Citigroup's Sale of Phibro: Ending the US$ 100 Million Pay Controversy

            
 
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Case Details:

Case Code : BECG108
Case Length : 13 Pages
Period : 2007-2009
Pub Date : 2010
Teaching Note :Not Available
Organization : Citigroup Inc.
Industry : Financial Services
Countries : US

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"Banks are the backbone of any financial system. I don't think they have any real business in doing a lot of speculative trading."1

- Paul Volcker, former Federal Reserve Chairman and Head of US President Barack Obama's Economic Recovery Advisory Board, in October 2009.

"We didn't just solve Obama's problem. We had to think of the risks that the company would be under from an irritated administration or pay master."2

- A Citigroup Executive, in October 2009.

"The case of Mr. Hall highlights the hazards of mixing the public interest with capitalism at its most unbridled, and it raises basic questions of fairness."3

- David Segal, an analyst, in August 2009.

Introduction

On October 9, 2009, Citigroup Inc. (Citigroup) announced the sale of its profitable energy-trading unit, Phibro LLC, to energy and chemicals giant Occidental Petroleum Corp. (Occidental), for US$ 250 million.

Business Ethics Case Studies | Case Study in Management, Operations, Strategies, Business Ethics, Case Studies

Citigroup reportedly decided to sell the unit to avoid a potential conflict with the US government over a US$ 100 million payout to Phibro's star trader and CEO, Andrew J. Hall (Hall).

Citigroup's Sale of Phibro: Ending the US$ 100 Million Pay Controversy - Next Page>>


1] Bradley Keoun, "Citigroup Sells Phibro Unit to Occidental Petroleum," www.bloomberg.com, October 9, 2009.
2] Eric Dash and Jack Healy, "Citigroup Sheds Energy Unit and Its $100 Million Trader," www.nytimes.com, October 9, 2009.
3] David Segal, "$100 Million Payday Poses Problem for Pay Czar," http://finance.yahoo.com, August 3, 2009.

 

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