Profit on Higher Ground

Joe Plumeri: Chairman and CEO, Willis Group Holdings

by Barbara Bowers

The insurance industry did not have a good year in 2004. That was when Eliot Spitzer, then New York’s attorney general, ­began probing contingency commissions — fees paid to brokers who lure clients. Spitzer accused many companies of bid rigging and accepting kickbacks.

The brokers denied any impropriety, but many ended up paying hundreds of millions of dollars in settlements and said they would no longer accept undisclosed monies from insurance companies. Twenty execs pleaded guilty to criminal char­ges; Marsh & McLennan handed more than 5,000 employees their walking papers. One of the few companies to emerge unscathed was Willis Group Holdings — in large part due to the leadership of chairman and CEO Joe Plumeri, 64, who runs the London-based company from New York. When Plumeri came onboard in 2000, at the recommendation of Henry Kravis — whose private-equity firm, Kohlberg Kravis Roberts, had taken the company private two years earlier — Willis was about $1 billion in debt. Rumors swirled that Aon was interested in snapping it up. Plumeri took the company public again, encouraging employees to buy stock; ramped up the core brokerage business; and bought majority stakes in companies in Germany, Italy and Spain. By 2003, Willis’s debt was down to $370 million.

His most fatefully prescient move came in July 2004, when he implemented a “Client Bill of Rights” — the company’s 10 commitments to “show our clients on paper why they should do business with us instead of our competitors, what they can expect from us time and again, and what our core values and beliefs are,” Plumeri says. During this period, he forbid employees from accepting compensation, gifts, entertainment or trips from insurers. He also began fully disclosing all compensation that Willis received for its services.

By the time the Spitzer probe came along, Willis’s practices were so aboveboard that it didn’t face a single lawsuit or have to issue any apology.

“Willis has implemented a more aggressive sales culture,” says Meyer Shields, principal at Stifel, Nicolaus & Co., a brokerage and investment-banking firm in Baltimore.

Plumeri’s foresight worked on another level, too: Reeling companies such as Aon went from being predators to wounded prey, ripe for poaching business. In 2007, ­Willis reported sales of $2.6 billion — up from $1.3 billion when Plumeri took over. Many people credit the Client Bill of Rights with helping keep Willis out of legal trouble. Previously, the company had relied on a simple Broker of Record letter to show it represented a client in the marketplace. Nothing stipulated customers’ expectations or Willis’s commitment to them; this approach became the industry standard.

Willis board member Joseph A. Califano Jr., the onetime U.S. Secretary of Health, Education and Welfare who has served on more than 20 for-profit boards over the years, says he can’t think of another firm that has done something similar: “Now, when I advise companies, I stress the importance of articulating their vision and values in a way that will have that kind of impact on their ­customers and employees,” he says. 

Executive Summary

• Fiscal Guru: When Joe Plumeri took over in 2000, Willis Group Holdings was about $1 billion in debt. By 2003, that figure was down to $370 million.

• Clients Come First: In 2004, Plumeri insti­tuted a “Client Bill of Rights.” One tenet: Employees were for­bidden to accept insurer-sponsored compensation or gifts.

• Success Story: By 2007, Willis reported sales of $2.6 billion — up from $1.3 billion seven years earlier.