Citibank: politics before performance

I've seen this happen at growth-stage startups. A CEO/Founder focuses on getting the job done and not on politics. Out of jealousy/spite/ego, another Founder/Investor plays a political game, rounding up the board to push the CEO out. Deals are done, favors exchanged, and in the end, the wrong decision for the shareholders is made at the altar of political back room deals. 


Yes, no one should shed too many tears for Vikram Pandit, the ousted CEO of Citibank, but he accomplished a remarkable financial turnaround, paid back the gov't, and dealt with a large overhang of bad debt. After the earnings call, the management team planned to celebrate the good results. But... 




From the New York Times on 10/25/12: "Vikram Pandit’s last day at Citigroup swung from celebratory to devastating in a matter of minutes. Having fielded congratulatory e-mails about the earnings report in the morning that suggested the bank was finally on more solid ground, Mr. Pandit strode into the office of the chairman at day’s end on Oct. 15 for what he considered just another of their frequent meetings on his calendar.


Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his."

An even more brutal message was given to the COO, John Havens. According to the NYT: " 'Vikram has offered his resignation, and we would like to give you the opportunity to offer yours,' a board member said, following a script prepared by the board’s lawyers, according to several people with knowledge of the meeting."

Of course, it now comes out that the Chairman was passed over the CEO spot he badly wanted. Then he spent months building a case, bit by bit, on why Vikram should be pushed out.  Hmmm...Shouldn't the Chairman have spent time helping the CEO and figuring out the mess that is Citibank instead?  Yeah, I know...naive thinking that a high level exec would actually try to improve the company he's in charge of vs play political games. 

So back to startups. I've seen this game played all too often. Replace Board with VC/Angels, and CEO with founder. You get the picture. Sometimes kicking out out an intransigent founder may be the last resort, but I see this played out many times, only to have the company implode under the supposedly "pro-CEO". Sometimes, the founder even comes back to save the sinking ship. I"m sure Steve Jobs would have a thing or two to say about that!