The Wall Street Journal reports that five executives who left Citigroup (C) will not get the balance of their severance payments which total several million dollars. The reason behind the action is that the bank does not want to look bad to the government and the public.
The tremendous compensation packages handed out by Wall St. firms continue to be a source of tension for banks and Citi hopes to get the issue behind it.
The move by the financial firm raises a question about business ethics. Apparently, each executive in question has a binding contract to be paid severance. Citi is gambling that none of them will sue the bank for the balance of its obligations to them. But, why should they have to go to court in the first place?
The near-collapse of the financial system has, in many cases, put expediency ahead of morality. It was greedy behavior that got Wall St. into its mess. Now, it is a series of broken promises that may help it get out. By allowing Citi to withhold payments from managers who are clearly due them, the federal government becomes an accessory to the behavior, a full partner in walking away from contractual obligations. If the government will aid and abet a dissolution of moral codes within the financial industry it has opened the door to making legal obligations convenient instead of binding.
Recently, Harvard Business School students started signing ethics pledges committing them to act ethically as they enter the business world. They may want to avoid being recruited by Citigroup.
Douglas A. McIntyre
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