Vikram Pandit- Citigroup's New "Can't Lose" CEO

Something dawned on me yesterday, as I read and heard debates on whether or not Citigroup will continue its dividend amidst pressures on its balance sheet.

Vikram Pandit, the company's newly-appointed CEO, is in a very enviable position. In fact, by my count, he joins just two other CEOs who have enjoyed his "can't lose" situation- Lou Gerstner, erstwhile CEO of IBM, and Art Ryan, the soon-to-retire CEO (and chairman and president) of Prudential since joining the firm in 1994.


Gerstner had enjoyed great success running RJRNabisco prior to joining IBM in 1993. Originally a McKinsey consultant, than an American Express executive, he demonstrated an unusual gift for running consumer-oriented businesses. At the time of his departure from Nabisco, to run IBM, he was paid foregone deferred compensation, by the latter. If memory serves, I believe the amount was something like a then-unheard-of $24MM. Relatively modest by today's standards but, in its day, the payment was considered huge.



Thus, upon arriving at the loss-plagued IBM, Gerstner could not lose, financially. And IBM was in such bad shape that nobody would find fault with Lou if he had failed to reverse the ailing computer giant's fortunes.

But Gerstner succeeded beyond anyone's wildest expectations. As the nearby, Yahoo-sourced chart indicates, IBM's stock price began an upward climb, outpacing the S&P, just after Gerstner took over as CEO. While the S&P slipped in the early 2000s, Gerstner's IBM see-sawed through the tech bubble deflation.

As a result, tracking from 1963, Gerstner took over after the firm had fallen below the S&P500 Index's price line (in 1987) and drove it back to parity when he left in 2002.

Then we have Art Ryan of Prudential.

By way of full disclosure, I should mention that I had interactions with Ryan earlier in my career. As a senior strategist working directly for the SVP of Corporate Planning & Development, I had several occasions to meet with, present to, and discuss business and corporate strategy and operating performance issues with Ryan when he was EVP of Consumer Banking. He later rose to President and COO of Chase Manhattan Bank.

In contrast to Lou Gerstner, who had distinguished himself earlier in his career as a consultant and senior executive at American Express, Ryan's major claim to fame at Chase was having been a member of the winning cabal earlier in the bank's history.

Back before I joined Chase, in 1983, from the dissolving AT&T, Chase Manhattan Bank had seen a veritable brawl between the two major internal groups, each of whom sought to see their leader replace the esteemed and much-beloved, retiring David Rockefeller. Barry F. Sullivan's "Irish mafia" lost out, and he decamped to head up First Chicago Bank. For some years, Sullivan's compensation was set so that, whatever Chase chairman Bill Butcher's was, Sullivan's was set a few thousand dollars more. Out of spite.

Art Ryan had been a mathematician cum systems and, then, operations executive at Chase, and, as such, sided with the operations group behind Tom Labrecque, who was Butcher's lieutenant. The operating systems executives wielded much power at Chase, which, no doubt, partially accounted for the bank's continuing dismal performances in the 1980s and '90s. Ryan climbed the leadership ladder as an operations executive, eventually replacing veteran banker and keen quantitative guru Fred Hammer as consumer banking chief.

When Labrecque engineered Butcher's fall from grace, and assumed the CEO title, he elevated his trusted operations guy, Ryan, to President and COO. I recall Tom once telling me, in a corporate planning briefing that my then-partner, Deb Smith, and I gave for our SVP, Gerry Weiss, that, contrary to the suspiciously optimistic performance numbers Ryan's consumer group had submitted,

'I trust Art. If he says he'll meet those numbers, I can count on it.'

Of course, Art's group didn't meet the targets. At all. Labrecque and his financial management team simply reset the goalposts, once again, that year, and declared budget victory, while the bank's actual performance remained lackluster.

The best that could be said of Ryan at Chase was that he was ineffective in running the consumer bank, and part of the management team whose inept performance eventually led to its takeover by Chemical Bank.

However, by the mid-1990s, Ryan was COO, and chafing under a similarly-aged Labrecque. Becoming CEO of Chase looked unlikely, when Prudential came calling on him.

The insurance giant was, as I recall, mired in one of its seemingly recurring regulatory messes. Between the policy-holder/ownership form, a struggling Pru-Bache unit, and various legal problems, the company looked unsalvageable.

Ryan, too, like Gerstner, couldn't lose. He was paid handsomely to forfeit various Chase deferred compensation, and signed on to head the Newark insurance titan.

Going public in the early 2000s, Prudential under Ryan is difficult to assess, because his first six years there didn't have a total return by which to gauge his performance.

However, in the years since Pru went public, Ryan's record is decidedly mixed. While, according to Forbes, being paid in the neighborhood of $25MM in 2005, the company has actually only enjoyed periodic outperformance vis a vis the S&P500. The nearby Yahoo-sourced performance comparison of the two since 2002 shows Pru to have bettered the index. But on closer examination, the only years in which it clearly trumped the index were 2004-2005.

As the next chart shows, the past two years have been problematic for the insurance firm. It's market performance has see-sawed with the S&P, crossing paths three times, and now largely tracking the index's performance.

Has Ryan been worth $25MM/year to Prudential's shareholders during this time? It doesn't look like it. But, since Pru is still around and independent, I think most people would judge Ryan to have not failed in his job. He'll retire next month having probably evaded termination at Chase Manhattan after the Chemical takeover.

Without a clear, public stock price and total return record of Prudential for Ryan's entire 13 year career there, it's impossible to determine how effective he was for shareholders. But he certainly did well for Art Ryan.

Now we have Vikram Pandit as the third in my little pantheon of "can't lose" CEOs.

No matter what happens next at Citigroup, Pandit will probably come out untarnished. Unless he actually contributes to even further boneheaded trading and investment banking losses, requiring the bank to be taken over to preserve the integrity of the US banking system, Pandit will likely be either credited with a turnaround, or judged to have inherited an impossible mess from Weill and Prince.

Either way, Pandit banked his share of the Old Lane purchase premium before he even joined Citigroup. Then enjoyed two promotions since receiving that windfall.

By agreeing to become CEO of a basket case, Pandit, perhaps unwittingly, joins a very select club of CEOs who, by virtue of successful or long service at another firm, have been prepaid a modest fortune to try their hand at rescuing a large American business icon.