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.Golub would prove such a star, and IDS such a success, that afterthe AmEx board asked for Robinson s resignation in 1993, whenthe company s sprawling financial services empire was unravel-ing, they decided to name Golub CEO.Saving Fireman s Fundeill, still smarting from the IDS pricing debacle, would soonWhave his hands full with a key role in resuscitating AmericanExpress ailing insurance subsidiary, Fireman s Fund.But it wasfar from a plum assignment.In late 1983, serious problems at Fireman s Fund emerged.Like many commercial insurers, Fireman s Fund paid out muchmore in claims in 1983 than it had projected.Meanwhile, theproperty/casualty industry was suffering a major downturn,which Fireman s Fund CEO Edward Cutler had warned Robin-son and Weill about.Without adequate reserves, American Ex-press had to sink capital into the company.Worst of all, thesharp losses in the insurance subsidiary dragged down the par-ent company s results.American Express was forced to an-nounce that its profits would fall about 10 percent for the year ston_c05.qxd 4/16/02 8:50 AM Page 147147Deputy Dogin December 1983 the first time in 35 years that the companydidn t have an annual earnings gain.For Robinson, this was a disaster.Along with Gerstner s card di-vision, Fireman s Fund had been a cash cow for AmEx.But it wasa high-cost producer in an industry that was getting increasinglycompetitive.After Cutler made a presentation at AmEx head-quarters detailing Fireman s Fund s financial woes, he would soonbe on his way out.The writing on the wall became clear for Weill when Robinsondecided to send him out to California in late 1983 to rescue Fire-man s Fund.Weill was smart enough to know that he was beingexiled.From House of Cards:Weill: Your mind is made up, then?Robinson: It s the best solution.Weill: What about Shearson?Robinson: Shearson can report to me.Don t worry about that,Sandy.As Friedman and Meehan wrote, It was a fatal blow to Weill.AmEx s president would be out of New York and out of mind.Even better, Weill would be completely severed from his re-maining power base at Shearson. 11 For the next year, Weillcould no longer complain of not having enough to do.Fire-man s Fund was a mess.Weill told colleagues he welcomed the challenge, despitemore honest intimations to friends.To his credit, Weill attackedthe job with his customary gusto.He rented a small apartmentthree miles from the Fireman s Fund offices in Novato, Califor-nia, north of San Francisco, where instead of overlooking theManhattan skyline his office had a view of a cow pasture.He ston_c05.qxd 4/16/02 8:50 AM Page 148148KING OF CAPITALworked full-time there, flying back to New York and his familyon the red-eye Friday mornings and returning on Monday.Adopting his old Shearson ways, he set about turning around theinsurance subsidiary.Weill moved fast.He cut the staff by one-fifth, reduced costs by$65 million, and attempted to thin an entrenched bureaucracy.Many of his cuts came from within the executive ranks.Weill ex-pected immediate changes to produce immediate results, as theytypically did at the brokerage firms he had turned around.But ittook about a year for Fireman s Fund to get back on firm foot-ing far longer than Weill had expected.Predictably, Weill alienated some executives at Fireman sFund who criticized him for moving too fast.The complaintswere familiar: Weill was abrasive; he would shout; he would nottake time to think things through.The staid insurance companyhad probably never seen the likes of Weill before. Fireman sFund was an old, low-key organization long on trust, a formerFireman s Fund employee said in an article from that period.Incontrast, Weill was described as, abrasive and insensitive. 12Weill and Cohen Clash Againt the same time Weill was shaking things up at Fireman sAFund, Cohen came up with an even more high-powered acqui-sition idea.In the spring of 1984, news broke that the partners ofLehman Brothers, the venerable Wall Street investment bank,were warring and looking for a buyer.Lehman had merged withanother ailing Our Crowd firm, Kuhn Loeb, six months earlierand attempts to integrate the two firms were failing miserably.As CEO of Shearson American Express, Cohen was eager to pur-chase an investment banking firm.Shearson was still known forits fleet of retail brokers.As Cohen saw it, Lehman could bolster ston_c05.qxd 4/16/02 8:50 AM Page 149149Deputy DogShearson in the key areas of banking, fixed-income trading, andgovernment securities.Not surprisingly, Weill was against it at the start, arguing it wasbad timing.The market was booming and he preferred to buyfirms when the market was suffering and he could get a goodprice.But, his clout at the firm badly damaged by the IDS pricingdebacle, Weill had no power with which to restrain Cohen.Weill Looks for an Exit from American Expresseill s stint running Fireman s Fund had rekindled his long-Wing to be on top again, and it was abundantly clear to himthat Robinson wasn t going anywhere soon.In August 1984,Weill started selling AmEx shares by the hundreds of thousands.As the months went by, he kept selling.For anyone who cared tolook, Weill was clearly signaling his impending departure, as hehad always viewed the willingness of employees to stockpile com-pany shares a litmus test for their loyalty. American Express Weill Sells 150,000 More Shares ran aJournal headline on March 8, 1985.Weill sold those shares ofcommon stock for about $6.1 million, leaving him with about150,000 shares.In the prior six-month period, Weill had sold450,000 shares of American Express, or about three-quarters ofthe 605,000 shares he owned.An American Express spokesmantold the newspaper that Weill sold the stock merely as a result of personal financial planning that includes diversification of hisportfolio. 13It became even clearer that Weill would soon be leaving whenanother management reshuffle in December 1984 left Weill outof the loop and gave Gerstner a top role.Gerstner s mandate wasbroadened beyond the credit card and traveler s check area toinclude various corporate financial and planning duties.Weill ston_c05.qxd 4/16/02 8:50 AM Page 150150KING OF CAPITALwas relegated to chairman of the finance committee of theboard of directors, a role that had been fulfilled by Robinson.Itwas a swift kick upstairs for Weill.Weill alighted on a potential exit strategy.Robinson and theboard decided that, even with a turnaround under way, Fire-man s Fund wouldn t be able to achieve benchmarks for growthand should be sold.Weill, who liked the insurance business, de-cided to buy Fireman s Fund himself.The strategy he came up with for buying Fireman s Fund wasa leveraged buyout, with assistance from Warren Buffett ofBerkshire Hathaway.It called for Buffett to get 40 percent,AmEx to retain 40 percent, and Weill to take the remaining 20percent.Robinson weighed Weill s proposal for nearly a month.But the board balked, so Robinson rejected Weill s offer.In-stead, the AmEx board decided on a strategy of selling Fire-man s Fund to the public over the next few years while theturnaround continued.As it turned out, one of Weill s big mis-takes during his tenure at AmEx was not doing more to culti-vate the board.But Weill was not completely rebuffed.Robinson offeredhim the chance both to become the CEO of Fireman s Fundand to buy a significant stake of the public company.Thoughskeptical, Weill negotiated with Robinson
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