Veteran Banker To Head Citigroup
Chairman, CEO Roles Separated

By Tomoeh Murakami Tse
Washington Post Staff Writer
Wednesday, December 12, 2007

NEW YORK, Dec. 11 -- Citigroup on Tuesday named Vikram Pandit, a Wall Street veteran versed in arcane areas of the credit market, as its chief executive.

The selection ends a five-week hunt for a successor to Charles O. Prince, who stepped down as chief executive and chairman in early November after Citigroup acknowledged that it could lose as much as $11 billion on mortgage-related investments in the fourth quarter.

Winfried Bischoff, who had been acting chief executive of the largest U.S. financial-services company since Prince left, was named chairman. Citigroup became the first major Wall Street firm to separate the roles of chief executive and chairman.

Robert E. Rubin, the former Treasury secretary who stepped in as chairman when Prince left, will return to his role as chairman of the Citigroup board's executive committee.

In conference calls with analysts and the media, Pandit, 50, said he planned to focus on increasing productivity and making sure that capital is allocated properly at the company. Citigroup has about $2.4 trillion in assets and 300,000 employees.

"I will undertake an objective and dispassionate review of all the businesses individually and in aggregate to make sure that we are properly positioned for the future," Pandit said. Simplifying Citigroup's structure would be a priority, he said.

Pandit faces a daunting task, as analysts continue to voice concerns about write-downs, dividends and undercapitalization. With the company's stock price down about 40 percent this year, some shareholders have said Citigroup should be broken up.

A criticism of Pandit is that he lacks experience in consumer banking, a critical part of Citigroup's business.

"They clearly got a professional who can address the current crisis," said Roger Ehrenberg, an entrepreneur who worked 18 years at Citigroup and Deutsche Bank in investment banking and derivatives departments. "But is he the right person to address the broader growth issues that they have? That's a different question."

Ehrenberg said the separation of chief executive and chairman made sense, given Pandit's shortcomings.

"Were they to have given him both titles, they would basically be making the statement that they feel he is the balanced professional, which I think the markets would have widely rejected," he said.

Activist investors support the separation of the chief executive and chairman roles, saying it helps establish a board with the best interests of shareholders in mind.

"We think it's best that the CEO isn't his or her own boss," said Daniel Pedrotty, director of the AFL-CIO's investment office.

Pandit said in an interview that he was chosen after a "very long, very complete process" by the board.

"They reviewed a lot of different attributes they thought were important for the job and they picked me," Pandit said in an interview last night.

"I bring to the table an experience of having run large complex businesses, understanding of financial markets, understanding of risk, understanding of clients, understanding of how to put capital to work and understanding of how to generate return for shareholders," he said.

Pandit spent 22 years at Morgan Stanley before leaving in 2005. He started a hedge fund, Old Lane Partners, that Citigroup purchased in April for an estimated $800 million. The acquisition was seen by some on Wall Street as a way to bring Pandit, a star banker, to Citigroup. Pandit became the head of Citigroup alternative investments and by October was promoted to head of both the investment banking and alternatives businesses.

Bischoff was chairman of the merchant bank Schroders before it was acquired by Citigroup in 2000. He was head of Citigroup's European operations before being named interim chief executive.

Rubin, in response to an analyst's question about why neither of the top two people at the firm had significant consumer banking experience, said Pandit had spoken "quite a bit" about realizing the full potential of the consumer business in an hour-long conversation with the board Tuesday morning.

"My own view is, we're in very, very good hands in terms of being able to strategically think that through and then work with the people who are there," Rubin said. "There are people in our place, as you know, who know an enormous amount about that business."

Jeffrey A. Sonnenfeld, a management professor at Yale University who routinely meets with Wall Street executives, said Pandit was a good choice for Citigroup.

"He's not versatile in all fields of finance, but he's smart enough and competent enough to understand them. . . . Every orchestra conductor doesn't have to beautifully play every instrument in the orchestra. He has to understand how they come together," he said. "Vikram Pandit certainly understands that."

Citigroup shares fell 4.3 percent, to $33.27, on a day when the Dow Jones industrial average fell about 2 percent.

Staff researcher Richard Drezen contributed to this report.