Citigroup to Pay Director $350,000 for Weeks of Consulting
Former dean of the Stanford Graduate School of Business and a member of the board of Citigroup, Robert Law Joss listens during an interview at Bloomberg headquarters in New York. Photographer: Daniel Acker/Bloomberg
Citigroup Inc. will pay director Robert Joss $350,000 for as little as three weeks of work amid criticism by shareholder-advisory firm Glass, Lewis & Co. that he lacks the independence needed to serve on the board.
Joss, a former Wells Fargo & Co. executive and Stanford University business-school dean who joined the board in July, will advise on projects “from time to time,” Vice Chairman Lewis Kaden wrote in an agreement dated April 5, according to a filing on May 7. The annual consulting fee is for “a minimum of approximately three weeks,” the filing said.
“This is kind of an interesting situation, where you’re not management, and you’re not independent, but you’re a director,” Joss said in an interview today. “I’m comfortable that I can handle that, but if it’s not working right, then we’ll undo it.”
Citigroup, 27 percent owned by the U.S. government, has overhauled its board to add directors with financial expertise and fewer ties to company management and purge those who served in the years leading up to the bank’s $45 billion bailout in 2008. Joss is the only director besides Chief Executive Officer Vikram Pandit who doesn’t meet the board’s independence criteria, according to a March 12 filing.
Citigroup spokesman Stephen Cohen declined to comment. The company’s shares rose 22 cents, or 5.5 percent, to $4.22 as of 4:25 p.m. in New York Stock Exchange composite trading.
Airplanes, Armored Vehicles
Joss’s consulting contract makes him the highest-paid director since the retirement in 2009 of Roberto Hernandez Ramirez, who was chairman of the Banamex banking subsidiary in Mexico. Hernandez was reimbursed more than $2 million a year for private-aircraft use, security guards, the operation of armored vehicles, an office and a secretary.
The consulting payments to Joss are in addition to the $225,000 in cash and deferred stock given each year to all outside board members. Last year, Joss got a prorated amount of $112,500.
“There are people who go out there and give speeches for $50,000 a speech, and I guess in some ways I think there’s a lot of value added, but that’s really up to the company to decide,” Joss said. “It’s not something I have to do. But I’m putting in a lot of time, and it seems like it’s fair.”
So far, Joss said, he has advised “five or six” Citigroup executives on topics including risk-management, leadership, strategy, operations and technology. While most of the work is in New York, he has spent “a couple days in Tokyo” with regulators and senior executives and a day in Australia, he said. Joss, who lives in the San Francisco area, was CEO of Australia’s Westpac Banking Corp. in the 1990s.
‘Not Sure It’s Easy’
When Citigroup Chairman Richard Parsons approached Joss last year about becoming a Citigroup director, Joss responded that he’d rather be a consultant, he said.
“They said, ‘Well, we’re very interested in that too,’ and I said, ‘Well, I’m not sure it’s easy to do both, but we’ll try,’” Joss said. “It’s an unusual category of director. I would grant you that. And it’s a situation that I’ve never been in.”
Joss, 68, had to quit the board of San Francisco-based Wells Fargo, where he had served for a decade, to join Citigroup’s board. He made the decision partly because the bank’s mandatory retirement age is 72, two years later than the Wells Fargo retirement age of 70.
Longer ‘Time Horizon’
“There was a little bit more time horizon for me to work at Citi, and it seemed like the needs were much greater at Citi,” Joss said. “They’re trying to put something back on the rails.”
Neither Parsons nor anyone on the board asked whether his personal stake in Wells Fargo, one of Citigroup’s biggest competitors, created a conflict of interest, Joss said. As of June 2009, Joss held 421,141 Wells Fargo shares with a market value at the time of $10 million, data compiled by Bloomberg show.
“I don’t think that anybody has conflicts by owning stock in other companies,” Joss said. He declined to say whether he had sold any of his Wells Fargo shares.
In a report prior to the company’s April 20 annual meeting, Glass, Lewis recommended that shareholders vote against Joss’s re-election to the board.
“We question the need for the company to engage in consulting relationships with its directors,” Glass, Lewis said. “We view such relationships as potentially creating conflicts for directors, as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions.”
97% Approval Vote
Joss said he didn’t blame any proxy service for recommending a no vote. “They don’t know me, and they can’t possibly go around and interview everybody,” he said. “Independence is a state of mind,” Joss said. “People who know me know I have no hesitation to challenge anybody on any issue if I don’t think they’re right.”
Joss got 97 percent of shareholder votes in his favor in the unopposed board election, Citigroup said in an April 23 filing. The bank’s March letter to shareholders disclosed that Joss received $100,000 of consulting fees in 2009, without mentioning his ongoing contract for 2010.
Grundhofer’s Fees
“The fact that they didn’t disclose this until after the shareholder meeting is really just shady,” Eric Dao, a San Francisco-based senior proxy research analyst for Glass, Lewis, said in an interview today.
Joss’s supplemental fees are almost three times those paid to the second-highest-paid director, Jerry Grundhofer, a former U.S. Bancorp CEO who joined the board in April 2009. In addition to his regular board pay, Grundhofer, 65, gets $35,000 a year as chairman of the board’s risk-management and finance committee and $100,000 a year as chairman of Citigroup’s primary banking subsidiary, Citibank NA, according to the March filing.
“I like to spend my time on helping people on the issues of strategy and execution, and there’s not as much of that when you’re a director as when you’re working more intensely with management,” Joss said. “On the other hand, sometimes you take both. If I can be helpful as a director, I know how to play that role too. I’ve been a director of many public companies.”
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
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