The big news this morning is that Citibank (C) CEO Vikram Pandit is stepping down, effective immediately. Here’s the official news release from Citi, which also includes the resignation of COO John Havens and the appointment of Michael Corbat as CEO.
Since there’s already been lots of pixels spilled on this, we wanted to focus on the few areas that we here at footnoted know best: reading between the lines on these sorts of things and digging through the filings.
The first thing we noticed was that Citi didn’t even bother to use the “personal reasons” non-excuse excuse for either Pandit or Havens. The release did note that Havens, who like Pandit is also 55 and was a partner of Pandit’s at hedge fund Old Lane Partners, which Citi bought in 2007 and then promptly closed 11 months later, had planned to step down at the end of the year anyway.
And then there’s Citi’s filings. We vaguely remembered that Pandit didn’t have an employment contract, which we confirmed after doing a quick skim of Citi’s most recent proxy. The good stuff is there on pg. 54:
No golden parachutes or severance agreements.
The named executive officers are not eligible for any —golden parachutes or severance pay upon termination of employment in excess of any benefit that may be available under Citi’s broad-based separation pay plans or local law.
The named executive officers do not have employment contracts or change in control contracts. Recent equity awards do not provide for acceleration of vesting upon change in control of Citi or termination of employment.
There’s also a helpful chart on pg. 75 that shows that both Pandit and Havens get zero for resigning voluntary or for an involuntary resignation that’s not for gross misconduct.
Of course, one of the big problems with these sorts of things is that once Pandit and Havens step down, they’re no longer considered to be executive officers (NEOs), which means that the disclosure rules get a bit murkier. As I wrote back in 2009 in this piece in the NY Times, former bank executives seem to have a knack for getting all sorts of goodies handed to them on their way out the door. There’s also the not-insignificant point (as spelled out in the proxy) that both men were very heavily compensation when they joined Citi in 2007. Here’s a snip from the proxy:
At the time of the Old Lane acquisition in 2007, a substantial portion of the purchase price paid to the former owners of Old Lane was required to be invested in the Old Lane Fund until July 2011, the fourth anniversary of the closing of the transaction. Accordingly, on behalf of each of Vikram Pandit and John Havens, $100,273,630 was invested (a substantial portion of which was subject to forfeiture until July 2011), and on behalf of Brian Leach, $10,862,222 was invested in the Old Lane Fund. In June 2008, Citi purchased substantially all of the assets in the Old Lane Fund and redeemed substantially all of the interests of investors in the Old Lane Fund. In connection with the redemptions of investors— interests, distributions were made in respect of a portion of the investments made by the former owners of Old Lane in the Old Lane Fund, including $79,706,630 each, in the case of Mr. Pandit and Mr. Haven
One other thing that will be interesting to watch is what happens to Pandit’s time-sharing agreement — that’s a fancy way to say access to Citi’s fleet of corporate jets. As the proxy notes, “In 2011, the board determined that for security reasons, Mr. Pandit, and his immediate family, when accompanied by Mr. Pandit, should be required to use corporate aircraft for all personal travel, subject to reimbursement under Citi’s Luxury Expenditure Policy. Mr. Pandit reimbursed Citi $97,916.58 related to his personal use of corporate aircraft during 2011.”
We’ll go out on a limb here and say that the family Pandit undoubtedly got a much better deal on those flights than if they had to actually use a NetJets Marquis card.
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