CASE ANALYSIS ON CITIGROUP RESTORING ETHICS AND IMAGE

BEFORE GROWTH

ASHWIN RAM RGOWTHAM SGOMATHI SNIC PAUL VARGHESEPORKO G

Has a Legacy of 200 years Citigroup is the first financial services company in the U.S. to bring together banking, insurance, and investments under one umbrella in 1998 Has 141,000 full-time, 7,000 part-time employees in the U.S.146,000 full-time employees in more than 100 countries outside U.S.

CITI GROUP

SANDY WEILLEVERYTHING ABOUT WEILL IS BIG, INCLUDING HIS AMBITION

EVERYTHING ABOUT WEILL IS BIG, INCLUDING HIS AMBITION

Was the CEO of CITIGROUP from 1998 to 2003 Founder of the Insurance company THE TRAVELER’S GROUP Merged Traveler’s Group, Salomon Smith Barney, and Citicorp banking empire for 83 billion dollars His name is associated with many corporate scandals

CHARLES PRINCE An absolute loyalist to Weill Became the CEO of Citigroup in 2003 Appointed as the CEO to be fireman,

cleaning up scandals and improprieties since the late 1990s

Introduced the Five Point Ethics Plan in 2005

SCANDALS SPITZER INVESTIGATION – Salomon Smith Barney

paid a$400M fine WINSTER – Jack Grubman, SSB paid $5m to settle

charges FEDERAL TRADE COMMISSION INVESTIGATION -

Tricking borrower into high cost credit insurance, $215m consumer protection settlement

ENRON FRAUD – helped ENRON to siphon out $500m before fililng for bankruptcy, paid $210m fine to SEC

WORLDCOM SCANDAL – led to the collapse of the company in 2004, paid $2.65b to WORLDCOM

FINANCIAL SERVICES AGENCIES INVESTIGATION – led to the termination of CITIGROUP operations in Japan in 2004

By 2002, lost 30% of its market value In 2005, Federal reserve blocks M&E activities

SCANDALS

PRINCE’S PLAN Hired Sally Krawcheck as the CFO to clean up

CITIGROUP’s image Introduced the ‘ THE FIVE POINT ETHICS

PLAN’

THE FIVE POINT ETHICS STUDY EXPANDED TRAINING ENHANCED FOUCS ON TALENT AND

DEVELOPMENT BALANCED PERFORMANCE APPRAISALS IMPROVED COMMUNICATIONS STRENGTHENED CONTROLS

DISCUSSIONS

1) Has citigroup grown too large to enforce corporate governance or internal controls?

DISCUSSIONS

Yes , The Citigroup has grown large

Strategy ->Five point ethics plan

DISCUSSIONS

What effect has the organization’s size and complexity had on the continued problems?

DISCUSSIONS Individual heads may be more powerful than the superior heads.

A new set of rules will bring a change in their work culture and working style.

People are resistant to changes in a work environment

DISCUSSIONS

2) What effect will the new plans have on Citigroup’s investors?

DISCUSSIONS

In short term,there wont be any change

In long term,the organisation can expect new investors to come in

DISCUSSIONS

What can Citigroup do to mitigate negative responses?

DISCUSSIONS Should keep the stakeholders informed

about the implementation of the plans. Should convince the stakeholders by

projecting the advantages of the plans. Should project on the remedies to be

followed incase of any uncertainities in the future.

DISCUSSIONS

3.How can Citigroup continuously communicate the reformed organizational culture to the public?

DISCUSSIONS Press Conferences Ad through different channels

1. TV talk spots and commercials.2. Internet ads3. Bill board ads4. Radio

DISCUSSIONS Community Events

1. Local Events2. Carnival Weekends3. Retreats4. Charity Events

DISCUSSIONS

4. How would you react if you were the corporate communications officer of a Citigroup competitor?

DISCUSSIONS• Already Citigroup has lost 30% of its market

value and people think it as ethically bankrupt.

• Competitors’ communication officer should project the advantages of their company’s plan and policies and must convey that their policies are not lower than the five point ethics plan.

DISCUSSIONS

5) Do you believe it is possible to enforce an ethics program with this or any other organisation?

DISCUSSIONS It is difficult to enforce ethics into an

organisation. Communication barriers. Focus on the long term rather than short term. Although difficult, its not impossible. New recruitments into the organisation Drawback- financial strain. Better pay can lure recruits over the ideals of

ethics. Story of Citigroup.

DISCUSSIONS

6) As a corporate communications officer, what would be your method to communicate the plan to Citigroup employees and inspire change?

DISCUSSIONS Guidance, training, incentive, reward,

promotion, support, recognition, empowerment and good office atmosphere.

Sense of security. Anonymous general feedback- hotline Shared responsibility. Message reinforced constantly. HR managers to be on a lookout.

DISCUSSIONS

7) Is Prince’s plan sufficient given the magnitude of the problems facing Citigroup?

DISCUSSIONS

No it’s not sufficient Prince Resignation in 2007

Appointment of new bloods may help the

better implementation of the ethical

programs, as the older employees are more

resistant to any changes

DISCUSSIONS

8) Who are the critical stakeholders? How should Prince handle the stakeholders’ responses and concerns?

DISCUSSIONS

Customers Employees Managers Shareholders Government

DISCUSSIONS Government said no to mergers - To avoid future scams and

also to settle past scams Prince handles by describing about 5

point ethical plan to the share holders regularly and giving them confidence

THANK YOU!