With bad news about Citigroup appearing with alarming regularity — the latest a forced shutdown of its private banking group in Japan — the financial-services behemoth is shuffling two top managers. CFO Todd Thomson and Sallie Krawcheck, head of the firm's Smith Barney investment-banking unit, swap positions this month. Although Citigroup says it's making the move to provide the two executives with opportunities to further develop their skills, the trade has the look of a last-ditch effort to prove the firm is serious about good governance.
Krawcheck, considered a beacon of integrity by the equity-analyst community, headed independent research firm Sanford C. Bernstein before Citigroup hired her to clean up Smith Barney's reputation in the wake of the WorldCom equity-research scandal. By making Krawcheck CFO, Citigroup is "trying to wave a magic wand over a lot of the negative stuff that's gone on," says Brian Sullivan, CEO of executive-search firm Christian & Timbers. "[This] sends a signal to the investing public that no nonsense will be tolerated. And it sends an incredible signal internally, putting executives on notice that everything is on the table."
But what kind of a message does it send Thomson, who had been CFO since March 2000? While Sullivan says the move puts Thomson in line for a bigger job, some analysts call it a demotion. Thomson told CFO a year ago that he wanted "regulators to view us as a company that is not dragging its feet on reform, but is leading reform." But the news of Citigroup's involvement in the Parmalat scandal broke shortly afterward. Then a bond-trading scandal in London riled European regulators this summer. In a September research report in which he downgraded Citigroup from buy to neutral, Merrill Lynch analyst Guy Moszkowski wrote, "CEO [Charles] Prince has pledged to keep Citi out of the headlines but has yet to succeed."
Can Citigroup ever police itself effectively? Given its size ($94.7 billion in 2003 revenues), maybe not, suggests credit analyst Kathy Shanley of research firm Gimme Credit. "Taken together, the problems in Japan and Europe illustrate how difficult it is even for insiders to monitor practices across Citigroup's far-flung global operations," she wrote in September.
Now it's Krawcheck's turn to try. A new challenge already looms: South Korea's financial regulator has announced it will be looking closely at Citigroup's operations there. —Kate O'Sullivan
In the Hot Seat
While most CFOs would welcome the title of co-president, some may not envy CFO Kevin Parker's recent promotion at PeopleSoft. Since June 2003, the software company has been the object of a hostile-takeover bid by Oracle. Stepping up to help fill the void left by the dismissal of CEO Craig Conway last month, Parker, who retains the top finance title, is in a tough spot.
"He's been trying to balance the interests of multiple constituencies, including employees, customers, shareholders, and his boss, not all of which have aligned at all times," says Mark Murphy, a research analyst with First Albany.
"But as a result, [Wall Street] is disgusted with the way PeopleSoft has handled things in the past year," he asserts. Murphy claims the company's earnings guidance has been motivated in part by a desire to inflate its stock price in an effort to deflect Oracle's bid. Oracle is now threatening to lower its per-share offer — which once stood at $26 — from its current level of $21.
In addition to the disruption caused by the threat of take-over, Parker also faces market conditions that are far from perfect. Business customers are spending cautiously, and many are outsourcing the human-resources functions that PeopleSoft's products address. But at least the CFO will be well compensated for his troubles: a filing with the Securities and Exchange Commission states that Parker and fellow co-president Phil Wilmington, head of sales, will each draw salaries of $750,000 in their new roles, with a guaranteed $500,000 first-year bonus. —K.O'S.
CFOs on the Move
Dina Dublon is stepping down as CFO of J.P. Morgan Chase & Co. at year-end after 23 years with the bank. She will be replaced by Michael Cavanagh....The aptly named Cedric Burgher is leaving Halliburton to become CFO of Burger King.... Finance chief Kenneth Budde was promoted to CEO at funeral-services provider Stewart Enterprises.... MBNA has named Kenneth Vecchione to the top finance post.... Gary Kelly, formerly CFO of Southwest Airlines, has been promoted to CEO after the resignation of James Parker.... Gregg Melnick, a former VP at Dow Jones & Co., joins Party City as CFO.