Citigroup's Last Best Hope

Finding candidates for the Citigroup board shouldn’t be hard—it’s the ultimate fixer-upper. Meet six strong contenders to help Dick Parsons clean up the mess.

03.02.09 6:12 AM ET

Much ink has been spilled lately about the challenging “hurdles” Citigroup—the US government-affiliated financial giant—now faces in finding at least six new board members to fill current or forthcoming vacancies on its 15-member board. As part of the deal reached last week, where the US Treasury will own 36 percent of the company, Citigroup Chairman Richard Parsons agreed that the majority of the board would comprise “new independent directors as soon as feasible.”

Being part of the effort to craft and to implement the resuscitation of one of the largest financial institutions on the planet could be the intellectual challenge of a lifetime.

The problem for Parsons in finding a few more good men (or women) to serve alongside him, according to the conventional wisdom, is that the potential liability from peeved shareholders and creditors that Citi’s directors are—and will likely continue to be—exposed to as a result of the bank’s ongoing financial difficulties make the job anything but plum. And, of course, there is also the small matter that the board itself—despite the heroic efforts of the Treasury to make it appear not the case—will be watched over ever so carefully by a Very Big Brother.

But, as usual, the conventional wisdom is wrong. In fact, there are many reasons why serving on the Citigroup board at this very moment can be a stimulating and richly rewarding experience. First, Citigroup indemnifies board members against most legal consequences of decisions they make as Citi directors. Besides, how bad could their decisions be at this point anyway? The stock is already trading at $1.50 a share (down 40 percent alone on Friday). How much lower can it go? Second, being part of the effort to craft and to implement the resuscitation of one of the largest financial institutions on the planet could be the intellectual challenge of a lifetime.

And third, the part-time position should be looked at as a form of patriotic government service, which it surely is. Wall Street honchos have for years felt the magnetic pull of Washington after satiating their needs for power and wealth in New York City. While it is true that being a Citigroup director does not carry with it the same prestige and power as, say, being secretary of the Treasury, it does pay more. Tim Geithner is being paid $191,300 annually (down some 50 percent from the compensation he made as head of the New York Federal Reserve Bank) while Citigroup directors get paid $225,000 a year for their service, of which $75,000 is paid in cash and the rest in Citi stock (oops!). All expenses are picked up, too. Those directors that serve as the chairman of certain committees get paid an additional stipend of between $15,000 and $35,000. If financiers such as Steve Rattner are willing to give up being head of Quadrangle Group, his private-equity firm, to commute regularly to Washington to be a “counselor” to Geithner on the failing auto industry, then surely there must be other civic-minded Wall Streeters with some extra time on their hands who would also be willing to serve.

Here then, in the spirit of helping the commonweal—and without having consulted with them to see if they would even consider the appointment—is a list of six candidates that Parsons can contemplate while sipping some of his Il Palazzone's Brunello di Montalcino:

WASHINGTON, DC - JULY 7:  Former U.S. Commerce Secretary Pete Peterson discusses the crisis in confidence with corporations and the U.S. economy on NBC's 'Meet the Press' July 7, 2002 during a taping at the NBC studios in Washington, DC.  (Photo by Alex Wong/Getty Images)

Alex Wong / Getty Images

Pete Peterson. Now 82 and recently retired from the Blackstone Group, the private-equity behemoth he founded with his former Lehman Brothers partner Steve Schwartzman. Peterson, the ultimate insider, has the world’s most gold-plated résumé. Having served as Richard Nixon’s Commerce secretary during his ill-fated second term, he also knows something about public service. Peterson would help Parsons and Vikrim Pandit, Citi’s CEO, navigate the back corridors of Washington—one look at the board of the Peterson Institute for International Economics tells you all you need to know about being überconnected. Sure, Peterson’s got much better things to do—like manage how the $1 billion he gave to his eponymous foundation is spent, and promote his new book—but he was also once upon a time the CEO of Lehman Brothers and so knows a thing or two about Wall Street. Pete, your nation is turning its lonely eyes to you.

Sandy Lewis. Who? Upstate New York organic farmer Lewis, 70, is the first-born son of Salim “Cy” Lewis, the man who made Bear Stearns a force on Wall Street for 30 years until his death in 1978. Sandy, a tour-de-force himself and one of the smartest guys on the planet, knows Wall Street’s plumbing inside and out after years of trading his way from one Wall Street firm to another before opening the highly successful but short-lived eponymous arbitrage firm, SBLewis & Co in 1980. True, he eventually got mired in a stock-manipulation scandal but Lewis did nothing wrong. In 2001, just before leaving office, Bill Clinton pardoned him, making Lewis one of the only Wall Street practitioners to ever receive a presidential pardon. As evidenced by his proposal last October for a Public Value Fund, Lewis believes that creating an orderly trading market for all the toxic securities—of which Citi has billions—is the only way out of this mess. Warning: Lewis, who author James Stewart once described as someone who claimed to be “Wall Street’s high priest of ethical behavior,” tells it like it is, with passion, and his brutal honesty may frighten his fellow board members—to death.

Image #: 41836    Charles M. Elson, Director, Center for Corporate Governance, University of Delaware is seen at a hearing of the Senate Committee on Governmental Affairs, Permanent Subcommittee on Investigations in Washington, DC, May 7, 2002.  The hearing revolved around the involvement and knowledge of Enron Corp.'s executive board in the energy traders collapse.  Photographer:  Chris Kleponis/ Bloomberg News. /Landov

Chris Kleponis, Bloomberg / Landov

Chuck Elson. Elson, 50, is the Edgar S. Woolard, Jr., Chair in Corporate Governance and the Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. He is also “Of Counsel” to the law firm of Holland & Knight. He formerly served as a law professor at Stetson University in St. Petersburg, Florida, from 1990 until 2001. His fields of expertise include corporations, securities regulation and corporate governance. Elson is a graduate of Harvard College and the University of Virginia Law School, and has served as a law clerk to Judges J. Harvie Wilkinson III and Elbert P. Tuttle of the US Court of Appeals for the Fourth and 11th circuits. And he also was a high-school classmate of mine. Your honor, I rest my case.

Brooksley Born, chairperson for the U.S. Commodity Futures Trading Commission, announces that the Japanese trading giant Sumitomo Corp. has agreed to pay $158 million to settle charges of illegal copper trading, during a press conference in Washington May 11. The $150 million payment is about equal to the gain realized by the company from some of the unauthorized trades.



Brooksley Born. Born, 68, a recently retired Washington attorney, was the chair of the Commodity Futures Trading Commission from 1996 to 1999. In 1997, she started exploring how to regulate the burgeoning derivatives market. She was concerned that unfettered trading of these “weapons of mass destruction,” as Warren Buffett called them, could threaten the economy without the government being aware. Talk about prescience! But then the dynamic duo of Fed Chairman Alan Greenspan and then-Treasury Secretary Robert Rubin—who would of course go on to become the consigliere at Citigroup (total compensation? $115 million) and who just recently resigned his board seat—nixed her inquiries and her proposals. “Greenspan told Brooksley that she essentially didn’t know what she was doing and she’d cause a financial crisis,” Michael Greenberger, who was a senior director at the commission, told the New York Times. “Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.” She sounds divine.

Paulson & Company, Inc. President John Alfred Paulson testifies on Capitol Hill in Washington, Thursday, Nov. 13, 2008, before the House Oversight and Government Reform Committee hearing on "Hedge Funds and the Financial Market". (AP Photo/Kevin Wolf)

Kevin Wolf / AP Photo

John Paulson. Putting Paulson, 53, the billionaire hedge-fund manager and one of the few people on the planet who made a fortune from the collapse of our financial system, on the board of Citi is a little like putting the fox in the hen house. On the other hand, did I mention he was one of the very few people on the planet who has figured out a way to make money—and lots of it—in the middle of this madness? Even Congress likes this Paulson (he is no relation to Hank). “I'm thinking we've probably got the wrong Paulson handing out the TARP money here,” Congressman John Tierney (D-Massachusetts) told John Paulson last November 13 at a hearing of hedge-fund managers before the House Committee on Oversight and Government Reform.

Nancy Peretsman. Peretsman, 54, has been a longtime investment banker and is one of the most senior women left on Wall Street. Since 1995, she has been a partner at the exclusive—and TARP-free—partnership Allen & Co., where she specializes in advising her media clients on their M&A deals. She advised Rupert Murdoch on News Corp.’s $5 billion 2007 acquisition of Dow Jones, the publisher of the Wall Street Journal. While—thank God!—Peretsman knows little, if anything, about mortgage-backed securities, she does know a thing or two about how small Wall Street partnerships work, which if Citigroup knows what’s good for it, it will make every effort to become as rapidly as possible.

William D. Cohan, a former senior-level M&A banker on Wall Street, is the author of The Last Tycoons: The Secret History of Lazard Freres & Co. Cohan's House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, will be published by Doubleday on March 10.