CitiSmorgasbord: Another One Bites the Dust
Citigroup CEO Plans to Resign As Losses Grow
Bank’s Board to Meet With Prince on Sunday; SEC Queries Accounting
—Wall Street Journal
Ah, here we go again.
Another corporate big gets the axe, weeks after promising to right the foundering ship and receiving assurances of full support from key shareholders—in this case a Saudi prince—and his board of directors.
Citigroup Inc. Chief Executive Charles Prince is planning to resign at a board meeting on Sunday, according to people familiar with the situation, as the bank faces big new losses from distressed mortgage assets.
—The Wall Street Journal No doubt Citibank shareholders will feel better, as Merrill Lynch shareholders did after their former star CEO got the axe (See “Chipping and Putting While Merrill Burns”). After all, everybody loves a sacrifice, don’t they?
But who, precisely, is the bad guy in the Citigroup story? Is it really Chuck Prince?
Full disclosure: I’ve met Chuck Prince once, in his role as Citibank’s representative to an inner-city fund foundation fund raiser, and I liked him. Still, I have no idea whether he’s liked at Citibank, which is where it counts, professionally, nor do I know what his peers think of him, or what role he played as Sandy Weill’s legal honcho during the years Weill was pyramiding financial acquisitions into the now-maligned Citigroup.
Still, was Chuck Prince the problem here? Did four years of Chuck Prince do something to Citigroup that destroyed an already-great company?
Today’s Wall Street Journal article contains a hint at the answer:
“We don’t have any culture and that’s definitely the problem,” says one long-time employee who asked not to be identified. That represents a big change from the 1970s and 1980s, when the bank had such a strong culture that other firms routinely raided Citi for top talent. Hmmmmm… Recall the timeline behind Citigroup’s creation:
1. Sandy Weill merges his Travelers Group with Citibank in 1998, shmooshing together two wildly disparate cultures into one financial smorgasbord re-christened as Citigroup.
2. Sandy Weill takes over as sole CEO of Citigroup in 2000.
3. Sandy Weill takes nearly $1 billion in compensation from Citigroup.
4. Sandy Weill retires from Citigroup in 2006.
And poor old Citibank hasn’t been its old self since. I repeat: hmmmmm…
Now, I don’t know Sandy Weill and I am sure he deserved every dollar of the nearly $1 billion he received in his years at Citigroup or CitiBank or CitiSmorgasbord or whatever it was he wanted to call it.
But I think if Citigroup’s shareholders and its board of directors and Wall Street’s Finest are looking for someone to blame, they might study a little more carefully the history of this patchwork of insurance companies, brokerage firms, and banks called “Citigroup,” and ask themselves whether they’ve dethroned the right man.
From the longer view, this looks more like the latest incarnation of the age-old public company shell game in which some fair-haired CEO convinces naive shareholders, gullible analysts and complacent board members that a kabillion dollar company can consistently outgrow the very market it serves quarter-by-quarter-by-quarter …until it can’t.
GE’s Welch, Coke’s Goizueta, Fannie Mae’s Raines, Citibank’s Weill—aren’t these all merely variations on a theme?
Chuck Prince—who ran Citigroup for four years—leaves in a cloud of humiliation and bad press. Meanwhile, Sandy Weill, who created Citigroup out of mergers and acquisitions that left it with “no culture” yet had the good sense to retire gracefully before the fallout, puts his Citigroup-generated stock-option uber-weath-enhanced name on hospital buildings.
Who’s really to blame for the problems at CitiSmorgasbord?
Jeff Matthews I Am Not Making This Up
© 2007 NotMakingThisUp, LLC
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.