Questions for Citigroup's Boardby
As it becomes increasingly clear that Vikram Pandit was forced out as chief executive of Citigroup on Oct. 16, the question for the board is why. There was plenty of fodder to build a case on why Pandit had to leave. The question is why the board felt it was necessary to orchestrate such a disruptive and disrespectful exit.
A piece in today’s New York Times lays out a scene in which Pandit was presented with three versions of a press release: one in which he quit right away, one in which he would stay through the end of the year, and one in which he was fired without cause. Which option would you choose in that scenario?
Were things really so tense that the board couldn’t have made it clear to Pandit that they felt a change of leadership was needed and negotiate a seamless exit? Isn’t that what boards do all the time?
The most troubling aspect of Citigroup’s leadership change is how it was communicated to the market. Instead of sharing the board’s qualms about the current leadership and outlining its rationale for a change, directors put the blame squarely on Pandit’s shoulders. He seemingly walked off in a huff, as did his No. 2 guy, President and Chief Operating Officer John Havens. No wonder the initial coverage was rife with speculation that they’d both asked for more money. What babies! Come on, guys, grow up!
The person who should have explained what really happened—and didn’t—was Citigroup Chairman Michael O’Neill. It was never a secret that he wasn’t enamored with Pandit, and many people assumed a change in leadership was possible when O’Neill took over the chairman’s post earlier this year.
Not only did O’Neill mischaracterize Pandit’s exit as a surprise, saying the chief suddenly quit a day after he delivered earnings that beat expectations; O’Neill added to the confusion by having Citi issue a press release filled with boilerplate praise for the departing executives. The board, one assumed, must have been in a state of shock.
Worse, the process undercut successor Michael Corbat. Let’s not forget that the new CEO arrived in a state of emergency, practically breathless from sprinting to the airport to get to the C-suite in time. By all accounts, Corbat is well-suited for the top job. He had been groomed and was held in high regard by Pandit himself, according to people within the company. But instead of a well-orchestrated succession, Corbat suddenly flew in from the other side of the planet. That creates the impression that he’s Mr. Right Now.
Were there legal reasons to orchestrate a coup? Perhaps. But boards are empowered to replace CEOs. That’s what they do. The question here isn’t why they ousted Pandit. It’s how they did it, and then explained it to the owners of Citigroup. Investors deserve better.