When Ethics Drive a Change in Strategy In 2003, Charles Prince took over as CEO at the large financial services company Citigroup. He was handpicked by the previous CEO, Sanford Weill, to carry on the same strategic focus of aggressive growth, a large number of acquisitions, and high year-to-year earnings growth. Weill stayed on as chairman of the board to ensure his protg was up to the task of steering Citigroup in the right direction for the future. After 2 years establishing his presence as CEO, Prince made dramatic changes at Citigroup. He stated that one of his primary goals was to improve the firm's corporate reputation and to focus on implementing stronger internal controls and a more comprehensive ethics program at the company. After the new initiatives were announced to the employees, two of the three highest-ranking employees at Citigroup left the company. The second-in-command, Robert Willumstad, and former global consumer banking head, Marjorie Magner, left the company. Weill also attempted to leave his position as chairman of the board. All were upset when their advice to Prince was ignored. The obsession with implementing a supportive value system at Citigroup was based on a number of ethical issues that had taken place when Prince took over as CEO. Citigroup did not separate its financial analyst functions from its role as an investment bank. Citigroup also had to address government probes in England for its aggressive strategy related to bond trading. Citigroup lost its private banking license in Japan because of activities by some of its employees. Furthermore, the Federal Trade Commission accused Citigroup of purposely misleading customers in its consumer lending unit. One of the driving forces to change the strategy at Citigroup was Prince's new interpretation of the role of Citigroup. Weill perceived Citigroup as primarily accountable to one stakeholder, the stockholders, through profitability, whereas Prince described Citigroup from a broader stakeholder perspective by styling the company as a "quasipublic institution." During the year before Prince made the strategic changes, he estimated that he spent half of his time focusing on culture and values issues. Prince stated that he needed to establish a new ethics model, which was not a priority for Weill.

1. Why do you think it was important for Sanford Weill to stay on as Chairman of the Board after Charles Prince was picked as the new CEO?

2. Why did three top-level employees at Citigroup want to leave after two years with Prince as CEO?

3. Why do you think there were multiple ethical problems at Citigroup when Prince took over as CEO?