Summary: Sacked in the Citi - What happened at Citigroup?Yesterday, with little fanfare, CEO Vikram Pandit stepped down, effective immediately. Along with Pandit, Chief Operating Officer John Havens also resigned. No explanation was given. Markets were shocked. Although a successor was named—a longtime Saloman Brothers and Citi veteran—you don’t just up and leave a multi-trillion dollar institution unless you’re in handcuffs. Analysts have described it as the worst management transition they’ve ever seen.Pandit has been CEO for the past five years, a time when the bank almost folded. Citi received a $45 billion capital injection from Treasury via the TARP program, and paid that back, along with a $12 billion profit for the US Government. But its finances are still shaky. Their capital plan—which included a reinstated dividend for shareholders—was rejected in April. And just recently former FDIC Chairwoman Sheila Bair slammed Pandit in her memoir of the financial crisis as a former hedge-fund manager who really didn’t understand banking. In a Bloomberg interview Tuesday she could barely disguise her glee at his sudden departure.At its heart, the Pandit’s problems began when Michael O’Neill succeeded Richard Parsons as Chairman of Citigroup’s Board this spring. O’Neill had been a senior executive in several large banks, including the troubled Bank of Hawaii, where he presided over significant asset sales and branch closures, boosting shareholder returns. O’Neill’s “shrink-to-succeed” plan may be what the Board wanted for Citi, and Pandit simply wasn’t delivering the goods.Transitions are tricky. Pandit was by many accounts prickly. He publicly challenged JP Morgan CEO Jaime Diamond in 2008 during the conference call when Diamond announced their acquisition of Bear Stearns. When Citi changed Board Chairs, Pandit needed to make sure he was in synch with the Board’s vision for Citi’s future. Apparently he didn’t do this.Boards are taking charge more often today, firing the managers at Best Buy and Hewlette Packard for personal foibles. But this is the first time a strategic difference has led to such a sudden CEO departure. Ultimately, Board responsibility is a good thing. But we’ll have to see how it works out this time.Douglas R. Tengdin, CFA Chief Investment OfficerFollow me on Twitter @tengdin
