Wednesday, October 03, 2007

Chuck Prince's Nine Lives

I'm beginning to think Citigroup CEO Chuck Prince is some sort of shape-change artist out of Harry Potter, who is, in reality, a cat. A nine-lived cat, to be precise.

How many mistakes can a CEO make and still keep his job? Perhaps due to Prince's example, GE CEO Jeff Immelt figures he has lots of time left to continue to mismanage his firm.

But, back to Citigroup. Having taken the helm from Sandy Weill in 2003, after the latter's excesses of merger-mania, Prince has presided over a performance that underruns the S&P for the timeframe.

As observed in the nearby Yahoo-sourced chart of stock prices for Citigroup and the S&P500 Index for the last five years, Prince has led the banking firm to a clear underperformance during his tenure.
Despite the company's major shareholder, Saudi Prince Alaweed bin Talal, commenting,

"No financial institution is immune from the financial turmoil in global markets....It's a hiccup in our journey to reach normalization at Citibank,"
Prince never seems to do more than 'normalize' mediocrity. As the two-year price chart nearby shows, even before this summer's fixed income markets crises, which have led to Citigroup posting third-quarter earnings that are 60% below last year's similar quarter, Citi was already lagging the index, suffering a plunging stock price since early this year.

As I wrote in these posts, here and here, in May and January of this year, Prince has been mismanaging Citigroup for quite some time. It has nothing to do with the market troubles of this summer.

Here's what continues to confound me. Prince would probably not suffer performance like his own in a lieutenant for as long as his board has suffered his own mediocre performance, without firing them.

Why is Prince still CEO? As I have written in prior posts, he's out of his depth trying to run the overly-diversified Citigroup. And financial service firms so diversified almost never manage to post consistently superior total returns.

As I wrote in my last (linked) post,

"Ideally, Citi needs to be split up into more easily led and managed, standalone units which may more nimbly respond to market and competitive forces in their particular financial service sectors. As a financial supertanker, Citi has proven unmanageable in a manner that performs consistently better than the markt for its owners. Can it really do worse as a number of smaller, more responsive entities?"

And Prince should go- break up, or not. He is simply overmatched by the firm's and market's complexity. It would be nice if the Saudi Prince considered other shareholders, and voted to boot the American Prince.

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