Bad debts claim Citigroup boss

So for a disastrous performance Prince is paid 25 million. I wonder how much he got on resigning for pension etc. If he had been a janitor he would have just got a pink slip. At the executive level there is often a disconnect between performance and compensation.

Bad debts claim Citigroup boss
Last Updated: Monday, November 5, 2007 | 8:18 AM ET
The Associated Press
Citigroup Inc. said Sunday chairman and chief executive Charles Prince, beset by the company's billions of dollars in losses from investing in bad debt, has retired and is being replaced as chairman by former treasury secretary Robert Rubin.

Rubin, a former co-chairman of Goldman, Sachs & Co., has served as the chair of Citi's executive committee.

In an announcement following an emergency meeting of its board, the largest U.S. banking company also said Sir Win Bischoff, chairman of Citi Europe and a member of the Citi management and operating committees, would serve as interim CEO.

Prince's resignation, which was secured at an emergency meeting of the Citi board Sunday, was expected after the nation's largest banking company revealed it had to write down billions of dollars in bad debt.

He joined former Merrill Lynch & Co. CEO Stan O'Neal, who resigned from the investment bank last month, as the highest-profile casualties of the debt crisis that has cost billions at other financial institutions as well.

In a separate statement, Citi said it would take an additional $8 billion US to $11 billion US in writedowns. It has already said it was writing down $6.5 billion US in assets.

Prince, 57, became chief executive of Citigroup in October 2003.

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Stock fell during Prince's tenure

Many shareholders criticized him openly for much of his tenure, as Citigroup's stock lagged its peers while Prince executed what was called an umbrella model of corporate organization, with several separate lines of business.

The company's shares closed Friday at $37.73 US, about 20 per cent below where they were when Prince became CEO.

Prince's position looked especially shaky after the company estimated that third-quarter profit would decline about 60 per cent to some $2.2 billion US after seeing nearly $6 billion US in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages.

At that time, Prince said the bank's earnings would return to normal in the fourth quarter.

But when Citigroup released its third-quarter results two weeks later, the write-downs and credit costs exceeded $6 billion US, and chief financial officer Gary Crittenden indicated the outlook going forward wasn't as upbeat as Prince had predicted.

Citigroup wasn't alone in its third-quarter turmoil. When borrowers with poor credit stopped paying their mortgages, many banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value.

But Citigroup's stumbles were particularly grievous, given the bank's size, history and CEO, who had been telling shareholders for years to give his strategy a chance. Even in October, Prince said in a call to analysts: "I think any fair-minded person would say that strategic plan is working."

The anger toward Prince was so intense that during a conference call last month, Deutsche Bank analyst Mike Mayo told Prince that investors wanted a significant change in management.

His supporters, though, argued that he was dealt a tough hand when his predecessor Weill gave him the reins, and that matching the hefty profit gains Citigroup saw in the 1990s would be difficult for any CEO.

Prince made nearly $25M US in 2006

Prince, whose compensation came to nearly $25 million US last year, is leaving under a much darker cloud.

It was not known whether Bischoff was in the running to replace Prince as CEO. Before Sunday's meeting, industry watchers floated many names as Prince's replacement.

Citigroup did a minor reshuffing in early October, combining its investment banking and alternative investments businesses into one unit.

At the time, Rubin and Saudi Arabian Prince Alwaleed bin Talal — Citigroup's biggest individual shareholder and once a critic of Prince — expressed their support for the bank's embattled CEO.


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