Corporate Governance at Citigroup

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Case Details:

Case Code : CGOX005
Case Length : 11 Pages
Period : 2003
Pub Date : 2005
Teaching Note :Not Available
Organization : Citigroup
Industry : Financial Services
Countries : United States

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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

The Board of Directors

The Board's primary responsibility was to ensure effective governance that would protect the interests of its stakeholders. It was also responsible for the formation of committees for various functions and overseeing the management of the organization and compliance with various standards, laws, rules and regulations...

Board Committees

With assistance from the NCGC and after consultation with individual directors, the Board appointed the members of the standing committees. All the committees except the Executive Committee were presided over and operated by independent directors, on periodical rotation within committees.

From time to time, the Board also established and maintained additional committees as necessary or appropriate. The Board and each committee had the power to hire and/or terminate the services of independent, legal, financial or other advisors, as was necessary, without consulting or obtaining the approval of any officer of the company in advance...

Code of Conduct

A code of ethics (see Exhibit: IV) applied to the executive officer of Citigroup and its reporting subsidiaries and all professionals worldwide serving in finance, accounting, treasury, tax or an investor relations role. The NCGC monitored the employees' compliance with the Code of Conduct, the Code of Ethics for Financial Professionals and other internal policies and guidelines...

Concluding Notes

Despite its efforts to introduce the highest standards of corporate governance practice, Citigroup had some concerns. On 28^th April 2003, Citigroup's CGM (brokerage arm of GCIB) reached a settlement with SEC on charges of research analysts' conflict of interest, and agreed to pay a penalty of $150 million¹⁷ and additional $150 million towards disgorgement¹⁸. In a settlement with SEC, Jack B. Grubman, a research analyst at CGM, agreed to pay $7.5 million as disgorgement and an additional $7.5 million in penalties on charges, of publishing false and misleading research reports, in favor of some telecom companies (including AT&T)...

Exhibits

Exhibit I: Citigroup: Board Structure (March 2003)
Exhibit II: Citigroup: Directors' Stock Ownership (March 2003)
Exhibit III: Citigroup: Committee Meetings (March 2003)
Exhibit IV: Citigroup: Code of Ethics for Financial Professionals

17] SEC Litigation Release No.18111, 28^th April 2003.

18] An anti competition law directing the defendant (Citigroup) to surrender all money or property (including profits) obtained through an unfair business practice, to the plaintiff (SEC), irrespective of from whom the illegal benefits were obtained.