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Just when you thought the waters were calm and it was safe to buy Citigroup (NYSE:C), out of nowhere, Chief Executive Officer Vikram Pandit and President and Chief Operating Officer John Havens resigned.

No explanation was given and, by the looks of things, it took everyone by surprise. The new CEO is 29-year-old Citigroup veteran and Harvard Graduate Michael Corbat. The question is: Why is it that the top brass of Citigroup resigned out of the blue in the third quarter?

For starters, management has to sign off on financial statements at the end of the year, so any irregularities will fall on the lap of the incoming CEO and CFO. Is the new CEO Corbat ready to undertake such a responsibility? Since he accepted the post he probably feels comfortable that everything is OK, and we have to assume the board feels there will be no surprises also.

Analysts were twice shocked because no evidence or clue was given in the company's most recent conference call. In fact, everyone was more than happy with the conference call and Citigroup's stock actually jumped on the news.

What is evident to me, which of course can only be the subject of speculation, is that the board is responsible for these resignations. And if this is true, what was the disagreement between the board and the CEO? Even though all parties involved said there was no disagreement, I smell something fishy here.

For example, Sheila Bair, former chairman of the FDIC, was very critical of Pandit and said she did not see in him someone with the ability to execute and someone who had all the information required at a large institution. When the former head of the FDIC says that, it's not a compliment. She also said that regulators were ready to shut the bank down.

I don't know if Pandit did a good job or not and I am not investigating if he was competent or not. I really don't care. I'm sure he is a nice person and a good family man. My beef is not personal, and it is not with him.

As an investor, I expect execution and I expect management to produce results. I expect management to be honest with me and I expect to have a fair chance at stock price appreciation, the same way they make millions on a guaranteed basis -- even when my stock goes to zero.

I don't hold Pandit responsible for Citigroup's current stock price, but I had expected something better than where things stand today. Honestly, I think Citigroup shareholders have been treated very poorly by management all these years.

Overall, I like the idea of any board deciding to fire executives (even if that might not be the case here). Whether there was a disagreement with Pandit or not is totally beyond the point. I just love the whole idea of any board flexing its muscles and forcing top executives to resign. Honestly, I think it should happen more often and there should be a special one-hour daily program on CNBC with the question: Which board should fire the executive committee next?

Also, I totally agree with Felix Solmon in his post yesterday. Not only is the conflict of interest thing gone far enough, but I think that the SEC and U.S. lawmakers should intervene and mandate a Chinese wall between the board and the executive committee.

Yes, you read that correctly. I think that a law should be passed (are lawmakers paying attention here?) in which companies with more than $500 million in assets should, by law, have a totally independent board. The CEO should be on the board as well, but he should simply be a regular member and not the chairman or in any other position of power -- or be in a position to influence the board.

And if you think the situation in the U.S. is bad (which, compared to everywhere else, it isn't), I dare you to come to Europe, where most investors and lawmakers don't even know what the difference between the board and the executive committee is. Please bring on the shakeouts. I also want to see a shakeout in Bank Of America (NYSE:BAC) and every other major money center bank.

Also, I don't know Corbat at all and I am sure he is a nice guy, but being a 29-year veteran of the bank, doesn't he have any responsibility for what has happened at Citigroup? Isn't he partially responsible for the fact that shareholders will never again regain their money in this lifetime, if they invested in the company 10 years ago? I am not bashing him or anything, but as far as insiders go, he is probably at the top of the list. And the board should scrutinize him to the max before officially giving him the position.

Bottom Line

For whatever reason it happened, the shakeout in Citigroup is a positive thing because executive egos need to come back down to planet earth. CEOs and other top brass have to bear the responsibility of what happens to shareholders, and I don't see many of them apologizing for the misfortune they have caused many people.

To the extent that this is the beginning of a new trend, this will put management in many companies on alert and make them vigilant regarding their responsibilities, which is to perform the best they can and respect the millions they are making -- even when shareholders don't make a cent. And that can only be a good thing for shareholders, stock performance, and the market as a whole.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: What Disorderly Exodus At Citigroup? Bring On More Blood!