CEO Succession Planning Issues at Citigroup: Vikram Pandit's Exit

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Pandit, born in 1957, in Maharashtra, India, completed his BS in Electrical Engineering from Columbia University in 1976. The next year, he completed his MS. He then joined Columbia Business School to earn an MBA in Finance in 1980 followed by a PhD in Finance in 1986. After a short stint as professor in Columbia University and Brock University in Canada, he joined New York-based Morgan Stanley in 1983 as an associate. Within seven years, he had become the Managing Director (MD) and Head of the US Equity Syndicate unit of Morgan Stanley. In 1994, he was promoted as the MD and Head of Morgan Stanley’s Global Institutional Securities division. In 2000, he was made the President and COO of its Global Institutional Securities and Investment Banking businesses... .

After becoming the CEO, Pandit focused on enhancing the capital base of Citigroup. In January 2008, Citigroup announced some key actions including raising US$12.5 billion of capital through the sale of convertible preferred securities; reducing the company’s quarterly dividend to US$32 per share; continuing the sale of non-core assets; and reducing its consumer-based holdings of mortgage-backed securities and other assets held in its Securities and Banking business...

In July 2010, Citi announced that it had received 13 major product and regional awards in the annual Euromoney Awards for Excellence including Banker of the Year award for Pandit. Commenting on this, Pandit said, "I am deeply honored that Euromoney has recognized the significant progress we are making at Citi."...

On October 16, 2012, Pandit resigned and Corbat was made the CEO of Citigroup. Corbat had joined Salomon Brothers in 1983 after graduating from Harvard University with a bachelor's degree in economics. In 1998, following the acquisition of Salomon Brothers by Travelers Group and its subsequent merger with CitiCorp, Salomon Brothers became part of Citigroup. In his 15-year-long career in Citigroup, Corbat had served as Head of Citigroup’s Global Corporate Bank and Global Commercial Bank, CEO of Citigroup’s Global Wealth Management (consisting of Smith Barney and the Citi Private Bank), and CEO of Citi Holdings...

Pandit’s shock exit attracted plenty of attention from industry experts. Although the company said that Pandit had resigned, analysts were of the view that actually, he had been fired. While some analysts applauded the Citigroup board for replacing Pandit with Corbat, others pointed to the corporate governance issues at Citigroup which had handled its CEO succession in such a messy manner. Moreover, the immediate resignation of Havens, the President and COO of Citigroup, along with Pandit also attracted criticism...

In December 2012, Corbat announced that the company would reduce annual expenses by around USD1 billion and cut around 11,000 jobs. The company expected that the “repositioning” would deliver USD900 million in cost savings in 2013 and USD1.1 billion per year afterwards. The company would take a USD1 billion pre-tax charge in the fourth quarter of 2012 and another USD100 million in 2013 related to the cuts...

Exhibit I: A Note on US Subprime Mortgage Crisis
Exhibit II: Business Segments at Citigroup
Exhibit III: Financial Highlights of Citigroup (2003-2012)
Exhibit IV: Citigroup's Board of Directors in October 2012
Exhibit V: Citigroup's Share Price during Pandit's Tenure
Exhibit VI: Breakdown of Citigroup's Repositioning Charges

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