleeting nature of his assignment. He thought it would be a matter of months for him to find a permanent successor. Perhaps. But the task of reforming major institutions often takes much longer than anticipated. And in an odd twist of fate, that task with the NYSE seems to have fallen to a plain-speaking, scrupulously honest Big Thinker, with a touch of the brawler in him. There's reason to hope, at least, that the search for Grasso's replacement is over.
Stone is senior writer for BusinessWeek Online
Edited by Douglas Harbrecht