Chuck Prince’s credentials to be the CEO of the world’s largest bank are not in doubt.
When he took over the helm at Citigroup in October 2003, the bank was suffering the pains of rapid expansion and the legal fallout that resulted. Mr Prince rightly focused on corporate governance and regulatory issues as he set about repairing the damage. Since then he has moved into a full-blown leadership role, with a focus on strategy that is obviously needed.
Given the backdrop of scandal and Mr Prince’s successful attempts at putting the house in order, it is all the more surprising that last month the bank made him chairman as well as CEO, a move that breaks a key rule of corporate governance.
The Banker wishes Mr Prince and Citigroup well for the future but it, of all banks, should be moving cautiously in such a sensitive area.
HSBC, which has broken the same rule, though not so completely, by announcing that its CEO will take over as chairman, may be given more leeway by shareholders due to its less accident-prone record.
This month, The Banker’s cover story takes a long, hard look at the whole issue of corporate governance of banks and the role of the board of directors. We discover that while standards in banks are improving, they still have a long way to go – and they started out a long way behind other industries.
In the FTSE ISS corporate governance indices for developed country banks, the UK and Switzerland performed best while Norway, Portugal and the US were at the bottom.
There are no strict rules for achieving sound corporate governance and there is no hard and fast reason why Citigroup’s structure cannot be effective. But there are general guidelines and Citi, of all banks, sends out the wrong message by flagrantly disregarding them.
