Vikram Pandit, who presided over a turbulent chapter in Citi’s history and navigated the troubled bank through the enormous market upheaval of the financial crisis and helped it shed billions of dollars in soured assets, announced his resignation to Wall Street. His ascent as well as his descent from the top slot has been remarkable; he had been at the bank only about five months when he took over the reins of the bank from Charles Prince when the bank was announcing large losses related to subprime mortgages and credit market turmoil. His resignation came a day after the bank released a relatively strong third-quarter earnings. According to media reports, the transition was well planned; perhaps it was the timing and handling of the high-profile leadership transition that was the surprise element.
While Citigroup had a succession plan in place, the turn of events raises questions as to whether or not companies are prepared to deal with similar situations. Do they have effective CEO succession planning in place? Survey reports highlight that high-profile leadership succession planning continues to be an area of concern for a number of companies. Korn/Ferry International’s ‘Report on Trends in Board Governance’ October 2012, states that only 17 percent of the companies specified that they had a plan or person at the ready, in the event of a sudden CEO departure, including 4% that have had a stated plan for an interim CEO, 7% with a list of potential successors, and 6% that put written procedures in place. Similarly, according to Washington based National Association of Corporate Directors 2009 survey, nearly half of the survey participants said that their companies had no formal CEO succession plans in place.
Michael L. Corbat, a Citigroup insider being elevated to the top slot is testimony to the fact that the Board is confident of its talent pipeline and leadership development capabilities. Corbat, who understands the firm’s culture and has working relationships with stakeholders and regulators, will have to continue to grapple with some of the same problems that dogged Pandit, including how to shed unprofitable assets and refocus the giant bank.