Andrew Hall does not deserve $100 million from Citigroup


Last month my colleague Zac Bissonette posted If Andrew Hall made Citigroup money, why shouldn't they pay him? and I have been pondering this myself for a while. As a very active participant in the investment world and a supporter of capitalism, I did not want to make a knee jerk response.

A Mr. Andrew J. Hall, who heads Phibro, LLC, a subsidiary of Citigroup Inc. (NYSE: C) thinks he deserves $100 million for being in charge of this division because it made over a $650 million profit -- and he is lobbying very actively for the cash.

So here is what I concluded: The $100 million payout is outrageous!!!

1) He was not at risk; no risk - no reward. It was a case of heads I win tails you (shareholders) lose.

2) He did not make these gains by himself. He was sitting in the right office, supported by many people and traders. He was like the guy who is in charge of opening and closing the primary supply valve of a dam and claiming he should get millions of dollars in salary because he provides water to 10 million people.

3) Energy prices skyrocketed last year and his business was exclusively energy focused by design. A blind man sitting in his office might have had similar results.

4) The percentage of the payout is higher than any commissioned sales person gets paid and it is not graduated as it scales up. It is disproportionate to any comparable compensation. Though $650 million is a big number, what is that on a percentage basis. Regardless, the amount of profit had some relationship to the amount of other peoples money he had to play with.

5) The profits he earned for the company were short term and ignore losses before and after. The bonus system is rigged by a board of directors that want their colleagues to make sure they get theirs too.

How about the fact that it is morally and ethically wrong to take advantage of people when given a position of responsibility. What if it was a 50/50 split between him and the company -- you could still argue he made a lot of money for the shareholders. That argument is ludicrous. HIS JOB IS TO MAKE MONEY FOR THE SHAREHOLDERS THAT ARE AT RISK!!! Not line his pockets at their risk.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own stock options in Citigroup.

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