Mike O’Neill

  • 24 Apr 2013 at 6:52 PM

Citigroup Lookin’ Pretty Good To Citigroup Chairman

Mr. O’Neill, meanwhile, told shareholders that the main work in shrinking Citi has been done. “Look at the performance of Citicorp: It’s quite respectable,” he said about the division that is Citi’s core lending and capital markets business. “We have the makings here of a very attractive company,” he said. [WSJ]

O’Neill…joined the Citigroup board in 2009, became chairman this year and has played an increasingly powerful role, as most vividly shown by his ousting of Vikram Pandit as chief executive in October, after months of tension. O’Neill, who hand-picked new CEO Michael Corbat, has an uphill task ahead of him. Citigroup is groaning under $171 billion of assets it wants to shed, has high expenses, and its profitability lags behind that of such competitors as JPMorgan Chase & Co. And O’Neill faces the same question that kept him from being a contender for the Citigroup CEO spot: while he can fix a smaller bank, can he revamp a behemoth as complicated as Citigroup? O’Neill, who declined to comment for this story through a spokesman, has provided some clues about his plan to turn the bank around. On a conference call with investors the day that Pandit stepped down, he said that he will follow his typical playbook. A dozen people who have worked with O’Neill over the years say that plan usually involves the ruthless pruning of underperforming operations and deciding which ones are worth additional investment. [Reuters]

The Times’s detailed story today on Citi’s deVikrafication is a fun read and adds a lot of information about Mike O’Neill’s coup and its aftermath, but I submit to you that if you found any of it surprising you need to pay more, or probably much less, attention to the conventions of corporate infighting. I pay a medium amount of attention, and the day the news came out I conjectured:

  • the board was planning to fire Pandit for a while but made the final decision after the earnings release,
  • then it fired him, though “fired” = more or less forced his resignation,
  • and this was part of a play for more power by O’Neill, the non-executive chairman,
  • and this would likely demoralize other executives because nice things are nicer than nasty ones and a cushy banking sinecure is nicer than Hobbesian war for P&L and efficiency.1

So that’s pretty much what the Times piece today reveals.2 I would pat myself on the back except, was anyone peddling an alternative explanation?3 Well, Citi, I guess, but come on. The notion that Vikram Pandit left Citi of his own initiative, the day after earnings, with no warning, is so absurd on its face that the fact that Citi and Pandit said that he didn’t doesn’t even qualify as a lie. The call on which O’Neill said “Vikram chose to submit his resignation and the board accepted it. Contrary to speculation, no strategic or regulatory or operating issue precipitated the resignation” so clearly meant “we fired the dude because we didn’t like him” that O’Neill shouted at Mike Mayo “Our statement is clear.”

It was! There is precisely one way to read it! That’s the kind of faint-praise statement you make if you fired someone because you didn’t like him but he wasn’t, like, cooking and eating security guards on company property. The statement where he actually chooses to resign – from an unlimited choice set as opposed to “resign or be fired” – looks very different. It comes on the earnings call, for one thing.

You can manufacture outrage about this in various ways. Henry Blodget and Fox Business think that Citi’s characterization of the ouster was fraudulent and/or is being investigated by the SEC; you can add salt to taste, but Blodget has some points here: Read more »