According to the FT, “People close to the situation said Citi had retained Egon Zehnder, a headhunter and board advisory consultancy, to carry out an in-depth management review requested by the government after stress tests on banks in May.” The certainly implies that, in the government’s mind, the Citigroup board is not capable of doing the work themselves. Jerry Grundhofer, the former CEO of US Bancorp (TBBK) and William Thompson, former head of Pimco, have been added to the board. The head of Ripplewood and a former superintendent of the New York State Banking Department have also joined.
The government plans to exert its control over Citi whenever and wherever it pleases. It is a puzzle why it would encourage the bank to re-build its board with experts and then undermine them in their most essential task which is evaluating and deciding the fate of senior management.
Citi also has a number of public shareholders outside the government. They elect the directors under the assumption that the governance of the company is in the directors’ hands. That has turned out not to be the case.
Douglas A. McIntyre
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