Vikram Pandit, “create and capture” victim
When Vikram Pandit was ousted just a day after Citigroup reported earnings last week, he tried defuse most observers’ surprise, insisting that he had “been thinking about this for a long time”. That was a pretty feeble defense: in August he was telling people that he planned to say on as CEO for “several years“.
Thanks to reporting from Jessica Silver-Greenberg and Susanne Craig in the NYT, we now know Pandit didn’t see any of last Tuesday’s events coming:
Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar.
Instead, Mr. Pandit… was told [by Citi Chairman Michael O'Neill that] three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his.
The sources behind this new information are allies of Pandit who think O’Neil was “needlessly ruthless” and that Pandit’s performance was good, context considered. But this more detailed account doesn’t make much of a case that Pandit was mistreated. Silver-Greenberg and Craig write that “interviews with people close to the board describe how the chairman maneuvered behind the scenes for months ahead of that day to force Mr. Pandit out and replace him with Michael L. Corbat, the board’s chosen successor”. O’Neill began to work to get rid of Pandit from day one. He started with the board kept widening the circle of people who knew his intentions until Pandit had “no allies left”. Yet Pandit was “stunned”.
O’Neill had decided that Pandit was an out of touch technocrat who couldn’t manage a organizational behemoth like Citi. Pandit’s complete lack of knowledge of the any subterfuge validates O’Neill’s assumption. If you’re the CEO of an institution where the chairman can work to engineer your removal for months without you being aware of what is going on, you’re probably not qualified to be the CEO.
A core competency of a CEO is being deeply plugged into what senior executives and board members are thinking and saying — to you and to each other — on everything from high level corporate strategy to C-suite and boardroom rumor, gossip and innuendo. If your chairman is trying to fire you for poor management skills, step one in refuting that point is finding out that the campaign to get you fired. Instead, Pandit allowed a create and capture campaign to flourish with his knowledge.
It’s not the best corporate governance practice for boards to just rubber-stamp management’s decisions. And you can argue, as Rob Cox does, that O’Neill was unfair, to Pandit and other stakeholders, in the way he went about plotting the CEO’s demise. But at these levels, power exists and will always be used between, among, and against all participants. O’Neill seems to have made a quick judgement that Pandit couldn’t get things done in this environment. Chrystia Freeland has a great quote from Mikhail Khodorkovsky that displays an extreme version of this ruthlessness: “If a man is not an oligarch, something is not right with him”. The CEO corollary: if a CEO is not constantly fighting to keep his job, something is not right with him. There’s a reason power is so often linked with paranoia.
Up until the end, Pandit was content to play checkers on a chess board, reading happy emails about a great quarter that wasn’t and the excellent job no one on the board thought he was doing. Hearing that anecdote probably won’t do much to make O’Neill doubt his judgment. The least Pandit could have done was fight for his job — but he never found out about the fight until it was over. What Chairman wants that guy as his CEO?