Citigroup's Sale of Phibro: Ending the US$ 100 Million Pay Controversy


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BECG107 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Business Ethics / Compensation practices / Trade practices
Case Length : 13 Pages
Period : 2007-2009
Pub Date : 2010
Teaching Note : Not Available
Organization : Citigroup Inc.
Industry : Financial Services
Countries : US

Abstract:

The case discusses Citigroup, Inc.'s sale of Phibro LLC, its profitable energy trading unit, to energy and chemicals giant Occidental Petroleum Corp. Citigroup sold the unit reportedly to end the controversy that erupted over the US$ 100 million compensation due to Phibro's star trader Andrew J. Hall.

The case mentions some of the arguments for and against making the payment. It then describes the reasons behind Citigroup's decision to sell the unit, and some of the consequences of the sale on the company and on other companies in the US financial services industry. The case also touches on the possible benefits and threats to Occidental from the Phibro acquisition.

Issues:

» Understand the role of compensation in motivating employees.

» Understand the impact of government ownership on private enterprise.

» Recognize the ethical issues involved in compensating employees extravagantly, especially during dire financial times.

Contents:

  Page No.
Introduction 1
Background Note 2
The US$ 100 Million Compensation Controversy 4
The Divestiture 7
Occidental's View 8
The After Effects 9
Exhibits 11

Keywords:

Citigroup, Phibro, Andrew Hall, Executive compensation, Pay review, Financial services

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