On one side, there are the quiet heroes who perform deeds of courage and generosity every day, often saving their fellow citizens from disaster. On the other, there are the overpaid CEOs at Citigroup and Bank of America who cannot even save their own companies from their misguided schemes and have made them financial wards of the state.
It was one of those weeks where one’s neck got quite a workout from all the surprises happening around it. On a cold afternoon in New York, an Airbus A320 was forced to make an emergency landing on the Hudson River, gliding like a gigantic bird onto the frigid water with 155 passengers and crew on board. Earlier that day, investors woke up to learn that giant Bank of America would, like its ailing competitor Citigroup, need billions more in government handouts to keep it afloat. By the end of the week, both institutions would post billions more in losses and write-downs.
Thanks to the skills of pilot Capt. Chesley B. Sullenberger, and one of the most remarkable feats of airmanship of its kind ever, the engineless US Airways Flight 1549 made an emergency landing in the busy lower Manhattan harbor and awaited the rescue that came fast. The stock of Citigroup and Bank of America was not so lucky. Both crashed to near record lows, leaving shocked shareholders wondering where their help will come from. They are still wondering. (more…)
The board says it continues to stand behind current management, led by CEO Vikram Pandit. But can a board stand up while sleeping? This is a question investors must ponder.
If you are wondering how Citigroup could have lost tens of billions, seen the value of its stock pared by more than three-quarters, and required taxpayer guarantees and capital injections mounting into the hundreds of billions, look no further than two figures who have played a prominent role in defining the Bank’s corporate governance culture. (more…)
My interview with AE Investimentos in Brazil on the hot topic of CEO pay is carried in its December issue.
Executive remuneration and the role it has played in promoting the excessive risks and leverage that helped give birth to the current economic crisis are placing boards and pay rewards under a microscope as never before. The story is one more example of an increasing global interest in curbing pay abuse and its wider consequences.
An excerpt from the interview in its original Portuguese follows below (click to enlarge):
Our comments about Citigroup’s hapless board of directors made their way into the New York Post today in a piece by business journalist Paul Tharp. Some of the observations first made here at Finlay ON Governance were reflected in the Post’s editorial, as well.
The Post’s story got quite a lift, appearing in the headline of the newspaper which was much discussed on CNBC this morning. Here is part of what was quoted:
Citigroup’s board of directors increasingly resembles a first-class sleeping car on a train wreck that just keeps happening,” said J. Richard Finlay, head of the Centre for Corporate & Public Governance.
“Almost whatever it does, it is too slow and too late.
“It can take months for Citigroup’s directors to clue into what others in the real world have known for some time.
Noting that Citi’s stock has lost more than $133 billion this year alone, Finlay said, “Citigroup’s board has demonstrated that it has not been on top of any major issue in more than a decade, much less ahead of it.”
You’ll be seeing some significant changes in Citi’s boardroom in the not-too-distant future. It’s one thing for directors to be portrayed as sleeping on the job. It drives them crazy when they are presented as clowns.
It was a week that illustrated how not to be a leader.
The CEOs of the big three auto makers appeared before the United States Congress, and showed a level of ill preparedness on even rudimentary questions about their bailout pleas that would have incurred the ire of a fifth grade teacher. Their separate arrivals in three luxury private jets reminded us of when Robert Nardelli, then head of Home Depot, cut off shareholder questions at the company’s annual meeting after 60 seconds. (more…)
There is a reason why the bank’s board appears little more than a bystander to the destruction of shareholder wealth. A good part of it has to do with its discredited governance structure.
Watching Citigroup’s shares crash through the 10 dollar level, then nine, then eight, seven, six -like some kind of inexorable countdown leading to the inevitable disaster- investors might be excused for asking, Where is the board? The answer is that it is stuck somewhere back in the 1940s, when it was considered bad form for directors to actually direct. (more…)
On one side, there are the quiet heroes who perform deeds of courage and generosity every day, often saving their fellow citizens from disaster. On the other, there are the overpaid CEOs at Citigroup and Bank of America who cannot even save their own companies from their misguided schemes and have made them financial wards of the state.