It's been almost a year since December 12, 2007, when Vikram Pandit took over as CEO of Citigroup (NYSE: C). His performance has been outstanding -- and not in a good way. During the last four quarters, Citi lost $20 billion. Sure Pandit has plans to fire 52,000 people and he's raised at least $45 billion from the U.S., along with guarantees on $277 billion worth of Citi's bad assets. But he botched the acquisition of Wachovia (NYSE: WB). And Citi stock has fallen 81% wiping out $138 billion in stock market value.
By contrast, John Thain, who took over as CEO from the Bank of America (NYSE: BAC) subsidiary Merrill Lynch, was far more agile as things cratered around him. Arguably, Thain had an even worse hand than Pandit when he took over Merrill Lynch because his predecessor had loaded it up with mortgage-backed securities at precisely the wrong time. But Thain could see Merrill's stock plummetting as it got trapped in a short play. And he salvaged shareholders' investment by selling to Bank of America.
Now CNBC's Charlie Gasparino reports that Pandit has about half a mistake more to make before he's out of a job. But this is not a problem for Citi shareholders as long as its board can convince Thain to leave Bank of America where he has taken on a sub-CEO role so he can get back into the big saddle at Citi. Count me among those shareholders who would be happy to see Pandit exit stage right as Thain enters.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.
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Reader Comments (Page 1 of 1)
11-25-2008 @ 8:28PM
Beltway Greg said...
Thain did a stellar job at NYX and then he managed to get himself $40 million for his brief tenure at Merrill. Come to think of it he'll fit right in. One thing they need to do is to jettison Bob "Mr. Clean" Rubin, the man with no job title. He's sort the financial world's equivalent of a free safety or a designated hitter.
11-26-2008 @ 8:42AM
BHarrison said...
Thain managed to get himself $40 million for his brief tenure at Merri?
Gosh, WHY are the corporations going through the motions of using CEOs who have proven bad and/or CORRUPT track records . . . and still paying them ENORMOUSLY EXORBITANT SALARIES and "OTHER COMPENSATIONS".
This all reminds me of a definition of "INSANITY": " Repeatedly doing the same things in the same way, and expecting different results." Paying exorbitant compensations to CORRUPT CEOs, who have failed at other corporations, to bail out other corporations with the same problems. It simply is NOT WORKING, is it?
These guys are merely "gaming the system", failing to achieve their objectives; and walking aways with TENS of MILLIONS in compensation for FAILED PERFORMANCES. This IS INSANE!
11-26-2008 @ 8:59AM
BHarrison said...
CEOs are merely "highly paid EMPLOYEES" of the corporations . . . they are NOT "entreprenuers" WHO ASSUME THE RISKS of their business enterprises.
The payment of EXORBITANT SALARIES and COMPENSATIONS to these "CEO employees" has become an OBSCENE CORRUPTION and PERVERSION of our capitalistic system.
When will this INSANITY end?
It is past time to replace these incompetent and/or CORRUPT CEOs and upper management with new managment who will not have a vested interest in the old CORRUPT ways . . . and who can re-instill the INTEGRITY in corpoarte management and policies; and who can recover the "retail investors' fiath and confidence" in the corporations and the markets".
For every CEO and upper managment person, there has to be hundreds of equally qualified business people who would perform those jobs at much lower costs, and BETTER . . . . Isn't that a basic part of the Law of Supply and Demand.
We don't have the need or luxury of using these incompetent and/or corrupt CEOs any longer. it is time to purge the managment of America's corporations. The good guys will survive, and the "bad guys" will fall by the way side. And those who are guilty of presiding over the orchestration of pyramid and Ponzi schemes MUST be indicted and prosecuted to the fullest extent of the Law.
Otherwise, there can be no INTEGRITY or "faith and confidence" in the corporations or the markets. It is time for massive changes . . .