Citigroup is stealing at least one march on its rivals – in governance. Back in December 2007, the megabank was one of the first US financial firms to split the role of chairman and chief executive. At the time, the decision was more expedient than exemplary: The bank had no suitable successor and was discovering billions of dollars of losses on mortgage-related investments on its books. Now that Citi is getting back on its feet, the board rightly resisted peer pressure to reunite the titles.
They had a golden opportunity to do so. Richard Parsons is stepping down next month after three years as Citi’s chairman, while chief executive Vikram Pandit has overcome naysayers of Citi’s strengths and his management chops. Morgan Stanley bestowed its CEO, James Gorman, with the chairman’s title when John Mack stepped down last year.
But, Citi is sticking with the split. Director Mike O’Neill is to take over from Parsons. He has a solid reputation as a bank executive, first as finance chief at Bank of America and then, after an abortive one-day reign at Barclays, as chief executive at the Bank of Hawaii. Moreover, he’s a relative outsider, having only joined the board in 2009.
It’s a good move for the firm, too, and not just because keeping the two top roles separate ticks a handy corporate governance box. O’Neill can manage the board and deal with shareholders, policymakers and shareholders, leaving Pandit to concentrate on running the bank day-to-day. That’s smart business sense.
Parsons, meanwhile, departs with some dignity. As a director since 1996, he shares some of the blame for the bank lurching from one crisis to the next, culminating in a $45 billion taxpayer bailout to stay afloat in 2008 – the same year a third of shareholders voted against reelecting him to the board. But, his time as chairman has been well spent and Citi’s stability and governance high ground make for a decent legacy.
