ANGRY SHAREHOLDERS CONFRONT CITI BOARD
The anger was evident at Citigroup Inc.’s annual meeting, where shareholders took turns at the microphone to object to how the bank has been operating.
The meeting is usually a well-attended affair lasting many hours as shareholders air their grievances, and Tuesday’s gathering was as somber and full of ire as ever. When Citi Chairman Richard Parsons recognized the five departing members of the board, who include ex-chairman Win Bischoff and former U.S. Treasury Secretary Robert Rubin, one man from the audience yelled out: “Thank God you’ve gone!”
Citigroup CEO Vikram Pandit tried to bring a more upbeat atmosphere to the ballroom at the New York Hilton hotel, emphasizing to shareholders that Citigroup is not the same company it was just a year ago, when it was became clear the bank was buckling under the weight of billions of dollars in bad debt.
In his opening remarks, Pandit said the four new board members would bring “new eyes” to the bank. He also discussed the “new structure” that has split the bank into two parts, and the “new strategy” and “new beginning” that the company is embarking on.
“Citi is one of the great business opportunities of our age,” Pandit said. He added: “I believe to my core that Citigroup has what it takes to rebound, what it takes to rebuild.”
The four nominees include former U.S. Bancorp CEO Jerry Grundhofer; former Bank of Hawaii CEO Michael O’Neill, former Philadelphia Federal Reserve President Anthony Santomero; and William S. Thompson Jr., former CEO of bond investment manager Pimco.
Many shareholders have been calling for change at the board level for years, but some say say the new nominations don’t go far enough.
Kenneth Steiner, who said he owns about 10,000 shares, supported a proposal that would require the company to nominate two candidates for every board position instead of just one.
“Right now, it’s a non-election, basically,” Steiner said. “We know who’s going to win.”
Shareholders brought up other issues, questioning Citigroup’s underwriting standards for credit cards, executive compensation and its decision to sponsor the New York Mets ballpark, Citi Field.
Citigroup last week posted its best quarter since 2007, but still reported a $966 million loss to common shareholders. Before dividends paid to preferred shareholders, Citigroup posted net income of $1.6 billion. The figure relieved investors to some extent — the bank benefited from strong bond trading, low borrowing rates and severe cost-cutting.
But they remain concerned Citigroup could have sharp losses ahead of it. Loan losses and reserve builds for future loan losses amounted to $10 billion. Furthermore, accounting rules allowed Citigroup to take a $2.7 billion gain in its derivatives, because it, counterintuitively, benefited from the declining value of its debt.
Chuck Jones, who said he owned about 25,000 Citi shares, asked Parsons and the board whether they were betting on Citigroup’s recovery and buying Citigroup shares.
“How many of these directors,” Jones asked, “bought Citi at a dollar a share?”
“I wish I had,” Parsons said with a chuckle. Citigroup’s shares have tripled since dropping to 97 cents in early March.