Adversity is a great teacher, and is an opportune time for some leadership lessons. US Gen. George S. Patton, who won many accolades during World War 2, was famous for his handling of adversities in warfare. During one operation in Sicily, he is said to have told one of his lieutenants that he had complete faith in him. To prove it, Patton went home and, you guessed it, slept! He used to famously quote, “Never tell people how to do things. Tell them what to do and they’ll surprise you with their ingenuity.”
Not letting down his board’s belief, it seems Citigroup CEO Vikram Pandit’s classy ingenuity – and that of his valued predecessors – has not only surprised, but even shocked the damned pants of Citi’s investor groups. Look at their performance on the ingenuity scale – for an organisation that had enviable smashing profits of $24.5 billion in 2005, the six months ending June 2008 have been pure genius – a killing loss of $7.6 billion! With one top US institution filing for bankruptcy (Lehman Brothers), the other (Merrill Lynch) being taken over by another (Bank of America), and the IMF estimate of gross losses suffered by the industry because of the sub-prime crisis crossing a gut wrenching $1 trillion, is Citigroup – one of the worst hit institutions in the US – going to be the next disaster on the West Coast? Boasting an asset size close to $2.1 trillion as on 2008 [double that of, say, India’s GDP], if Citi falls, Patton or no Patton, nobody’s going to sleep again for many months!
Not the least Victor J. Menezes, retd. Senior Vice Chairman of Citigroup, who reverted to us commenting, “I do not wish to get involved in any such media interactions concerning Citibank.” Truly speaking, the problems that Citigroup had piled up for itself were there for everybody to see; and as surprising as the analysis might be, the fact is nobody was ready to bell the billion-dollar pig and send it to the butcher’s. That Citi’s future is in grave danger can be easily viewed from the way share prices have plummeted. It’s a massacre on the bourses, with Citi’s share price falling from $55 in January 2007 to a pathetic $14 on September 17, 2008!
On September 15, 2008, Citi’s shares plunged by 15%, & on September 16, by another 7%, as news of Citi’s exposure to Lehman’s bankruptcy came to light. Lehman named Citigroup amongst its “largest unsecured creditors,” with a numbing $138 billion of Citigroup’s money tied up in unsecured Lehman bonds. Consider that Lehman’s gross outstanding debt is $613 billion dollars! So Citi is exposed to almost an unbelievable 23% of Lehman’s crash!
As B&E had analysed just a few weeks back in its cover issue Murders & Acquisitions [August 7, 2008], Vikram’s predecessor, Charles Prince, is an equal, if not better conspirator in this bloodbath. In 1998, he, as the Chief Administrative Officer [under Sandy Weill, then CEO], engineered the utterly disastrous $140 billion merger of Citibank with Travelers Group ten years back. Former Citi Chief Executive John Reed, who engineered the deal with Sandy Weill, confessed to the Financial Times in April 2008, “The specific merger transaction clearly has to be seen as a mistake,” and he was ‘unclear whether the company’s model or management deserved the greater share of the blame for its problems.’
Not letting down his board’s belief, it seems Citigroup CEO Vikram Pandit’s classy ingenuity – and that of his valued predecessors – has not only surprised, but even shocked the damned pants of Citi’s investor groups. Look at their performance on the ingenuity scale – for an organisation that had enviable smashing profits of $24.5 billion in 2005, the six months ending June 2008 have been pure genius – a killing loss of $7.6 billion! With one top US institution filing for bankruptcy (Lehman Brothers), the other (Merrill Lynch) being taken over by another (Bank of America), and the IMF estimate of gross losses suffered by the industry because of the sub-prime crisis crossing a gut wrenching $1 trillion, is Citigroup – one of the worst hit institutions in the US – going to be the next disaster on the West Coast? Boasting an asset size close to $2.1 trillion as on 2008 [double that of, say, India’s GDP], if Citi falls, Patton or no Patton, nobody’s going to sleep again for many months!
Not the least Victor J. Menezes, retd. Senior Vice Chairman of Citigroup, who reverted to us commenting, “I do not wish to get involved in any such media interactions concerning Citibank.” Truly speaking, the problems that Citigroup had piled up for itself were there for everybody to see; and as surprising as the analysis might be, the fact is nobody was ready to bell the billion-dollar pig and send it to the butcher’s. That Citi’s future is in grave danger can be easily viewed from the way share prices have plummeted. It’s a massacre on the bourses, with Citi’s share price falling from $55 in January 2007 to a pathetic $14 on September 17, 2008!
On September 15, 2008, Citi’s shares plunged by 15%, & on September 16, by another 7%, as news of Citi’s exposure to Lehman’s bankruptcy came to light. Lehman named Citigroup amongst its “largest unsecured creditors,” with a numbing $138 billion of Citigroup’s money tied up in unsecured Lehman bonds. Consider that Lehman’s gross outstanding debt is $613 billion dollars! So Citi is exposed to almost an unbelievable 23% of Lehman’s crash!
As B&E had analysed just a few weeks back in its cover issue Murders & Acquisitions [August 7, 2008], Vikram’s predecessor, Charles Prince, is an equal, if not better conspirator in this bloodbath. In 1998, he, as the Chief Administrative Officer [under Sandy Weill, then CEO], engineered the utterly disastrous $140 billion merger of Citibank with Travelers Group ten years back. Former Citi Chief Executive John Reed, who engineered the deal with Sandy Weill, confessed to the Financial Times in April 2008, “The specific merger transaction clearly has to be seen as a mistake,” and he was ‘unclear whether the company’s model or management deserved the greater share of the blame for its problems.’
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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