Focus on Citigroup
Interview: Sea Cliff Capital---Ellman, James---Managing Director / Partner
Interview: The Corporate Library---Minow, Nell---Editor
>> welcome back, everybody. it is 5:12 here in new york. our coverage of today’s top stories, citigroup continues. we’ve got a round table discussion on citigroup. right now we’ll hear from two different sides on kprapt governance issue, on the effect of news on citigroup stock . we’re joined by james el man joining us from san francisco. nel mino is the editor of the corporate library. we welcome both guests to bloomberg television and radio today. thank you for being with us to the both of you. james, i would really like to start with you. you own shares of citigroup. are you going to make any changes to your position in the stock because of weill’s departure?
>> no, not at all. in fact, i think this is a positive situation in that it removes some uncertainty to the stock , and clearly uncertainty is a negative in the market. >> nel, you named citigroup the company with the worst board in america recently. is prince’s appointment, does that make the situation a little bit better?
>> i don’t think so. we tend to suspend our score for six months after a major change like this. the question is is there a major change?
>> what we have is sandy weill being kept on as chairman of the board until 2006. that is simply an outrage. it looks to me at the moment as though citigroup is trying to adopt the appearance of improved kprapt governance without really understanding the substance.
>> james, do you feel sandy weill still being chairman of the board is going to impart as much influence as he did as c.e.o. or is he going to give a looser hand to chuck prince?
>> oh, he’ll still be walking the halls and bothering quite a few people, particularly if they are not doing a good job. i think we should remember that mr. weill created a lot of shareholder value, billions of dollars of shareholder value for millions of shareholders over a couple of decades.
>> that’s the sandy weill touch, if you will. nel, i wanted to ask you about that. do you think that that is something that is going to serve prince well, something that he can overcome or certainly maintain?
>> well, he’s going to have to --
>> go ahead, james.
>> please, go ahead.
>> he’s going to dves.
>> nel, you go ahead. he’s going to have to establish himself as a leader in his own right. he’s coming in just as a major acquisition is under way. he’s going to have to take charge of that. he’s going to have to show that he is the boss. if it were me i would move sandy weill out of the building, he’s a part timer and a retire yeef at this point. i would make it absolutely clear that this is my job and i’m up to the task.
>> james, as a shareholder is that something you want to see?
>> oh, absolutely not. i want to see a slow, gradual departure of mr. weill from the executive positions at the k i believe over the next six months mr. prince will have a much higher profile. he’ll be spending a lot of time one on one with the major analysts that follow the company. i remember that mr. wellingstod, the new c.e.o., the c.f.o. and mr. prince and mr. weill have been workinging the, at least the three of them, for more than 20 years now. these people know how to working the. they have in the past. i believe we will see them all working at the company in the next couple of years.
>> nel, do you think weill’s departure is a direct result of litigation and charges against the firm over the last few years?
>> yes i do.
>> clearly not. certainly mr. weill has talked about the fact that he was going to be departing within the next few years. clearly this is just a six-month period which is a reasonable period of time to move in the new management where everybody moves up a notch. but i don’t believe that it really had much bearing on the fact that we had some investigations at the company in the last few months.
>> following the settlement he is not even allowed to be in the room with his own employees, the the analysts, without a lawyer present. he was personally involved in one of the most horrendous scandals of last year. i think it has been a huge embarrassment. he himself admitted he’d under estimated the reputational risk that had come to the company. he knew he had to remove himself. the question is has he?
>> nel, another question of course, maybe for you to consider, is he recently increased the dividends on citigroup shares. he is―owns about 22 million shares. just on an annual basis he stands to make quite a substantial amount of money just from the dividend increase. what do you think of that?
>> i think we’ll be seeing a lot of dividend increases at companies following the tax changes. so i’m not surprised. but certainly it is a nice going away present for himself.
>> james, clearly a nice going away present for himself but for you and many other shareholders.
>> well, of course, mr. weill had clearly enunciated to the market that he would be interested in raising the dividend if in fact ts law went through, which it did.
>> where do you think prince takes citigroup from here? james, you first.
>> one point i would have to make is that it’s not necessarily clear that wellstad and prince will be able to get along and there may be a horse race to see who ends up really being the c.e.o. of the company. i don’t think what we are going to see is a mass exodus of departures of people as you saw at merrill lynch where you had a horse rate race set up or general electric ha few years ago where one of the members of the internal management get elevated. to a certain extent i believe with city if the markets continue to do well and the economy starts to improve, you are going to see more of the same from city going forward.
>> we’d like to thank both of you for being with us today. we’ve been talking with james elmann, a fund manager with sea cliff capital, nel minnow, editor of the corporate library. at this point we have to take a break.
when we come back we are talking about federal reserve chairman alan greenspan.
