There seems to be a coup underway at Citigroup. It has already taken down Robert Rubin, looks as though it will lead to Sir Win Bischoff being replaced as chairman by Dick Parsons, and could culminate in the departure of Vikram Pandit as chief executive.
I say this not from inside knowledge but from reading the stories that broke on Friday, when Mr Rubin’s resignation as director and senior adviser was announced and news leaked that Citi is in talks with Morgan Stanley on divesting Smith Barney, its retail broker.
The thing that strikes me most forcibly about events at Citi is the influence of the US government, which has had to recapitalise the bank and shows no sign of being a passive investor. The FT emphasised the government’s role in making Mr Pandit reverse course over keeping Smith Barney inside Citi.
What is unquestionably true is that Mr Pandit has been spending a lot of time in Washington lately and now has to answer not only to the New York Fed, Citi’s main regulator, but also the Washington Fed and the Treasury.
As a result, he has abandoned his insistence that Smith Barney would stay part of Citigroup because “I love that business” and has buckled down to selling assets and improving its capital reserves. From the Treasury and Fed’s point of view, of course, this makes sense: they have no desire to be forced to inject yet more public money into Citi.
Chief executives of US corporations traditionally have wide latitude to ignore investors’ wishes because, short of a proxy battle to replace board members, investors have little formal means of exerting control over them. But things are different for Citi, and the other Wall Street financial institutions that took government money.
The stories about Mr Parsons, who is Citi’s lead director, taking over the chairmanship from Sir Win refuse to die. Sir Win said when he took over a year ago that he only envisaged staying a year or two as chairman, but it looks like being on the short end of that range.
Finally, what about Mr Pandit? There continue to be ominous noises that Citi directors respect his intelligence but regard him as lacking as the leader of such a big and diverse organisation.
The New York Times put it this way:
Citigroup is likely to undertake further changes, including a possible shake-up of its board, according to a person briefed on the situation. Although directors have been impressed by Mr Pandit’s financial acumen, they continue to question his leadership ability. And Citigroup directors are considering replacing its chairman, Winfried Bischoff, with Richard Parsons, its lead director and the former Time Warner chairman, as early as next week, this person added.
Mr Rubin was influential not only in the appointment of Sir Win as chairman but also that of Mr Pandit as chief executive. If both Sir Win and Mr Rubin are now on their way, the clock may be ticking for Mr Pandit too.
Update: Mr Parsons is now trying to douse the flames, telling the Wall Street Journal today that Mr Pandit is not in jeopardy:
“We have confidence in the current management and leadership of Vikram,” Richard Parsons, a former CEO of Time Warner, said in an interview Sunday. “There’s no truth” to rumors that Mr. Pandit’s job is in jeopardy barely a year after he took the reins, he added. Mr. Parsons is expected to be named Citigroup’s chairman this month, replacing Sir Win Bischoff, say people familiar with the company.
