Should Citi cancel its $400 million sponsorship of the new Mets stadium?

Commentary about business and finance.
Nov. 24 2008 6:25 PM

Ills de la Citi

Should the troubled bank cancel its $400 million sponsorship of the new Mets stadium?

Citigroup Center. Click image to expand.
The Citigroup Center in New York City

The giant bank now known as Citi bellied up to the bailout bar again on Monday morning. Because Citi is such a huge bank and one of the nation's largest advertisers, there will be great scrutiny on how it spends the latest injection of taxpayer funds—some $27 billion. And that scrutiny is well-deserved. We all have a big stake now in how Citi manages its (our) resources. Cost-cutting and parsimony should be in. Excess and profligacy should be out. This can be a difficult lesson for a big-time Wall Street firm to learn, so let's hope Citi executives have been paying attention to how other bailed-out (or wannabe bailed-out) companies have been behaving publicly.

For example, transport policy. As we saw in last week's shambolic congressional hearings, in which CEOs of the Big Three were chastised for flying their own planes to Washington, jetting in to cry poverty isn't just expensive; it's bad form. Citi should ground corporate jets and instead send execs on the Acela train or the Chinatown Bus ($35 round-trip) when they go to Washington to talk with their new stakeholders. The best option for taxpayer-financed travel: a Joad-style flatbed (American-made) truck.

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Companies like Citi also need to clamp down on the luxury lifestyle that its top employees have come to expect. As AIG showed, spending $400,000 on spa treatments, fancy hotel rooms, and fine wine for agents at a time when you're burning through $100 billion-plus in taxpayer loans is a really stupid move. Citi is as well-known for its retreats as the French army. (It has its own big center in Armonk, in Westchester County, N.Y.) In August, it banned off-site meetings. The good news: There are plenty of large venues right in New York City at which employees can congregate, including on its own rapidly depopulating trading floors. The software tools that companies use to bar the use of foul language on internal e-mail should also be tweaked to delete any mention of Ritz-Carlton, Four Seasons, Tiffany's, and the Caribbean. While they're at it, Citi should cancel all Christmas parties loudly. It's unseemly for the remaining employees to get hammered and enjoy canapés while their erstwhile colleagues pound the pavement. Besides, parties are a legal nightmare for Wall Street firms (lots of opportunities for inappropriate comments and contacts). And everybody secretly hates them.

But there's a tendency for troubled companies to engage in mindless cost-cutting, which I examined in a two-part series back in 2006, here and here. Rather than focus on the things that employees will complain about to reporters or, worse, to blogs—clamping down on paper clips and Post-it notes—Citi should take a hard look at a prominent item that's both symbolic and financially meaningful: the dividend. No company that has messed up its affairs so poorly that it needs to borrow money from the taxpayers should pay a dividend to stockholders. And here, Citi is failing. Monday's press release notes that Citi "also has agreed not to pay a quarterly common stock dividend exceeding $0.01 (one cent) per share for three years." Why 1 cent? As  told to me by the CEO of a banking company that had cut its dividend to a penny before being eaten by another bank, there are lots of mutual funds that invest only in companies that pay dividends. Eliminating the dividend entirely would force those funds to sell shares immediately at a time when the stock is already under stress. That makes sense, I suppose. But for Citi over the next few years, a zero dividend is enough. A penny per share per quarter works out to about $218 million a year, by my calculations—money that would be better used to pay back debt.

Citigroup would also be well-advised to save a few tens of millions of dollars by zeroing out compensation for the top executives over the next several years, especially for CEO Vikram Pandit. Pandit joined Citigroup when the bank bought his hedge fund in April 2007 for a price reported to be $800 million in cash. Within a year, the unit exploded and was folded, thus contributing to Citi's many losses. Shareholders shouldn't have to pay anything to "Mr. Vikram," as Saudi investor Prince Alwaleed Bin Talal referred to Pandit in an unintentionally hilarious interview with Maria Bartiromo. (With the horses behind him, the brown scarf, the worry beads, and the retro hairstyle, the prince looks, as a colleague noted, like a cross between Guido Sarducci and Frank Zappa circa 1979.)

But not every extra expense must be eliminated. How about those full-page advertisements Citi has been running for the last few days in the New York Times and Wall Street Journal,touting its diversification, expertise, and commitment to customers? I actually think those expensive ads are fine. Citi is suffering as much from a crisis of confidence as anything else. So the company is spending a few million bucks on ads that hammer home the notion that "Citi never sleeps." If Citi, a major advertiser in a variety of media, were to withdraw entirely from the field, people would begin to think that the Citi that never sleeps is sleeping with the fishes. And the Times and the Journal need all the ads they can get. [Editor's Note: Citi would be well-advised, however, to spread some of that love to Slateand Newsweek while avoiding the properties of Time Inc. altogether.]

Citi Field is also a tough one. In 2006, Citi signed a $400 million, 20-year deal to name the Mets' new stadium after the company. It's hard to walk away from signed contracts. And if Citi manages to stick around for the next 20 years, this could turn out to be a very good deal. The company's name will be mentioned millions of times in a range of media—online, television, radio, newspapers—over the next two decades. As a gesture to the company's new partial owners, perhaps there could be some tweaks: Paulson Park at Citi Field or the Ben Bernanke Bullpen. And, of course, the field's tarp can just be called the TARP.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster. Follow him on Twitter.

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