CitiGroup Overview of CEO’s Crisis Leadership By Kristen Bennett BUSM 520-Assignment One 5/4/2010 Dr. Michael McDermott CEO Vikram Pandit is the Chief Executive Officer of Citi. Before being named CEO on December 11, 2007, Mr. Pandit was Chairman and CEO of Citi's Institutional Clients Group, which includes Markets & Banking and Citi Alternative Investments. Previously, Mr. Pandit was President and Chief Operating Officer of Morgan Stanley's institutional securities and investment banking business and was a member of the firm's Management Committee. Mr. Pandit earned a PhD in Finance from Columbia University in 1986. He also received an MS degree in 1977 and a BS degree in electrical engineering in 1976 from Columbia. Crisis Snapshot Over the past several decades, the United States government has engineered at least four different rescues of the institution now known as Citigroup. Despite the most recent tax-payer funded rescue of $25 Billion in Federal bailout money, Citigroup was insolvent and on November 17, 2008 Citigroup announced plans for about 52,000 new job cuts, on top of 23,000 cuts already made during 2008 in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before 2010. Many senior executives were fired[ and but Wall Street responded by dropping its stock market value to $6 billion, down from $300 billion two years prior. As a result, Citigroup and Federal regulators negotiated a plan to stabilize the company and forestall a further deterioration in the company's value. The arrangement calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in the company. The assets remain on Citigroup's balance sheet. On January 16, 2009, Citigroup announced its intention to reorganize itself into two operating units: Citicorp for its retail and investment banking business, and Citi Holdings for its brokerage and asset management. Citigroup will continue to operate as a single company for the time being, but Citi Holdings managers will be tasked to "take advantage of value-enhancing disposition and combination opportunities as they emerge", and eventual spin-offs or mergers involving either operating unit have not been ruled out. On February 27, 2009 Citigroup announced that the United States government would be taking a 36% equity stake in the company by converting $25 billion in emergency aid into common shares. Citigroup shares dropped 40% on the news. On June 1, 2009, it was announced that Citigroup Inc. would be removed from the Dow Jones Industrial Average effective June 8, 2009 due to significant government ownership. Citigroup Inc. was replaced by Citigroup's sister firm, insurance company Travelers Co. Pandit’s Crisis Leadership • Citibank's Vikram Pandit has been named one of the worst CEOs in America. But Pandit is unfazed and is focused on turning Citibank around. Pandit outlined his plans in an exclusive interview with CNN's Matthew Chance. Interview Text: • • • • • • • • CNN: You have been named the worst CEO. Have you considered stepping down? Vikram Pandit: I have a job to do and haven't finished it. So I will keep doing it. We have gone through enormous change at Citi. New management team has been brought in to cleanup after the crisis and we have made progress, restored financial strength and restructured Citi. CNN: Shouldn't you be held accountable for the massive investor losses? Vikram Pandit: I hold myself accountable to restore Citi to its original position. I hold myself accountable to get Citi through this economy. The new management and the leadership team has come in with a lot of assets particularly concentration on the consumer. CNN: The government is on a lookout for a possible successor to your position? Vikram Pandit: Speculation is natural when we have made losses of the kind that you have mentioned. This management team was brought in to address these issues at Citi. CNN: Will Citi return the bailout money? Vikram Pandit: $ 45 billion has been invested in Citi and much more has been invested in other banks. All due to what happened in the financial markets post Lehman Brothers and the lack of confidence they created. A lot of programmes have been put in place to support banks. Our goal is to repay every dollar as fast as possible with a great rate of return. Meanwhile we will keep paying the government .5 billion in dividend. http://ibnlive.in.com/news/vikram-pandit-vows-to-bring-citibank-back-on-track/94479-7.html Vikram Pandit’s Leadership Style • Citi's stunning decline has increased the scrutiny of Mr Pandit's personality and management philosophy and raised questions over whether his methodical, technocratic style is what the company needs to survive. • When asked to point out Mr Pandit's most visible attributes, friends and foes point to his sharp mind and calm, professorial manner. Vikram Pandit’s Leadership Style Cont’d According to FT.com, his critics say that Mr Pandit’s sharp mind and passion for intense analysis – often carried out alone with only spreadsheets for company – have hindered his development as a chief executive. “He is not a leader of people, he is a quantitative trader who overanalyses things and can take ages to make tough decisions,” says a former Morgan Stanley banker. Mr Pandit points to his traditional Indian upbringing as a source of calm. “I cannot deny that a piece of my Indian upbringing stayed with me,” he says. “As I go about my life, there is a clear sense of Karma, that the tide is going to come and go and the main thing you have to do is influence where you are on the tide.” But Citi’s woes might call for more visionary and charismatic leadership than he can offer. Leadership Qualities Comparison What his Qualities are: • Methodical • What they should be: • Previous list except for Technocratic. (philosophy that advocates the enlistment of a bureaucracy of highly trained engineers, scientists, or technicians to run the government and society) • Technocratic • Focused • Charismatic • Calm • Emotionally & Socially Intelligent (empathy, social skills, motivation) • Professional Critical Analysis of Vikram’s Style While I think that some of his qualities are clearly beneficial to have during an crisis, it is clear that the way he presents himself in his answers to questions and the decisions he has made in staffing he keeps himself removed socially and emotionally. As Goleman states in “What makes a leader”, Harvard Business Review, “IQ is important, but emotional intelligence (EI) is the sine quo non of leadership”. A great leader has all 5 components of EI: •Self-Awareness-Does he really? •Self-Regulation-Clearly he does! •Motivation-? •Empathy-No outward sign of it? •Social Skill-Doesn’t come off that way?