Time & Attendance
By Staff Report
Apr. 22, 2009
Citigroup is trying to revive its fortunes by shaking up its executive team and electing new directors to its board. But critics say the moves are window dressing meant to appease the company’s largest shareholder—the U.S. government.
Despite voting Tuesday, April 21, to elect board members nominated by the company, the acrimony on display at Citigroup’s annual meeting revealed a deep skepticism and anger among investors toward the company’s new management team.
“Do you consider this to be talent?” asked one shareholder, Kenneth Steiner, referring to the board of directors. “I don’t. If it is, it’s talent I can do without.”
CEO Vikram Pandit told investors that the company has reduced its assets by $500 billion since he came on board in late 2007, and “made painful but necessary decisions” to shed 66,000 employees, or 18 percent of its workforce.
“We will repay every dollar with interest and a great rate of return for the taxpayer,” Pandit said at the meeting at a Midtown Manhattan hotel.
In recent weeks, Pandit has focused on executive-level management changes that have put relative newcomers to Citi—though in several cases old colleagues of Pandit—into positions of power.
“The changes by Pandit is a rationale to say, ‘We’ve got everything in place—that the government should take a hands off approach,’ ” said Rich Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees.
But Ferlauto said he is skeptical that Pandit, who came to the job with little institutional management experience, can turn the company around.
“In my view, Pandit is on the way out one way or another,” he said.
In recent weeks, Pandit promoted executives he worked with at Morgan Stanley and Old Lane, the hedge fund he helped found and which Citi later acquired. Observers say these changes highlight how the financial services firm has done little to manage its succession.
“It’s hard to believe they don’t have expertise within,” said Jeffrey Sonnenfeld, founder and president of the Chief Executive Leadership Institute at the Yale School of Management. “And it’s a shameful indictment of all financial institutions that they’ve had to turn to the outside” to fill key management positions.
Earlier this month, Pandit named Edward J. Kelly as CFO, replacing Gary Crittendon, who was named chairman of Citi Holdings Inc., a company created to include the financial services firm’s noncore businesses. The company intends to sell or find a joint-venture partner to run Citi Holdings. Crittendon became CFO in 2007.
Last year, Citi hired Paul McKinnon, a former senior vice president for human resources at Dell, to be the company’s first-ever chief talent officer. By November, with the financial crisis in full swing, McKinnon replaced Citi’s longtime head of HR, John Donnelly.
The management changes were preceded by the departure of Marty Lippert, the company’s chief information officer and chief operations and technology officer, and Anita Sands, a managing director who was head of transformation management.
Lippert and Sands joined Citi last summer. Citi says Lippert resigned, and would not respond to questions regarding Sands’ status.
“The management story of Citigroup is one of the worst in corporate American history,” said Richard Bove, an analyst with Rochdale Securities in Tampa, Florida. “They should find people within the organization to run the organization. However, the people who run Citigroup—the board of directors and the executive suite—have no confidence in the people who have been groomed and trained by Citigroup. They have no confidence in their employees.”
Jeffrey Herdan, a Citi employee of nearly 25 years who was laid off in December, attended the meeting. He criticized board chairman Richard Parsons for not addressing why the company allowed former CEO Charles Prince to walk away with a multimillion-dollar exit package when the company was on the verge of collapse. Herdan, whose comment provoked loud applause from fellow shareholders, said the company did not encourage employees to voice criticism.
“I learned how to be quiet to retain my position,” he said.
Some leadership changes at Citi, however, elicited enthusiasm. Shareholders simultaneously cheered and booed as Parsons opened the meeting by announcing the departure of longtime board members Roberto Hernandez, Kenneth Derr, Franklin Thomas and, of particular delight to investors, Sir Winn Bischoff and Robert Rubin.
As the names were read a shout came from the audience: “It’s about time!”
Parsons, widely seen as an experienced hand who knows how to finesse political minefields, responded: “I see this will be a spirited meeting.”
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