Citigroup: New government money means breaking board rules
Filed under: Company News
It looks like the federal government will take a much larger common stock equity stake in Citigroup (C) than the one it already has. The government's ownership may be as high as 40 percent. Citi will need to find some private investors to put in money alongside taxpayers, and the board membership will change.
According to Reuters, "Under the deal with Citi, a majority of the bank's directors will be replaced, though Chief Executive Vikram Pandit will keep his job." Pandit has done so poorly, the news is surprising, but the information about the board is shocking. In most cases all shareholders would have a chance to decide whether a board will be replaced and would get to vote on new members. In this case, that critical step is being skipped.
Two issues come out of the decision on the board. The first is whether the government is by-passing one of the most important rules of corporate governance: the shareholders pick the board. The other part of the government's actions that raise a red flag is whether the move is a takeover of the bank without calling it that.
Once an outside investor can name the board, a company is no longer independent. All of the other shareholders have lost their rights. It says a lot about what procedures the government will violate in the name of saving Citi.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
2-28-2009 @ 4:00AM
Jschlich said...
Get your head on straight McIntyre.
The shareholders lost any right to say anything with their last dividend check. The shareholders allowed CITI to become what it is... good or bad.
Some think that taking my money [taxpayer money] is an action that and does not include getting the right to alling the shots? Such foolish, foolish and greedy people.
The shareholders have accepted the taxpayer money and the taxpayer now controls the destiny opf CITI. If the shareholders don't like it they should have been paying attention how their dividend checks were being created.
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