In a couple of sudden moves that shocked Wall Street and fueled speculation about the reasons behind them, Vikram Pandit resigned as Citigroup Inc.'s chief executive - just one day after the bank announced stronger-than-expected earnings. Meanwhile, John Havens, Citi's president and chief operating officer as well as the CEO of Citi’s Institutional Client Group, also resigned.
Citigroup offered no explanation for the sudden departures. Citi's board of directors announced that Michael Corbat will be the new CEO and will join the board. Previously, Corbat was Citi's CEO of Europe, the Middle East and Africa.
"Given the progress we have made in the last few years, I have concluded that now is the right time for someone else to take the helm at Citigroup," Pandit said in a statement. "I could not be leaving the company in better hands."
Pandit, whom Marketplace journalist Heidi N Moore once described an executive of “irreproachable and sometimes impenetrable diplomacy” had been at Citi’s helm since December 2007, and steered the nation’s third largest bank (after JP Morgan Chase and Bank of America) through the dark days of the financial crisis and its aftermath.
This included selling businesses, removing Citi from government ownership after a bailout in 2008 and putting the bank’s balance sheet back into profit after posting billions of dollars in losses on bad mortgage investments made before Pandit took over Citi’s reins.
Still, it hasn’t all been good for Pandit, at least not in the eyes of shareholders and some regulators.
First, his $15 million pay package angered investors. Earlier this year, shareholders including potentially thousands of employees - rejected a board-approved compensation package which boosted his pay to $14.9 million from $1 the previous year. Some 55 percent of votes went against the package, in the first major rebuke against the chief executive of a major financial firm. Shareholders also sued the bank’s directors for their 2011 compensation on the basis that it was not justified.
The government has also had its share of things to say against Pandit. In March 2009, President Barack Obama ordered the Treasury Department to consider breaking up Citigroup and removing its executives, including Pandit, according to a behind-the-scenes book about the crisis published last year by journalist Ron Suskind. Treasury Secretary Timothy Geithner ignored Obama’s request, according to Suskind. [The Washington Post notes that both Geithner and the White House have disputed his version of events.]
Pandit had another vocal opponent in Sheila Bair, an influential bank regulator who ran the Federal Deposit Insurance Corp. during the crisis, the Washington Post reports. “Bair wanted the government to fire Pandit after it extended billions in bailouts and guarantees to his company. Geithner disagreed, and Pandit kept his job,” according to the paper.
In an interview with with CNBC Tuesday after Pandit’s departure was announced, Bair said Citigroup has lacked “a clear strategic direction and focus” under his watch.
Meanwhile, CNBC's Jim Cramer and the Wall Street Journal reported that Pandit was forced out in a disagreement with the board, which was frustrated with the performance of the institutional clients unit, among other issues – which could explain the equally sudden departure of Citi president and COO John Havens.
In what may have been the last straw for Pandit, Bair recently released a book, called “Bull by the Horns”, which was highly critical of Pandit and Wall Street.
Some experts, such as veteran banking analyst Nancy Bush, believe this may have ultimately contributed to his decision that now was simply the right time to leave.