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

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Case Details:

Case Code : BECG108
Case Length : 13 Pages
Period : 2007-2009
Pub Date : 2010
Teaching Note :Not Available
Organization : Citigroup Inc.
Industry : Financial Services
Countries : US

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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.

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Excerpts

Background Note

CITIGROUP

In 1998, Citicorp, Inc (Citicorp) merged with non-banking financial services and insurance giant Travelers Group, Inc. (Travelers). The US$ 140 billion merger resulted in the formation of Citigroup, Inc (Citigroup)...

PHIBRO

Phibro Energy Inc. (Phibro Energy) was originally a unit of Philipp Brothers Co. (Philipp), a large international commodities company, and was in the business of metals trading. Later, it took up oil trading after oil prices turned volatile in the 1970s and 1980s...

The US$ 100 Million Compensation Controversy

The economic crisis in the US adversely affected Citigroup, resulting in huge losses for the company. In November 2007, after it had to write down US$ 11 billion in sub-prime mortgage assets, CEO Charles O. Prince resigned. In December 2007, Vikram Pandit (Pandit) was made the new CEO of the company...

The Divestiture

Citigroup considered several options to deal with the problem, including spinning off Phibro as a separate business to distance itself from the controversy. It also considered opening Phibro - which till then had only been investing Citigroup's capital -- to outside investors...

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