Last Man Standing (13 page)

In 1994 Dimon welcomed Weill’s daughter, Jessica Bibliowicz, to Smith Barney as an executive vice president in charge of sales and marketing in the company’s $55 billion mutual fund division. Bibliowicz would report to Dimon, not to her father. She had previously worked at Prudential Mutual Funds for two years and in Shearson Lehman’s asset management division for the eight years before that.

In January 1995, Dimon named Bibliowicz chairman of the company’s mutual fund operations, then the ninth-largest in the country. He’d even pushed her ahead of a candidate favored by Jeff Lane, the company’s head of asset management, taking some political heat in the process. In reality, Bibliowicz ran only mutual fund sales, a department with a mere 18 people. Despite the loftiness of the title, she didn’t oversee money management, operations, or finance for the fund group.

Dimon and Bibliowicz had been friends since childhood, but their
relationship began to fray the next year, when Dimon pushed for the company to sell no-load mutual funds in response to the success of Vanguard and other no-load fund companies. Bibliowicz resisted the idea, arguing that the company should stick to its own internal funds—brokers were far more motivated to sell them, after all, because of the commissions—and Weill himself sided with her in discussions on the subject. Dimon eventually won the debate, and in July 1996 Smith Barney was the first Wall Street broker to sell no-load funds. In the end, the move proved to have been a smart one.

In August, the
New York Times
picked up on the tension, which Bibliowicz called “perceived” and not a “conflict.” Whatever the case, there was a conflict soon enough. Dimon became convinced that Bibliowicz’s strengths were restricted to “soft” skills like marketing and that she lacked a thorough enough understanding of the numbers of the business. He began to criticize her openly, alienating her and irritating Weill. At least some of the results seemed to support his claim. In 1996, for example, Smith Barney’s mutual fund division brought in just $288.3 million in net new assets, compared with $3.1 billion at Merrill Lynch.

Soon, too, Lane found himself in Dimon’s crosshairs. With Dimon repeatedly calling for his reassignment, Weill ultimately agreed, but at the same time suggested Bibliowicz as a candidate to be Lane’s replacement. Dimon vetoed the idea, saying she was not yet qualified. After some deliberation, he instead promoted Robert Druskin, the onetime chief financial officer of Shearson Lehman Brothers and later co-CAO of Smith Barney Shearson. Druskin had known Weill since 1969, when he joined Shearson Hammill in the management training program, so Weill could hardly call the choice inappropriate.

Still, it rankled. And not long afterward, in February 1997, Dimon again subjected Bibliowicz to what Weill regarded as ignominy. Dimon named three executives to the Smith Barney planning committee—including Smith Barney’s general counsel Joan Guggenheimer—and excluded Bibliowicz. Weill’s daughter felt that this was a message directed squarely at her: a woman, yes, but not
you
. Guggenheimer, it should be pointed out, managed hundreds of people, compared with Bibliowicz’s 18. (She was also a top-shelf legal mind who served as one of Dimon’s
closest advisers at three different companies before her premature death from cancer in 2006.)

From Weill’s perspective it was an unforgivable slight. His reaction was near-hysteria. It was a staggering misapprehension on Weill’s part, considering that there were numerous people within the company who deserved such a spot more than his daughter. Weill was also upset that Dimon did not inform Bibliowicz personally, even though she did not technically report to Dimon.

The final, irreconcilable breach in the relationship came when Dimon actually acceded to Bibliowicz’s ambition. When she asked him how she could get ahead in the company, he asked what she aspired to. “Well, I’d love to run Smith Barney one day,” she replied. Dimon told her that if that was ever going to happen, she needed experience in the retail side of the business. He then called Mike Panitch, who oversaw the retail branches, and asked him to find a spot for Bibliowicz to learn the ropes. Panitch initially replied that he would offer the boss’s daughter a single Smith Barney branch. Dimon balked, and asked Panitch to put her in charge of one of the company’s four divisions—East, Midwest, Southwest, or West.

Panitch offered her California, with the rationale that the other three states in the West division—Nevada, Montana, and Idaho—would add too much travel and too many headaches for someone settling into a new position, and assigned the other states to another division head. Dimon signed off on the arrangement, thinking that it wouldn’t be a comedown for Bibliowicz, because California had 2,100 or so brokers out of the 2,700 for the four states combined. He was wrong. Bibliowicz felt slighted. Weill exploded when he found out. “You insulted her!” he raged.

Weill beseeched Dimon to reach out to Bibliowicz and somehow make things right, for fear that she was about the leave the company, and to his recollection Dimon agreed to do so. Then, after returning from a two-week vacation in France, Weill found to his displeasure that Dimon had done no such thing, and his daughter had decided to resign. In the midst of it all, the Travelers Group reached another milestone: in
March, the stock was added to the Dow 30 Index. But Weill, for once, was in no mood to celebrate.

Dimon told Bibliowicz she was doing the right thing. “Honestly, Jessica, you’re not going to be treated properly around here anymore,” he said. “Not everyone is telling you the truth. Not everyone is telling your father the truth. He’s gotten too involved. You need your own life outside this company.” When Weill chose to tell reporters that he had known nothing of the issues, Dimon was shocked. “That was the first time I saw him not being completely honest with the press,” he recalls.

When Dimon’s friend from Harvard Business School, Stephen Burke, who had gone on to work at ABC, read in the
Wall Street Journal
about Bibliowicz’s departure, he called Dimon. “Jamie, did you miss the class at Harvard when they said you never fire the boss’s daughter?” he asked. After a fifteen-second pause, Dimon replied, “I had to tell her she wasn’t going to get a job she wanted, she didn’t like it, and she left the company. I couldn’t do something I didn’t feel was right.”

Others thought Dimon had placed inordinate importance on his own greatest strengths—analysis of financials—and overlooked the fact that Bibliowicz was indeed a marketing talent. “But in Jamie’s mind, it would have been a compromise, that he risked losing credibility with his own people,” recalls Bob Willumstad. “If it were me, I am guessing I would probably have found a way to make that compromise. It wasn’t like she was incompetent.”

According to Monica Langley, a member of Travelers’ board, Arthur Zankel, also thought Dimon had lost sight of pragmatism at a crucial moment in his relationship with Sandy Weill. “This isn’t your finest hour,” Zankel told Dimon. “It was your prerogative as Smith Barney president to pick your own asset chief last year, but you could have put Jess on the executive committee. As businessmen, we all have to live with this stuff occasionally.”

Most observers blame Weill, though, for putting Dimon in an untenable position. If Dimon had promoted Bibliowicz as fast as she’d wanted, it would look have looked as though he was sucking up to the boss. When he didn’t, the boss became mad. But that was classic Weill.
Despite his well-deserved reputation as a visionary, he had blind spots when it came to what
he
wanted.

Bibliowicz later told the
New York Times Magazine
that her leaving had more to do with her father than with Dimon. “I couldn’t be open with him because I had to go through channels,” she said. “I didn’t leave because of Jamie.” Dimon, too, denied any irreparable damage. “Sure, we disagreed, but we worked it through,” he told a reporter. “She was a friend before she got here. She was a friend while she was here, and she’s a friend now.”

His relationship with Weill, however, had just slipped down another notch, writes Monica Langley. “You drove her out,” Weill accused the younger man. “It might be the right thing for your daughter and the company,” was Dimon’s curt response. When asked by reporters whether Jamie had thrown his status as heir apparent into doubt, Weill was pushed to even greater heights of annoyance. “I have never made it clear to anybody that Jamie is my successor,” he said. “I have no plans to leave this company.”

In August, Weill hired Thomas Jones from the asset manager TIAA-CREF and put him in charge of the company’s asset management business. Weill had stripped this unit out of the Smith Barney infrastructure and made it a separate division reporting directly to him. When the
Wall Street Journal
asked if this was a retaliatory move, Weill denied it. “If I wanted to retaliate, I would really retaliate,” he said.

Years later, Weill still stews over how Dimon handled the situation. “I’ve said this to him in the past, and he doesn’t like me to say it,” recalls Weill. “I think Jamie built terrific loyalty from some people and developed a group of people who he really had great relationships with. Others bumped into that, and those that bumped into that, their fate was not great.”

It is amazing that when two men joined forces in a display of empire building for the ages, their relationship started to come undone over nepotism. What’s more amazing is that each man had a critical shortcoming that did not allow him to find a way out of the situation. Weill could be so single-minded about his own needs and wishes that he failed to consider the position he put others in. And Dimon, ever the moralist,
could not bring himself to bend in the one instance that nearly anyone would have given him a pass on. (On the other hand, maybe he was looking over his shoulder. If you have an inkling that you’re about to engage in a power struggle with your boss, it’s probably smart not to promote his kids.)

Bibliowicz landed a job as president of John A. Levin & Co., and later National Financial Partners (NFP), an insurance company roll-up that went on to buy 180 smaller life insurance firms. She had a decade of success, but in a jarring display of symmetry, NFP slipped below $1 a share in 2008 just as Citigroup, her father’s creation, also teetered on the edge of the void.

• • •

Fortunately for Dimon, Smith Barney was cruising, and this had the effect of blunting Weill’s anger. Buoyed by a new issue market that set records in 1995 and 1996, the bank was taking a larger chunk of Wall Street business, and Dimon’s focus on the bottom line meant that the firm achieved profitability ratios—if not actual gross revenues—exceeding those of nearly every other bank on the Street. Smith Barney’s return on equity reached an astounding 36.7 percent in the second quarter of 1996.

“Jamie was demanding. He was relentless,” remembers his assistant Sweeney. “And he always wanted the one thing I hadn’t done. I’d walk in there with my pad of paper and he’d give me 10 things to do. I’d go back to my desk. An hour later, he’d call me and I’d have already done nine of them. And he’d ask for the tenth. And he pounded and pounded and pounded until you got it done. By the third time he asked for something, you better have been at a funeral, because that was the only acceptable excuse for not having it finished.”

Dimon refined a tactic Weill had long utilized: skipping several layers of reporting to find the exact person who might have the number or answer he was looking for. While it was efficient—why ask person A for something if you knew A would merely turn around and ask person B, when you knew perfectly well who person B was yourself?—it also caused consternation in the ranks. It was not uncommon for an executive
to walk by Dimon’s office and see one of his own reports in there talking to the Travelers president. “What’s
he
doing in there?” the executive would ask Sweeney, fearful of insurrection. “Why is
she
in there?”

It was a lush time for all. In the second half of the 1990s, stock and bond underwritings doubled in number, along with the total market value of firms listed on the New York Stock Exchange. Investors’ appetite for stocks fueled the largest bull market in history, pushing financial institutions to record levels of profitability. Travelers’ stock climbed from $21 in 1994 to $53 in late 1996. This was the dawn of the cable network CNBC, along with real-time stock tickers that scrolled across the bottom of its screen.

But not all the news at Smith Barney was good. With Greenhill’s departure, the firm ceded back all the progress it had made in mergers and acquisitions. Scores of bankers had followed Greenhill out of Smith Barney, and some who didn’t leave were pushed out. Dimon showed Greenhill’s deputy Bob Lessin the door in early 1997, and recast the goals for the investment banking division to more moderate levels. He told
Business Week
that instead of “elephant hunting”—aiming for a piece of the biggest deals—Smith Barney planned instead to make the middle market its specialty.

Dimon continued grooming a few of his best employees, particularly Mike Cavanagh, Heidi Miller, and Charlie Scharf. (A colleague later referred to one of the three as “Jamie Dimon’s Jamie Dimon.” When asked about it, the executive jokingly dismissed the label, adding that they had yet to have the opportunity to fire their boss’s daughter, thus making any such comparison premature.) Dimon utilized management tactics similar to those Weill employed, including shifting the most promising underlings around to ensure the broadest learning experience, even if it was not entirely clear to a lawyer such as Cavanagh why, at 26 years old, he should be mired in the budgeting process for the retail brokerage system at Smith Barney when most of his friends could already lay claim to much more obvious career paths.

In August 1996, Dimon worked with three CEOs—Daniel Tully of Merrill Lynch, Phil Purcell of Dean Witter, and Jon Corzine of Gold-man
Sachs—to hammer out a $100 million settlement with regulators over price-fixing on Nasdaq. Only 40 years old—the youngest CEO of a major securities firm—Dimon emerged from the negotiations with an even higher profile than before. His confidence, too, grew along with the fortunes of Smith Barney.
Business Week
ran a lengthy profile in October 1996, “Whiz Kid.”