Calpers calls for heads to roll at Citigroup over allegations of poor corporate governance

The US investment bank Citigroup is heading for a collision with Calpers, one of America's most powerful shareholder bodies, after the giant pension fund warned it would not support the re-election of the bank's chief executive and chairman on the grounds of poor corporate governance.

The US investment bank Citigroup is heading for a collision with Calpers, one of America's most powerful shareholder bodies, after the giant pension fund warned it would not support the re-election of the bank's chief executive and chairman on the grounds of poor corporate governance.

Calpers, which has $160bn (£88bn) under management, issued a damning statement about the role of eight Citigroup directors ahead of the bank's annual shareholder meeting next Tuesday.

The move is unusual in America, where companies do not adhere to many of the boardroom rules that UK companies follow. Calpers, which supported Citigroup's directors last year, said its opposition was due to a toughening in its stance on corporate governance.

Calpers' main concern was that five directors, including the chief executive, Charles Prince, were members of Citigroup's audit committee, and had authorised the audit firm to carry out other, potentially lucrative, consultancy work.

It also attacked the chairman, Sanford Weill, saying that as chief executive from 1998 to 2003, Mr Weill "had a significant role in several scandals to negatively impact the company". It added that the bank, the largest in the world, which bought Schroders in the UK, would be better served by a chairman it considered to be independent.

Citigroup was one of a number of US banks which last year was forced to hand over a total of $1.4bn to Eliot Spitzer, the New York attorney general, following allegations of banks issuing biased research and offering shares in popular IPOs to favoured clients.

Calpers, the California Public Employees Retirement System, has 26 million shares in Citigroup, which is only 0.5 per cent of the vote, but the group is often looked to by smaller funds as an activist leader in proxy voting.

Citigroup dismissed Calpers' criticism as "unwarranted". A spokesman said: "Citigroup adheres to the highest standards of corporate governance, business practices, accuracy and transparency in its accounting and financial disclosure."

Calpers is also turning its fire against Coca-Cola, saying certain directors, including Warren Buffett, the billionaire investor who heads Berkshire Hathaway, are not independent.

Calpers said it would withhold a vote to re-elect Mr Buffett and some other directors because they had authorised Coca-Cola's auditor to provide non-audit services, and it would vote against all of them.

Calpers said it had tightened up its guidelines on auditors after a string of corporate scandals in the US such as the collapse of Enron, where the company's auditor, Andersen, was found to have been complicit in the massive cover-up of the true state of its finances.

Comments