22 Jan 2009
Jan. 22 (Bloomberg) -- Citigroup Inc. named former Time Warner Inc. Chief Executive Officer Richard Parsons to head its board of directors, replacing Chairman Win Bischoff after the U.S. bank posted a record $18.7 billion net loss last year.The appointment is effective Feb. 23, the New York-based bank said yesterday in a statement. Parsons, 60, was the lead independent director since July 2008. Bischoff, 67, became chairman in December 2007, when he was selected following the ouster a month earlier of Charles O. "Chuck" Prince.
Citigroup's board turns to Parsons, who ran Time Warner from 2002 to 2007, as it faces pressure to improve corporate governance and overhaul a failed strategy that forced the bank last year to seek $45 billion of bailout funds from the U.S. government. His selection may do little to cheer shareholders who wanted more-radical change.
Parsons has been on the board "all through this period of disaster," said Porter Bibb, managing partner at New York-based Mediatech Capital Partners LLC, which advises media and technology companies. "He has a genius for surviving." Parsons has been a Citigroup board member since 1996.
In a statement last week, Parsons said the "anticipated departures" of directors would provide an "opportunity to reconstitute the board." Robert Rubin, the former Treasury secretary who had been a top Citigroup executive and board member since 1999, announced plans to step down two weeks ago after being criticized by investors for failing to help steer the bank clear of the subprime mortgage market's collapse.
Shares Tumble
Parsons wasn't available for an interview, said Citigroup spokeswoman Shannon Bell.
Citigroup's stock has tumbled 93 percent since the end of 2006, as surging losses on mortgages, bonds, corporate loans and credit-card balances eroded the bank's capital cushion. The shares climbed 87 cents to $3.67 yesterday in New York Stock Exchange composite trading.
Last week, CEO Vikram Pandit unveiled a plan to focus on banking, client trading, securities underwriting and payment processing while targeting other businesses for eventual disposal, including the CitiFinancial consumer-lending unit. Former CEO Sanford "Sandy" Weill cobbled together banking, insurance and securities businesses over a 17-year run before leaving Prince in charge in 2003.
‘Bad Choices'
"It particularly infuriates me that we are now at a point of unwinding all the bad choices they made," Nell Minow, editor of the Corporate Library, a Portland, Maine-based corporate- governance research company, said in an interview. "The job of the board is to be very skeptical and insist on being shown why the deal works."
Parsons said in the statement that the board was "committed to strong, independent corporate governance." Bischoff didn't meet the test of independence because he was Citigroup's top executive in London prior to his appointment as chairman, according to the bank's most-recent proxy statement.
Pandit is the only other Citigroup executive on the company's board. Other board members include Alain Belda, chairman of Alcoa Inc.; Anne Mulcahy, chairwoman and CEO of Xerox Corp.; Michael Armstrong, former CEO of AT&T Corp.; and Franklin Thomas, former Ford Foundation president.
Bischoff plans to retire this year, according to the statement. He said he agreed to take the chairman's job to ensure a "smooth process" following Prince's ouster, and "that objective has been met."
Dismantling
Parsons may be the only board member willing to assume the role now, said Smith Asset Management Inc. CEO Bill Smith, a Citigroup shareholder who has repeatedly called for a breakup. "There's not a lot of people who want to come in and oversee the dismantling of the company," Smith said.
Parsons, who held New York state and U.S. government jobs in the 1970s and later worked as a lawyer in private practice, was the CEO of Dime Savings Bank of New York from 1991 to 1995.
He joined Time Warner as president in 1995 and was promoted to CEO in 2002 after the company's $124 billion combination with America Online Inc., the largest Internet provider, led to record losses. He returned Time Warner to profitability and helped settle a class-action lawsuit over AOL for more than $2.5 billion.
"He was one of those solid, anchor-type individuals who basically calmed things," said James Goss, a media analyst with Barrington Research in Chicago. "Given all the turmoil within the financial industry, perhaps the presence of a person like him is a desirable attribute."
Shareholders
Citigroup shareholders may be less enthused about the performance of Time Warner's stock under Parsons. The shares, which fell 60 percent following the AOL merger, lost another 13 percent during his more than five years as CEO.
"It's not a picture of a history of great value creation, which certainly Citi could use," said Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland.
In 2006, Parsons fended off pressure from billionaire Carl Icahn to split up the company, including getting rid of AOL and the cable systems. Parsons stepped down as CEO in December 2007 and as chairman at the end of last year. Jeffrey Bewkes, who succeeded Parsons as CEO, reversed course and announced plans to split off the cable systems and arrange a deal for AOL.
Parsons may be valuable to Citigroup for another reason: his ties to U.S. President Barack Obama. He was one of 17 members of Obama's Transition Economic Advisory Board, along with Rubin and Mulcahy.
The U.S. Treasury Department became one of Citigroup's biggest investors last year when it acquired $52 billion of preferred shares in the bank under the Troubled Asset Relief Program, or TARP. The government's preferred stake comes with warrants to buy 8 percent of the common shares.
