All this is important, but the most important thing is the change in tone and business culture since the go-go 1990s. There’s always the potential for fraud. If somebody like WorldCom is going to perpetrate a fraud, no amount of rules is going to keep that from happening.
Have you had to walk away from deals as a result of your net-effect rule?
We initially had a couple of tough conversations with clients on the rule. More recently, our clients, as I said, have been on board with this.
What types of structured-finance deals are no longer done?
There’s very little that’s not done. I think some of the more-structured things that Enron was doing—those became very popular as off-balance-sheet financing instruments for utilities. I think those are a lot less popular today for utilities.
The issue with Enron was how it was disclosed and how they talked about it, and what this really meant for their operating business. There’s nothing evil about structured finance per se. It is just that when it is not disclosed properly, there is the potential for misleading investors.
You’re one man. How do you stay on top of all that’s going on at a company with the size and diversity of Citigroup?
This is a big place. We’re in more than a hundred countries. We’re in every major financial-services product. It’s a fantastic perch from which to see what’s going on almost anywhere in the world. That’s one of the exciting things about the job.
The flip side of that is that anything that happens anywhere has an impact on us. So we have to be on top of the risks that exist in the company. And from my perspective—a control perspective—I’ve got to make sure that the controls are in place to ensure that we’re reporting accurate financials and not having operational breaks.
Most important is maintaining a culture of integrity in the finance organization, because regardless of how many controls you try to put in place, if the culture isn’t right, somebody will take advantage of the situation. We spend a lot of time on internal training. We deliberately transfer finance people across businesses on a regular basis to make sure that nobody goes too native anywhere. That’s very important as a control mechanism.
We also have an accountability approach. This was started years ago, way before Sarbanes-Oxley. At the very lowest level of a P&L of a product and a country, the finance person responsible for those numbers has to sign that those are the right numbers, and then that cascades up to the next level.
So there’s a culture of accountability and integrity. That gives me the ability to sleep well at night. The final part is you have to have really, really talented people working with you. We have one of the finest finance functions of any business in the world.