The Panditocracy

I think that most of us Americans who work for others worry about keeping our jobs.  Today, the board of directors of Citigroup has reached an agreement for Vikram Pandit to leave the board and step down as chief executive.  Pandit was the successor CEO to Charles Prince, who followed the legendary Sanford Weill.

Throughout the 90s and into the middle part of the last decade, Weill turned Citigroup from a megabank into a one stop shopping megalopolis with traditional banking, investment banking, insurance, investment management, prop trading and more.  Weill's successors were unable to manage the behemoth that he'd created and, of course, Citigroup was rescued by U.S. taxpayers under Pandit's watch, receiving an infusion of $48 billion, depending on who you ask.

That Pandit was not immediately replaced is amazing.  But the rules of bailout era America protected executives so long as they didn't work at AIG or the auto companies.

Pandit presided over a 90% decline in Citi's stock price.  Certainly, he can claim extraordinary circumstances.  In February 2009, Pandit agreed to work for $1.  If you look at Citi's most recent proxy, that means he made $120,000 in January.  That's more than twice the medium income for a family in the U.S. for a year.  And, for 2011, Citi's board tried to reward Pandit for his sacrifices with a $15 million cash and stock package that shareholders voted against.

But the story of Pandit at Citi has nothing to do with his base pay and bonuses and this is why the very rich are different from you and me -- Pandit never had to worry about failure because of the circumstances of his hire.  When Pandit joined Citigroup as CEO in 2007, he was running a hedge fund called Old Lane Partners.  He sold this fund to Citigroup for $800 million.  All of that money didn't go to Pandit (he had partners) but he did all right.

Pandit then shut down Old Lane because, you know, it became his job to get Citigroup out of inappropriate businesses like the hedge fund that he had sold them.  So, did Pandit do a good or a bad job at Citi?  It doesn't matter.  He had extracted multiple millions before he'd done any of the job at all.  That is the state of American meritocracy.

Oh, and it seems that Pandit's old partner, as recently as three months ago, is out to raise another half billion dollar fund.  If Pandit gets back involved and then sells this one to Citi, I'd be able to overlook the unfairness of it all just for the value of the comedy.