Chuck Prince at Citigroup (C)…….
Shareholder groups are becoming more activist and this trend will continue in 2007. Private Equity and LBO Groups can only acquire so many companies, and there are only so many candidates that can run behemoths. The best way to see change is right at the top in many cases and there is a slew of US public companies that would do far better if they could replace current management. These aren’t in any ranked order, so the first isn’t the worst and the last isn’t the best of the worst. The problem in stating this is that it is very easy to come in and criticize, yet finding replacements for companies this size is not exactly an easy feat. Private Equity as a sector has taken all the talented guys, and they haven’t stopped with the age limits that many public companies live by. There just aren’t too many Lou Gerstner and Jack Welch carbon copies out there.
Citigroup’s (C) CEO Chuck Prince needs to leave first AND its CFO Sallie Krawcheck may need to go if the current path continues. She isn’t really the blame here for no growth like the CEO, but if he doesn’t get forced out she will not be able to avoid then hangman either. At the current pace, Mr. Prince probably has another 6 to 9 months to hold on, but if the stock falls (even if it is just the market) then the board is going to need to send him packing. Earlier this year Prince Alwaleed bin Talal has already called for "draconian measures" to be taken, and it wouldn’t get more draconian than booting Prince (Mr. Prince, not the Prince). The fact that Citigroup shares are within 1% of the 52-week highs of $52.88 isn’t the issue here. The issue is that the shares are this way in hopes that Prince will do the right thing and the other issue is that the stock has been dead money for 5 years. Because of the laws of large numbers, the company will not be able to mirror its exponential growth of the 1990’s; but returning to at least SOME growth might not be too much to ask. The company lost the pole position to Bank of America as the largest bank by investor value in market capitalization, and Bank of America cannot make any more real traditional bank "deposit base acquisitions" in the US because it is up against the 10% deposit cap. Yesterday the CEO himself noted frustration over the share price, but his spending cuts and the like may not be what the street was looking for. A Reuters article noted some diconnection from the investment community, and here is a link to that. Citigroup has a 3.7% dividend, but that lags the 4.15% paid by rival Bank of America (BAC).
Jon C. Ogg
December 14, 2006
This is part of "THE 10 CEO’s THAT NEED TO GO" series coming out today and tomorrow. Jon Ogg can be reached at firstname.lastname@example.org; he does not hold securities in the companies he covers.