New York: Citigroup Incorporated, the bank 27 per cent owned by the US government, named former Mexican President Ernesto Zedillo to its board as part of an overhaul in which three longtime directors will leave.
Former AT&T Incorporated Chief Executive Officer Michael Armstrong and Xerox Corporation Chairman Anne M. Mulcahy won't stand for re-election at the annual shareholder meeting on April 20, Citigroup said today in a statement. Massachusetts Institute of Technology chemistry professor John Deutch announced in January he would step down.
Citigroup Chairman Richard Parsons, 61, has shaken up the board under pressure from US regulators after the bank had to take a $45 billion (Dh165.2 billion) government bailout in late 2008. Investor consultants including RiskMetrics Group Incorporated last year called for the removal of Armstrong and other directors who failed to prevent a drop of more than 90 per cent in the stock price.
"The question is, why did it take so long to make these changes?" said Michael Mayo, an analyst at Calyon Securities USA who rates Citigroup's shares "underperform". "We've been talking about problems with Citigroup's board and corporate governance for a decade."
The bank's shares rose 1 cent to $3.40 as of 4pm in New York Stock Exchange composite trading.
Citigroup repaid $20 billion of bailout funds in December. The Treasury Department's 7.7 billion shares currently worth about $26 billion carry voting rights, so it will have a say on the bank's board slate at this year's annual meeting.
Rising Inflation
Zedillo took office as president in 1994. Three weeks later, the peso collapsed and he faced spiralling inflation and interest rates as Mexico plunged into its worst economic crisis since the 1930s. Zedillo cut spending, increased the sales tax to 15 per cent from 10 per cent and negotiated a US-led $50 billion bailout package that kept the country from defaulting. The economy rebounded and had average growth of 5.5 per cent for the remaining five years of his term.
"Zedillo's extensive experience as a world leader and his expertise in global economics make him a valuable addition to the board," Parsons said in the statement.
Zedillo is director of the Yale Centre for the Study of Globalisation, which aims to "enrich the debate about globalisation" at Yale University in New Haven, Connecticut, and promotes "the flow of ideas between Yale and the policy world", according to the centre's Web site.
From 1978 to 1987, Zedillo worked at Mexico's central bank, in positions including deputy head of economic research. He serves on the boards of Alcoa Incorporated and Procter & Gamble Company.
Alcoa's chairman is Alain Belda, 66, who served as Citigroup's lead director from April 2004 to July 2008 and was panned by RiskMetrics along with Armstrong, 71, Deutch, 71, and Mulcahy, 57.
Nominees
Mulcahy last year was named to the Johnson & Johnson board, where former Citigroup CEO Charles "Chuck" Prince heads the nominating and corporate governance committee. Mulcahy recruited Prince to the Xerox board in July 2008, less than a year after he was ousted from the Citigroup post.
Armstrong has served on the boards of Citigroup and its predecessor firms for 21 years, according to Citigroup filings. At the April 2009 meeting, he got 70 perc ent of shareholder votes, the lowest margin among the 14 director nominees.
