By Pam Martens: February 13, 2019 ~
In a blog post on January 19, Citigroup’s head of Human Resources, Sara Wechter, wrote that “Citi’s commitment to diversity and inclusion is longstanding.” She next bragged that “Last year, Citi was the first financial institution to publicly release the results of a pay equity review.” Three paragraphs later, we get the cold, hard facts: “median pay for women globally is 71% of the median for men” at Citigroup.
Citigroup didn’t come up with the idea of releasing that data out of some newfound quest for transparency. The data came as a result of a pressure campaign by Arjuna Capital, an investment firm focused on sustainable investing. The campaign is introducing shareholder proposals at the big Wall Street banks, asking that the banks disclose, and then close, their gender pay gaps. After Citigroup released its data, Arjuna withdrew its shareholder proposal at Citigroup. At 1 p.m. today, Arjuna will host a live national news conference with Equal Rights Advocates and Closing the Women’s Wealth Gap Initiative to announce the leading US banks and tech companies targeted with the median pay gap shareholder proposal. A streaming audio recording of the news event will be available after 4 p.m. today at this link.
Let us distill for you Citigroup’s claim of a “longstanding” commitment to diversity. Citigroup’s origins date back 207 years but when the bank imploded in 2008, it had only two women, or 13 percent, on its 15-member Board of Directors.
Citigroup was also the parent of the retail brokerage firm Smith Barney in the late 1990s as women in branches from coast to coast came forward to reveal credible allegations of sexual harassment and sexual assault. The charges became the basis for the largest class action lawsuit by women in Wall Street history. The corporation’s focus at the time was on manipulating the media while doing little to correct the egregious situation for women at the firm. A decade after the lawsuit, many of the worst abusing men were still employed at the firm. The New York Post reported that even the much vaunted, newly established sexual harassment hotline wasn’t working. A reporter failed repeatedly to get anyone to pick up the phone over a period of four days. (See Editor’s note below.)
The seminal book on the lawsuit, Tales from the Boom Boom Room: Women versus Wall Street by Susan Antilla (named after a frat house like bar set up in one Smith Barney branch) revealed horrific statistics on Citigroup’s so-called commitment to diversity. Antilla writes:
“Louise Fitzgerald, a respected psychologist in the fields of sex discrimination and sexual harassment, contacted 1,853 women who had worked at Smith Barney four years earlier and received information from 1,210 – 65 percent of those she surveyed. One-third had the symptoms of post-traumatic stress disorder. One-quarter of them had been stroked or fondled in a sexual way while on the job…One-third of the women surveyed claimed they had been sexually coerced during the period Fitzgerald studied. Workplace studies done prior to this one typically showed no more than 5 percent complaining of sexual coercion, defined as the extortion of sex either through the promises of job-related rewards or threats of punishment, Fitzgerald says. She saw the same kinds of problems at company offices all over the country, she adds. Fitzgerald found it remarkable that an industry culture could breed such similar conditions in disparate locations.”
What all U.S. studies have failed to examine closely is the connection between top management at Wall Street banks who are frequently focused on getting personally rich by incentivizing their male workforce to operate as a predatory hunting band for profits and the attendant lack of interest in fair pay and fair treatment of women. All too often, if the male members of the hunting band are generating big profits, their sexual harassment of female colleagues is not only condoned but considered an effective means of helping them refine and enhance their predatory skills.
Sanford (Sandy) Weill was the Chairman and CEO of Citigroup as the Smith Barney lawsuit played out. Here’s how we previously explained Weill’s personal get-rich scheme:
Weill’s stock option plan worked like this: every time he exercised one set of stock options, he got a reload of approximately the same amount of options. Now, stock option grants are supposed to be based on outstanding performance benefitting the shareholders. But even in years when Citigroup was getting dragged through the press for facilitating frauds at WorldCom and Enron and issuing fraudulent research to the public, Weill was reloading the hell out of his stock options.
Graef “Bud” Crystal, the corporate compensation expert, is the man who coined the Dracula analogy for Weill’s stock options. Writing for Bloomberg News, Crystal explained that between 1988 and 2002, Weill “received 96 different option grants” on an aggregate of $3 billion of stock. Crystal says “It’s a wonder that Weill had time to run the business, what with all his option grants and exercises. In the years 1996, 1997, 1998 and 2000, Weill exercised, and then received new option grants, a total of, respectively, 14, 20, 13 and 19 times.”
When Weill stepped down as CEO in 2003, he had amassed over $1 billion in compensation, the bulk of it coming from his reloading stock options. (He remained as Chairman of Citigroup until 2006.) Weill wasted no time in cashing in some of his chips. One day after stepping down as CEO, the Citigroup Board of Directors made an exception and allowed Weill to sell back to the corporation 5.6 million shares of his stock for $264 million.
Weill did not have to concern himself with driving down the price of his shares when that quantity of shares flooded into the market. His Board kindly negotiated the price at $47.14 for all of the shares. Two years after Weill stepped down as Chairman, Citigroup was insolvent and its shares were trading at 99 cents. Regulators discovered that the company had hid subprime debt off its balance sheet and was drowning in toxic debt.
The year after Weill stepped down as Chairman, the Federal Reserve began to secretly make low-cost loans to the bank to shore it up. From 2007 to the middle of 2010, the Fed funneled a cumulative $2.5 trillion in almost zero interest rate loans to Citigroup while its management initially tried to reassure the public that everything was just fine. In 2008, U.S. taxpayers provided the largest bailout to this bank in the history of global banking. The company received $45 billion in capital from the U.S. Treasury; the Federal government guaranteed over $300 billion of Citigroup’s assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits.
The stench of cronyism on the Board of Citigroup wafted to the front page of the New York Post on November 25, 2008, where it dubbed the Board the “Citi of Fools.” New York Post reporter Paul Tharp wrote that “As Citigroup careened down the road to destruction, its board and top executives were…too busy counting their huge salaries, fees, bonuses and stock options to put the brakes on the wild speculation that nearly destroyed the once-proud American icon.”
Tharp provided the following rundown of the lavish compensation being handed out to Board members:
Michael Armstrong, the chairman of the risk committee, who earned $797,294 between 2004-2007.
John M. Deutch, a former CIA director who made $814,088 in that period. He served on the risk committee.
George David, who alternated between the governance and risk committees, picking up $700,000 during those four years. He left the board this year.
Ken Derr, who also served on both panels, getting $774,085.
Alain Belda, whose take was $696,462 for his work on the two committees.
Winfried ‘Win’ Bischoff, the do-little chairman who was paid $6.1 million last year and got a low-interest loan of $343,390.
Roberto Hernandez, a Mexican banker who was allowed to cash out his $737 million worth of shares in a Citi-run mutual fund just before the stock crashed. He refused to take a salary, but was given $2.61 million to cover what Citi called his expenses.
And, of course, there was also Robert Rubin, who came straight from his post as U.S. Treasury Secretary in the Clinton administration to serve on the Citigroup Board for a decade. During that period, Rubin amassed compensation of over $120 million for a job which he concedes included no operational role and with just two secretaries reporting to him.
Given the longstanding culture of misdeeds at this bank (see A Private Citizen Would Be in Prison If He Had Citigroup’s Rap Sheet) and its well-documented culture of misogyny, we’d like to suggest that Arjuna Capital rethink the withdrawal of its shareholder proposal at Citigroup and, instead, file a new one seeking more granular data.
Editor’s Note: The author of this article and Editor of Wall Street On Parade, Pam Martens, was the lead plaintiff in the class action lawsuit referenced above. She withdrew from the settlement and received no money from it. Together with the New York State and New York City chapters of the National Organization for Women, Martens called the settlement a sham and a travesty of justice for women on Wall Street.