Pandit Settles In At Citigroup With His Colleagues & Big Bonuses

To paraphrase Clint Eastwood's "Dirty" Harry Callahan's character from the 1971 movie Dirty Harry,

'Now in all the financial services excitement of the past few weeks, I can't remember if I covered Citigroup's latest indiscretions. Well, do you feel lucky, Vikram?'

You probably think I forgot all about Pandit's Citigroup. But I haven't. Right now, I'm eyeing a short stack of Wall Street Journal articles going back to early March.

The first article, from the March 5th issue of the Journal, catalogues the reasons why Citi's stock price was under assault in recent months. Without providing all the details of the now nearly month-old piece, suffice to say, Citi looked unusually exposed, going forward, to more loan losses and slowing growth.

The nearby pictures, including the smirking visage of Mr. Pandit, accompanied the article.

I found this article concerning Pandit's recent compensation numbers, since I had not saved the Journal's piece on this stunner. It reads, in part,

"Citigroup Inc.'s new chief executive Vikram Pandit received $3.16 million in total compensation during 2007 - the year that started with him running his own hedge fund and ended with him at the top of the largest U.S. bank by assets.

And to convince Pandit to stay with the troubled bank while he works to extricate it from losing bets on mortgages and the now-frozen credit markets, Citigroup's board in January signed off on awards valued at about $102 million. That includes a $2.5 million retention equity award; nearly $27 million worth of stock, and 3 million options that in January were worth around $73 million.

For his six months at Citigroup last year, Pandit received a salary of $250,000, according to a Thursday regulatory filing. He received no cash bonus and no perks, but got stock and option awards in July worth $2.91 million."

As I wrote here in late December of last year, Pandit already had a "can't lose" proposition from the Citigroup board. About a week earlier, I wrote this spoof of a hypothetical interview with Pandit, upon his elevation to Citi CEO. As I note in the piece, Pandit and his partner, John Havens, have already received some $800MM for their underperforming hedge fund group, Old Lane Partners.

Now, in concert with the special awards to 'retain' Pandit in this already-plum job, they also elevated his erstwhile hedge fund partner, now Citi confidant, John Havens. Havens, as I recall from the Wall Street Journal article, also received a nice bonus to stay in his cushy new job, as well.

Let's be truthful here. Does anyone besides Citi's board think that Pandit and Havens are likely to bolt their new, overpaid positions running Citigroup? These guys were trying to keep an underperforming hedge fund in business less than a year ago, and now Pandit is CEO of one of the country's three largest commercial banks. His former partner is still his right-hand man at the new firm.

If we needed yet another glaring example of pay for non- or yet-to-be performance, besides Jeff Immelt's, on which I commented in this recent post, this would be it.

Then, last friday, the Wall Street Journal reported that Citigroup is to lay off an additional 2,000 staffers. The article stated,

"Mr. Pandit and other senior officials had said previously that multiple rounds of layoffs are one component of a broad cost-cutting strategy that the bank is undertaking as a result of investment losses stemming from the mortgage crisis. Citigroup has been hit particularly hard by the crisis, having written down the value of its assets by more than $20 billion in the last year."

This distinctive drawing of Pandit accompanied the article. Once again, the CEO is caught in a laughing expression.

It's almost as if he's saying,

'Ha ha, the joke is on you guys! I got the CEO job and millions in compensation, but you get the sack!'

Just a friendly aside. If I were Vikram Pandit, I'd contrive, with my public relations staff, to arrange for some better photo ops to let me show some more concerned, business-like facial expressions. Anything to dispel these grinning, smirking countenances amidst the business of firing people and presiding over record losses at Citigroup.

In the final analysis, does Citigroup's board really believe they need to further incent Pandit and Havens to keep these jobs? My earlier post about Pandit's can't lose situation suggests that he isn't going anywhere for a while. He has nothing to gain by leaving. Neither does Havens.

As the nearby, Yahoo-sourced price chart of Citi and the S&P500 Index for the past three months shows, it's a bit early to reward Pandit for any 'success.' One brief bounce does not a recovery make. So we know these awards are not for his performance of the past few months.

Yes, I know the awards are equity-based in large part. But it's the image that counts, and right now, it appears that the board is just throwing potential windfalls at Pandit.

If Citi really wants to reduce expenses, how about starting at the top?