Subject: Ethical Business Dilemma of Citigroup: Use of Government Bailout Funds
The purpose of this memorandum is to discuss the ethical, financial and legal issues presented by Citigroup Inc. ("Citigroup") receiving $45 billion dollars in government rescue funds and then shortly after paying $13 million dollars in bonus compensation to employees for cancelled trips to resorts. We propose a number of solutions to the Department of Treasury in dealing with the dilemma.
The Ethical Dilemma
Both Primerica Financial Services Inc. (“Primerica”) and Smith Barney are part of Citi Holdings, a new unit of Citigroup. Citigroup paid 1,900 agents of its Primerica Financial Services Inc. unit $5,000 each for missing a three-day stay at a Bahamas resort. In addition, around 2,000 Smith Barney brokerage advisers got debit cards valued at $1,000, $2,000 and $3,000 for various canceled getaways. After being warned by President Barack Obama, “That companies receiving bailout money can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers’ dime,” Citigroup decided to pay employees in lieu of canceled getaways.
Stakeholders: Creditors (U.S. Government), Taxpayers, Shareholders, Employees, Consumers Citigroup’s dilemma encompasses a large number of stakeholders, including creditors, taxpayers, shareholders, employees, and Citigroup customers. Creditors (including the U.S. Government) are stakeholders because they provided the funds used by Citigroup to make these bonus payments. The government has sought to calm this debate by imposing unfavorable tax treatments against unduly paid bonuses, essentially reclaiming the bonuses paid. Taxpayers have argued that the funds should be used in a way to benefit all society, i.e. rebuilding the financial credit system, rather than a discrete segment of Citigroup employees. Taxpayers’ main contention is that it is unfair for Citigroup to pay reward bonuses to employees using government bailout money...
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