Citi Claims Major Reforms in Corporate Governance
Moyer, Liz, American Banker
Citigroup Inc. said it will begin accounting for employee stock options as expenses next year and has started telling corporate clients it will no longer arrange off-balance-sheet financing for them unless the structures are fully disclosed to investors.
The company said it is also setting up a board committee that will focus on corporate governance.
The initiatives were disclosed to employees Wednesday afternoon in a memorandum from Sanford I. Weill, its chairman and chief executive officer. Mr. Weill said that he and chief financial officer Todd Thomson signed oaths Wednesday certifying the accuracy of Citi's financial disclosures.
"Citigroup has always strived to be at the forefront of progressive industry change," Mr. Weill said in the memo. "We continue to review practices and policies and take action to make changes where appropriate."
Expensing options for all employees would have an estimated impact of 3 cents a share next year and 6 cents a share after five years, when the program would be fully phased-in, the company said.
The changes came just weeks after Citi suggested during its second-quarter conference calls that it would not expense options for all employees because their financial impact was already disclosed in filings with the Securities and Exchange Commission and readily available for investors to interpret. At the time Mr. Weill proposed expensing options for just the top five executives in the company.
But in the ensuing weeks, Citi has faced a barrage of bad press that has battered its stock, and top executives have been working to contain the damage. Citi shares rose 3.7% in trading Wednesday.
Citi has tried to position itself as the leader in industry reforms on research practices. When Mr. Weill changed his mind on the options issue, he immediately drew the praise of one of Wall Street's most venerable figures. …