Sub-prime crisis in the US has taken its toll in the markets around the world. Several top American firms are facing some tough times. CEOs are bearing the brunt of investor’s ire. One such man Charles Prince - Citigroup’s top man who resigned on Sunday - might see some good come out of the bank’s huge losses.
The terms and conditions of his leaving the group have been made public. Price will manage a princely exit indeed. On his way out he will pick up $95 million in compensation. The breakup of this exit deal is as follows: $16.05 million in deferred stock, $10.7 million of restricted shares, $1.28 million worth of options and a whopping $12.3 million bonus. This is in addition to the $53 million of Citigroup shares that he already owns.
The compensation might seem huge but is measly compared to what Stan O’Neal - former CEO Merrill Lynch - got on his departure last month. His expected share and retirement benefits are expected to run up to $161 million.
These levels of compensation are being considered vulgar by several shareholder activists and politicians. Seen as a reward for incompetence and negligence, they are being considered unacceptable in several quarters. Needless to say, these deals are also inviting scrutiny of industry regulators.
SEC (Securities and Exchange Commission) is embarking on an investigation to inquire as to whether Citibank had revealed the level of actual sub-prime exposure to its investors. Also another investigation will seek to determine whether company’s executives knew more than they revealed to investors about the value of the bank’s sub-prime mortgage related and buyout loan investments.
The heavy losses in third-quarter have cost millions of dollars to the investors in the company. Citibank’s shares have fallen in each of the past eight days. This is a serious setback to Prince as well. His shares are eroding fast causing him serious losses.
Charles Prince is unlikely to be the last victim of sub-prime crisis; several of the top brass in important business houses stand in line to loose jobs over the financial risks that they so readily took. However, if the compensating deals are to be taken into equation, many won’t loose sleep over the insecurity surrounding their jobs either.
