The most important piece of business news over the past couple weeks was released when Citigroup’s CEO, Vikram Pandit, suddenly declared he was stepping down and leaving the company. This move came as a shock to onlookers, and even Citi employees. The only people not surprised were the company’s board members.
Pandit was instated as CEO on Dec. 11, 2007 amidst both the economy’s and Citigroup’s spiraling recession at that time. As it turned out, he was no stranger to criticism throughout his tenure. Recently, according to Forbes.com, former FDIC chair Sheila Bair wrote in her new book she doubted Pandit’s abilities when being named CEO, stating, “I thought Pandit had been a poor choice.”
Bottom line — it was determined by Citi board members that Pandit was no longer the person this company needed to encourage improvement within the organization.
Enter Michael Corbat. The announcement was made last Tuesday, October 16 that Corbat will be the new CEO of Citigroup, amassing the responsibility and expectations of future growth on his shoulders.
According to the Citigroup website, Corbat had most recently been positioned as CEO of European, Middle Eastern and African operations. Before that, he had been CEO of Citi Holdings, overseeing the divestiture of many of Citi’s subsidiary businesses.
In evaluating an individual for the position of CEO for one of the top Fortune 500 companies, many qualities must be taken into consideration. To keep it simple however, there are two questions I’ll address concerning Michael Corbat. The first being — does he have the intellect and the experience for the job?
The answer is yes.
A Harvard alumnus with a degree in economics, he understands wealth management, risk management, global markets and the finer points regarding the different categories of banking (investment, corporate, consumer etc.), all of which are integral aspects of Citigroup’s business operations. He experienced these business features through almost years of employment with Citi and its predecessors.
The second and more important question is whether is he characteristically right for the job, but the answer for this isn't as simple.
It’s clear that in order to stay competitive, Citigroup will need to change the way it conducts business. To facilitate this transformation, Corbat will not only need to be adaptive, but able to foresee valuable business opportunities. This was Pandit’s greatest fault. He reacted more than he predicted. As a result, Citi is lagging behind other banks in the refinancing market, which as a result of low interest rates, is booming. Citi was late to the party and Pandit was the traffic jam.
In the debate of whether to elect someone from within the organization with many years of experience, like Corbat, or a relative outsider, like Pandit was, Citi has made the right choice. The fact Corbat has been part of this company for so long will greatly benefit the efficiency and quality of his work. This is because he will already know the people he is working with along with the specific processes involved in decision making that are unique to Citigroup.
The broad effect of Citigroup’s business actions, and therefore its importance, is based on the same principle that caused all banks to be hit as hard as they were by the market crash. There is a network that connects all major banks. They lend to each other, borrow from each other and invest with each other. This means that even if you aren’t a direct client of Citi, you are affected in some way by its decisions.
As far as this particular decision to alter management, Citigroup has done well. It is making the necessary steps to better its situation, and that alone indicates promise. Plus, the candidate it elected was a strong choice. As is true, though, with many aspects of business, time will be the telling factor of just how strong a choice it was.