From reports in the media, Citigroup’s CEO was ousted by the Chairman. From statements like “unnamed sources” at Citigroup to inferences about the Chairman’s relations with the incoming CEO, the situation has been made to sound like conspiracy.
Until October 15th, Vikram Pandit was the CEO of Citigroup. It is said that Michael O’Neill, Chairman at Citigroup, called Mr. Pandit into his office. O’Neill is said to have given Pandit three options:you resign immediately, resign effective at the end to of the year or you’re fired without cause. He chose to resign immediately.
On the street, the rumors say that O’Neill wanted to remove Pandit since he became Chairman in April of this year. People believe that O’Neill was envious of Pandit because he was unable to become the CEO of Citigroup in 2007. To make matters worse, Pandit’s right hand man and COO, John Havens, was approached by three board members and told he had the same opportunity to resign. After putting up a fight, he resigned.
The real reasons the board asked for both resignations is unclear. While Citigroup’s earnings were positive for the 3rd quarter, the stock price dropped 89% during Pandit’s tenure. Some believe the reason was because the Federal Reserve rejected Citigroup’s request to buy back shares and increase the dividend. Along those lines, the board believed that if Pandit would have created better relationships with regulators it would have been easier for him to get the fed to honor his requests.
The succeeding CEO to Pandit is Michael Corbat. Corbat had been serving as Citigroup’s CEO for Europe, the Middle East and Africa. Before that, Corbat headed Citi Holdings, the unit that holds the bank’s soured assets and O’Neill was the board member overseeing relationships with federal regulators for that unit. The 2 of them took trips to Washington, DC together. Because of that, the board believes that Corbat had developed better relationships with regulators.
While there are many rumors about Panits resignation, to much information is based on unnamed sources. No one, outside of the board, is absolutely certain why Pandit and Havens were asked to resign. The fact Citigroup is under investigation by the Securities and Exchange Commission does not help. Nevertheless, as long as Citigroup continues to effectively serve its stakeholders, it may never matter. Perhaps it is simply a case of a CEO doing a great job of turning around an underperforming corporation in times of crisis and now the board believes different talent is required to move forward.
It does, however, point to how much power the board, especially the Chairman, can have over the career of a CEO in any company. It points to the fact that all leaders need to know who their stakeholders are as well as the expectations. In Pandit’s case, he may have lost touch with both the board and regulators. In turn, this left him vulnerable to being blindsided.
If you are a leader, know your stakeholders, their needs and the resources required, including time, to fulfill those needs. At some point, we all answer to someone.
What do you think? I’m open to ideas. Or if you want to write me about a specific topic, please let me know.