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November 16, 2012
Investors Urge Citigroup Board to Consider Breakup of Too Big to Fail Bank
    by Robert Kropp

Trillium Asset Management and AFSCME Employees Pension Plan file a shareowner resolution with Citigroup asking its board to explore a separation of one or more of its business units.


Years after the financial crisis and the taxpayer bailout of banks whose failure would endanger the economy, Citigroup's shares continue to trade below book value. Vikram Pandit, the bank's former CEO, was fired earlier this year after shareowners voted against a $15 million compensation package for him. Also, the bank "failed the Federal Reserveís CCAR stress tests in March 2012, and regulators continue to forbid it from returning significant capital to stockholders due to concerns over its financial stability," according to Trillium Asset Management.

Along with the AFSCME Employees Pension Plan and on behalf of the Benedictine Sisters of Mount St. Scholastica, Trillium filed a shareowner resolution with Citigroup this week, requesting that its board of directors consider ways to break up the too-big-to-fail bank.

The shareowners asked the board to appoint a committee of independent directors to explore and then report on transactions that could enhance shareowner value, including the separation of one or more of Citigroup's businesses.

"There is a gap of almost $50 billion between what Citi says its assets are worth and what the market is saying," said Lee Saunders, Chairman of the AFSCME Employees Pension Planís Board of Trustees. "It is high time that the board gave shareholders a plan for recovering this value."

Appearing on CNBC, Trillium CEO Matthew Patsky said, "They just fired their CEO, they just put in a new CEO. It's clear that this board of directors has taken more control perhaps than they have been in the past. We see ourselves as a fiduciary and an owner and having a role to play."

"I think there's tremendous support broadly, and if they don't do it, they're going to look at government trying to look at the whole issue of the systemic risk of the too big to fail banks," Patsky continued. "I would rather they be at the front of this, moving forward and thinking about it now and taking action and being one of the first to take action and unlock that value rather than waiting for the government to take action."

"Citigroup boasts many attractive attributes, but remains burdened by excessive complexity, as well as the stigma and risks associated with being named a 'too big to fail' institution," Patsky said. "These factors could threaten stockholder return through breakdowns in risk management, increased regulatory scrutiny, higher litigation expense, greater capital requirements and poor public perception, among other challenges."

Earlier this month, the Interfaith Center on Corporate Responsibility (ICCR) announced that it would rank the major US banks, including Citigroup, according to their corporate governance performance on such issues as executive compensation, political spending, and risk management.

In its annual report, ICCR stated, "While progress has been made on several fronts, it is difficult not to despair at the seeming pervasiveness and intractability of the problems facing the industry."

"The vast majority of these problems can be avoided by adopting the appropriate risk management safeguards and the requisite checks and balances," Rev. Seamus Finn of ICCR stated. "With each new scandal we think 'maybe this time they will get it,' and then we open the morning paper to see that we still have work to do. We see the need for increased oversight, and for tools to help us more effectively communicate and realize our objectives: a stable, reliable and trustworthy financial system."

 

 
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