Citigroup hardly needs any more conflict — but its board just walked right into one. The bank said it will pay director Robert Joss, a former Wells Fargo executive and Stanford business school dean, $350,000 for consulting services this year for what may be as little as three weeks' work. The set-up positions Joss as neither an independent director nor an insider, potentially giving Citi the worst of both worlds.
This rare arrangement looks undesirable on several levels. First, there's the way it was disclosed. Citi said in March that Joss was paid $100,000 to consult last year. But the ongoing nature of the deal wasn't revealed until Friday. That was after Joss's continuation on the board after his appointment last July had received the support of 97 percent of shareholders, despite a recommendation from advisory firm Glass, Lewis to reject him. Second, Joss told Bloomberg he has advised a handful of Citi executives on a range of issues, including strategy and risk management. Yet Joss sits on the board's risk management committee, leaving him potentially in position to oversee policies he helped put in place.
Broadly, the situation may be manageable. Citi has come a long way from Sandy Weill's cozy board, adding welcome expertise and independence while splitting the CEO and chairman roles. Joss was last a teacher, and he seems mostly interested in carrying on mentoring. Still, with Joss falling between the cracks of director classification, Citi shareholders fail to get an independent to look out for their interests — even if Joss professes that "independence is a state of mind," a notion any Stanford MBA candidate would probably be expected to dispute.
In any event, the conflict will require delicate handling if Citi keeps the status quo. The board will need to be careful not to have Joss's role as a director conflict with his consulting gig. For Citi, which is still 27 percent owned by the U.S. government and fighting its way back to full health, the extra effort and the added scrutiny hardly seem worth it.
