http://www.moneyweb.co.za/mw/view/mw/en/page38?oid=205818&sn=Detail
Citigroup's Pandit faces test as pressure on bank growsCEO Vikram
Pandit faces mounting pressure to show that he can turnaround one of
the largest and most troubled banks. David Enrich, Wall Street
Journal06 May 2008 03:19 Four months into his tenure as Citigroup
Inc.'s chief executive,Vikram Pandit faces mounting pressure to show
that a detail-obsessedex-professor can turn around one of the world's
largest and mosttroubled banks. Even executives who praise his
cautious, deliberative approach expressconcern Mr. Pandit is taking
too long to make decisions. He has earnedhigh marks for quickly
addressing the most pressing financial issues.Still, executives and
investors alike complain that Mr. Pandit hasn'tarticulated his vision
for the company. Some executives also say theyare stuck in holding
patterns awaiting instructions from his team ondecisions that
previously wouldn't have attracted such high-levelattention. "At a
time like this, you really want people marching shoulder-to-shoulder
with you," says Sanford Weill, the former CEO who engineeredthe 1998
merger that created the Citigroup behemoth that Mr. Pandit isstill
wrestling with today. Mr. Weill, who sup****ts Mr. Pandit, hasurged him
to use the bully pulpit of his job to boost morale andreassure
investors. "The leader needs to relate to the people," says Mr. Weill.
"They needto know who they're following." Some of Mr. Pandit's biggest
changes have stirred controversy. Forinstance, an executive shakeup in
late March resulted in a complex newchain of command: Some executives
now have two or more bosses,sometimes located thousands of miles
apart. "Where does the decision-making lie?" Sallie Krawcheck, who
runsCitigroup's wealth-management business, asked Mr. Pandit at a
meetingof top executives, according to people familiar with the
matter. Sheexpressed concern that the new structure could cause
"paralysis." Mr. Pandit, 51 years old, replied in that meeting that
the change wasdesigned to "get across the value of teamwork and
collaboration." Thestructure will also bring Citigroup closer to
customers, he has said. The CEO strongly defends his analytical
approach to fixing thecompany. Because Citigroup -- a mammoth firm of
some 370,000 employeesspread across more than 100 countries -- has so
many problems, thereis no room for making poorly informed snap
decisions, Mr. Pandit saidin an interview. "The more patience people
have, the better off they're going to be atseeing the true value of
this company," he says. "It's probably goingto take some time." This
Friday, his leader****p approach will be on display at a
highlyanticipated meeting with analysts and investors. He is expected
toreject persistent calls to break up the company into smaller,
moremanageable businesses. Citigroup's financial condition has
continued worsening under hiswatch. Since he took over in December,
the New York company has postedtotal losses of nearly $15 billion for
the past two quarters, andexecutives warn that Citigroup is likely to
suffer for the remainderof the year, especially if the economy sinks
into a recession. Itsstock is down 26%. Shareholder Anger During
Citigroup's annual meeting late last month, he was drowned outat one
point by angry shareholders. "What are your plans?" one personyelled.
Former Treasury Secretary Robert Rubin, who heads Citigroup'***ecutive
committee and helped lure Mr. Pandit to the company lastJuly, recently
encouraged the new CEO to be blunter with Wall Streetby acknowledging
that it could take several years or more to turnaround the company,
according to a person familiar with the matter. He has sup****ters
within the firm. "I will take substance over formany day of the week,"
says James Forese, a senior capital-market***ecutive at Citigroup. "I
will take judgment over charisma any day ofthe week." Mr. Pandit
didn't make this mess. He got the job after ballooningmortgage-related
losses forced his predecessor, Charles Prince, toresign in November.
He inherited a giant that -- a decade after its creation from a
mergerof Citicorp and Travelers Group -- can still tend toward
fiefdoms.Cultures and computer systems clash. Employees sometimes
ignore, orcompete against, each other. In one extreme instance, the
former co-heads of Citigroup's investment bank sometimes refused to
sit in thesame room together. One of Mr. Pandit's first moves as CEO
was telling top executives thatpettiness like that would no longer be
tolerated. "It's either goingto be a partner****p, or you're not here,"
he has repeatedly said,according to numerous executives. Mr. Pandit
has quickly tackled several problems. In the weeks after hebecame CEO,
he flew around the world to drum up billions of dollars inmuch-needed
capital to fix the damage caused by the company's badmortgage
investments. He made the tough decision to urge Citigroup'sboard to
slash the dividend for the first time in more than 20 years. He has
also sold off two small units that he viewed as peripheral, andplans
to unload a third -- insurance and mutual-fund sales companyPrimerica
Financial Services -- in the next few months, say peoplefamiliar with
the matter. 'Talk About Vision' Asked about his vision for the
company, Mr. Pandit says first it needsto fix the little things. "Only
after we get those foundations rightdo we earn the right to talk about
vision," he says. Associated PressVikram PanditHis late-March
management restructuring isn't the first time Citigrouphas grappled
with chain of command for the sprawling enterprise. Ascandal in Japan
in 2004, which tem****arily cost the bank its private-banking license
there, was blamed in part on a lack of clarity inre****ting lines to
the New York headquarters. In this latest management reorganization,
after Ms. Krawcheck andother senior executives raised concerns about
the blurry re****tinglines, Citigroup executives clarified who would be
responsible forwhat. Mr. Pandit is busy clamping down on expenses big
and small. Late lastyear, he reinstated an annual ritual of weeding
out the worst-performing 5% of the staff. Citigroup has also begun
charging lower-level employees to use the investment bank's coveted
box seats ats****ting events when big shots aren't occupying them.
Previously,these tickets were free. Some of the pressure from Wall
Street, which craves instantgratification, is simply unrealistic,
given the depth of the problemsMr. Pandit inherited. "In many ways,
our fate is going to be decidedto some extent by the duration of the
environment we're goingthrough," Mr. Pandit says, referring to the
twin perils of the debt-market crisis of recent months, and the
sluggish U.S. economy. Fornow, issues like these are "likely to
overwhelm our actions." Mr. Pandit grew up in Mumbai. His father
worked for a pharmaceuticalcompany, a job that carried the family to
New York City. Mr. Panditsettled there and earned his undergraduate
and master's degrees fromColumbia. He seemed likely to settle into
academic life at Indiana University,where he was an associate
professor. But then Morgan Stanley hired himas a part-time consultant.
That experience, he said, showed that "youcould have a big impact" by
working on Wall Street. "That becameintriguing," he said. Consensus
Building Soon he took a full-time job at the investment firm. Over the
next twodecades or so, he pushed Morgan Stanley into electronic
trading andservices that cater to hedge funds, developing a reputation
as aderivatives expert and patient consensus-builder. "His goal is to
always have intellectual agreement," says a formercolleague.
"Sometimes that takes a little longer, and sometimes younever get
there." Mr. Pandit was widely seen as a candidate to be Morgan
Stanley's CEO,but lost his job in an internal power struggle in 2005.
With a fewother Morgan Stanley alumni, he launched a hedge fund
focused oninvestments in emerging markets like India. Citigroup bought
his hedge-fund group last July, bringing Mr. Pandit into the company.
Despite being ambitious, Mr. Pandit resists the celebrity status
thatcan accompany success on Wall Street. He skips gabfests like the
WorldEconomic Forum in Davos and sometimes rides the subway instead
ofusing Citigroup's fleet of on-call cars. The day he was named CEO,
Mr. Pandit returned to his apartment nearCentral Park and phoned his
85-year-old father in India. "The Princehas left, the king has
arrived," he re****tedly told his father,according to an interview the
elder Mr. Pandit gave on Indiantelevision. Mr. Pandit later ribbed his
father about the quip. "Dad, you're tooold to be a TV star," Mr.
Pandit said, according to an acquaintance. To get his arms more fully
around the company he now led, Mr. Panditlate last year enrolled
himself in a crash course with Ajay Banga, whoat the time ran
Citigroup's international consumer group. Mr. Panditspent hours
grilling him about the Japanese consumer-finance unit,which was
reeling from customer defaults. Citigroup executives say they have
learned to expect interrogationslike this when Mr. Pandit shows up.
"What are you doing with theshareholders' money?" is a typical
starting point, they say. Yet some worry that the CEO's fixation on
details is slowingdecisions. Shortly after taking over, he convened a
group of topinvestment bankers to consider ways to reorganize their
businesses toreduce overlap. They spent a month brainstorming and came
back withideas, but "nothing happened," says one executive, who felt
Mr. Panditwas happy to explore things on a theoretical level but
hesitant toimplement them. Today, four months after that meeting,
Citigroup is now preparing toreorganize the unit along the lines
originally proposed, according topeople familiar with the situation.
The goal will be to knock downlongstanding barriers between cor****ate
and investment bankers. Similarly, at a February meeting in Turkey, a
Citigroup employeewanted to know when staffers would no longer "have
to go to New York"for approval of every decision. "It's going to take
some time because we have to be diligent," Mr.Pandit responded
politely. "I don't want this to be based only onintuition."
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