Citigroup Inc. is replacing its chairman with long-time board member Richard Parsons, marking a larger-scale overhaul of a board many investors blame for the bank’s problems.
Parsons, the former CEO of Time Warner Inc., succeeds Win Bischoff, who became chairman in December 2007 after Citigroup let go of its embattled CEO and chairman at the time, Charles Prince. The move is effective Feb. 23, Citigroup said Wednesday.
Bischoff, who has been working at Citigroup since 2000, is not putting himself up for re-election at the board’s annual meeting this spring and will retire later this year, the bank said.
Long-time board member Robert Rubin, a former U.S. Treasury Secretary, said earlier this month that he, too, would be retiring from Citigroup.
With Parsons saying he expects other board members to retire, too, analysts are now wondering how far the rebuilding of Citi’s board will go — and whether changes could occur within the company’s executive management as well.
CEO Vikram Pandit has had a little over a year to turn around the troubled banking behemoth. Board members, including Parsons, have continually voiced their support for him, but investors are getting restless; Citigroup stock fell a 17-year low on Tuesday.
“The big question,” said banking industry consultant Bert Ely, “is what happens to Pandit?”
“Parsons is a solid guy, but Pandit is the CEO,” said Ely, who is based in Alexandria, Va. “The real leadership has to come from Pandit ... You get the impression that there’s still a lot of foot-dragging going on with really coming to grips with Citi’s problems and its far-flung, scattered, non-integrated nature.”
The ailing bank has suffered five straight quarters of losses and received $45 billion in government aid as it struggles to stay afloat amid the credit crisis. Last week, the company said it would reorganize into two units — effectively breaking up the “supermarket” model it has been trying to make work over the past decade — as it reported a fourth-quarter loss of $8.29 billion.
Citigroup’s board has been the target of much criticism among investors for allowing the bank to invest so heavily in the risky housing market. As that criticism escalated over the past several weeks, so did speculation that Parsons would become chairman.
Parsons is one of the few Citi directors with experience in both banking and leading a large company. Before helping negotiate Time Warner’s merger with America Online in 2000 and serving as the new company’s CEO and chairman, Parsons was chief executive and chairman of Dime Bancorp, a thrift bank, in the early 1990s.
Parsons was also an economic adviser on President Barack Obama’s transition team.
“One of my top priorities will be to ensure the board remains committed to strong, independent corporate governance — especially in today’s challenging economic conditions,” Parsons said in a statement. “I also will work to reconstitute the board as directors retire with new members who bring strong, proven business judgment and financial and banking sector expertise.”
Parsons joined the board of the company’s predecessor, Citibank, in 1996.
Citigroup said separately in a filing Wednesday with the Securities and Exchange Commission that top three executives — including Bischoff — have passed up bonuses. Bischoff, Chief Executive Vikram Pandit and Chief Financial Officer Gary Crittenden have declined incentive and retention awards that were offered to members of the bank’s executive committee, Citi said.
Citigroup shares rose 87 cents, or 31 percent, to $3.67 on Wednesday, before the announcement was made. In after-hours trading, shares were flat.