Einstein once famously defined insanity as the act of doing the same thing over and over and expecting a different result. That definition came to mind yesterday—how could it not?—when I read that Citigroup’s (NYSE:C) board of directors, in its infinite wisdom, has elected Richard Parsons as its new chairman.
Insane. This is the same board of directors, remember, that has already overseen the destruction of what was once the largest banking institution on the planet, and has played no small part in bringing the nation’s financial system to the edge of the abyss.
And now these sages believe Dick Parsons (who’s been on Citi’s board since 1996) can find the way out of the mess it’s created? Please. Let’s take a look at the highlights of Parsons’ career on Citi’s board to get a sense of whether he’s the one to fix the company’s problems:
- Parsons approved Sandy Weill’s original, grandiose, financial supermarket roll-up strategy, which is what got Citi into the fix it’s in in the first place.
- In particular, he approved that most disastrous piece of Weillian empire-building, the marriage of Travelers and Citibank in 1998, which even John Reed now concedes was a mistake.
- He approved the hiring and retention of Robert Rubin as senior advisor to Citi. Not only did Rubin not warn Citi’s board that the company was taking on too much leverage and risk, he actually encouraged the high leverage and risk-taking that has brought the company low. All for $115 million.
- He then approved the appointment of the hapless Chuck Prince, a lawyer with essentially no direct experience in banking, to succeed Weill.
- He approved the appointment of Vikram Pandit, yet another non-banker, to succeed Prince after Prince’s flameout.
So Dick Parsons had a hand in every major decision that has brought the company to the sorry state it is in today. At a minimum, his record does not give one a sense he is the sort of skeptical, independent-minded thinker the company needs to be running its board. Just the reverse. He’s part of the problem at Citi, not part of any solution.
Nor has Parsons shown a gift for managing the sort of highly complex enterprise that Citi has become. The other highlight of Parsons’ career, recall, is the role he played, as president of Time Warner, in concocting what is now broadly seen as the most disastrous non-financial merger in history: AOL’s acquisition of Time Warner. Since the deal was announced in January, 2000, the combined company’s stock has fallen to $9.23 from $75.88—down 88%. The deal is legendary for the sheer amount of value it destroyed—and Dick Parsons was in the middle of it.
Let’s just say he doesn’t have much of a record of creating value for shareholders.
And this is the individual Citi thinks should be chairman. What can the board be thinking? There can be no more incompetent a set of directors than Citigroup’s--as the company’s pending nationalization could soon prove.
What is it about America that a consistent record of failure such as Parsons’ leads to one promotion after another? Wall Street is in crisis, and it responds by reshuffling the same unsuccessful managers from one box to another. That makes no sense. Nor, I expect, will it solve Citigroup’s problems.
Or is this just President Obama’s first appointment to Citigroup’s board?