Yesterday, Citigroup (NYSE: C ) named current CEO Chuck Prince chairman, replacing Sandy Weill, who will retire at the conclusion of the company's annual meeting on April 18.
I couldn't be more displeased.
My ire has nothing to do with Prince, who, by most accounts, is an excellent lawyer and strong executive who has navigated the Citi through troubled waters in recent years. Instead, I find myself confused by the company's willingness to once again hand near absolute power to a single executive. By "absolute power," I'm referring to consolidating the two most important positions -- CEO and chairman -- into one office, which Weill held during his entire tenure at Citi, and Travelers Group before that.
Here's why this matters: The chairman of the board, at least symbolically, is the shareholder's representative in corporate governance. As such, he's supposed to be the CEO's boss. That's why the Sarbanes-Oxley legislation of 2002 so fervently encouraged independent directors on corporate boards.
Sadly, it doesn't seem like much has changed at Citigroup since "SOX" went into effect. A check of the most recent proxy statement shows that Prince is the primary senior executive on the board. The remaining majority, including Motley Fool Stock Advisor pick Time Warner (NYSE: TWX ) chairman and CEO Richard Parsons, Dow Chemical (NYSE: DOW ) chairman-elect and CEO Andrew Liveris, and United Technologies (NYSE: UTX ) chairman and CEO George David, are independent. I'd be impressed if, before the shareholder suits and regulatory problems, there were far fewer independent directors. But that doesn't appear to be the case, at least not by my count. A check of the 2001 proxy reveals one fewer independent seat than today.
With its checkered past, Citigroup should know better than to repeat history. Indeed, as much as Prince strikes me as a good guy, history is littered with stories of good guys put in bad positions, with disastrous results. I wouldn't be surprised if that's what happened with a few of Citi's regulatory tangles. Investors deserve better.
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Fool contributorTim Beyerslikes Citigroup's credit cards, but not its corporate governance. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Foolprofile. Dow Chemical is aMotley Fool Income Investorpick. The Motley Fool has an ironcladdisclosure policy.