Citi\'s Chairman Steps Up to a Decisive Role

When Michael E. O'Neill became chairman of Citigroup earlier this year, he dug into the sprawling bank by visiting a number of its trading floors and taking a detailed look at its business lines.

The unusual hands-on approach of Mr. O'Neill, 66, a former Marine and career banker, at times created friction with the bank's chief executive, Vikram S. Pandit - and paved the way this week for the board to ask for Mr. Pandit's resignation after five years at the helm.

Tension between Mr. Pandit and Mr. O'Neill had been brewing for months after a series of public missteps with regulators and shareholders and concern that Mr. Pandit was not moving fast enough to cut costs, according to people with knowledge of the bank's operations. As a result, Mr. O'Neill and his fellow board members replaced Mr. Pandit on Tuesday with a longtime Citi executive, Michael L. Corbat.

Mr. O'Neill said in an interview on Wednesday that the progress the bank made in recovering from the financial crisis under Mr. Pandit “has been enormous. Five years ago this company was in dire straits and I don't want to minimize Vikram's legacy because it is something he can be proud of.”

“But there is a British saying about horses for courses,” Mr. O'Neill added, “and Mike Corbat has a sort of single-minded data approach that is right for the job today.”

Timeline: A Bank's Leaders

Mr. O'Neill represents a new generation of more vocal board members who, after the financial crisis, are unwilling to cede too much power to chief executives. On Wall Street, Mr. O'Neill has more muscle because he holds what is still a relatively unique job - nonexecutive chairman. Corporate governance experts argue that practice is good for shareholders, providing an important counterpoint to company management. Still, while Bank of America has also split the roles, JPMorgan Chase, Morgan Stanley and Goldman Sachs have all resi sted the move.

Shortly after Mr. O'Neill took over from then-chairman Richard D. Parsons, he, along with several other board members, grew increasingly disenchanted with what the board saw as Mr. Pandit's sluggish pace in executing a strategy of slimming down the bank, according to several people close to the bank.

In addition, some board members were concerned that this summer Citigroup did not lock down a price for its stake in the wealth management joint venture it has with Morgan Stanley, forcing the negotiations into arbitration. Some board members think Citi lost hundreds of millions of dollars on the deal as a result. Still, others within the bank said that much of criticism being leveled at Mr. Pandit was unfair and that his ouster stemmed instead from a simple clash of personalities.

Mr. O'Neill said that while he had taken a more active role in the company than some expected, his job was not to run Citigroup. “There is a difference between asses sing and running a place,” he said. “If you spot an issue you bring it up. What you don't do is effect the change. You simply advise.”

Mr. O'Neill has built his career on rehabilitating troubled banks by methodically whittling them down. He got his first taste of turning around wayward banks in the early 1990s as chief financial officer of Continental Bank, which was later sold to the California predecessor of Bank of America.

After becoming chairman and chief executive of Bank of Hawaii in 2000, Mr. O'Neill refocused the bank, which had strayed from its core business, including, for example, making loans throughout the South Pacific. He also shook up the board and the executive ranks.

“He downsized the bank, got it out of extraneous activities and focused on credit quality,” said Lawrence K. Fish, the retired chairman and chief executive of Citizens Bank.

By the time Mr. O'Neill left in 2004, the stock's price had soared. “You need a will ingness to take the data, presuming it is correct, and step up, knowing that whenever you do something like this someone's ox is going to get gored,” Mr. O'Neill said.

Mr. O'Neill consistently immerses himself in the projects that he tackles. Mary Bitterman, who was lead independent director at Bank of Hawaii, said “he really goes to the heart of the matter.” Mr. O'Neill, for example, decided to indulge his passion for art by taking three years off, beginning in 2005, to study history and art history at the University of London.

Mr. O'Neill, who interviewed for the top position at Bank of America in 2009, a spot given to Brian T. Moynihan, advised that the bank be broken up, according to several people with knowledge of the discussion.

Mr. O'Neill said that while it was harder to manage larger institutions, he was not opposed to them. “I do not have a one-size-fits-all approach,” he said.

In a conference call with investors on Tuesday, Mr. O 'Neill said the board remained confident in Citigroup's strategy of reinforcing its core banking lines and selling the less desirable assets, without giving many specifics.

Mr. O'Neill has been on Citigroup's board since 2009 and was elevated to chairman in April, giving him an office roughly 100 feet away from Mr. Pandit's.

Tensions began to mount between Mr. Pandit and the board, spawning a flurry of meetings in recent weeks as the directors determined how to replace Mr. Pandit, according to people briefed on the matter. Board members met Sunday night at the law firm of Willkie Farr & Gallagher to discuss the transition of power to Mr. Corbat, according to the people briefed on the matter. Late Monday at Citigroup, the board voted again, this time to accept Mr. Pandit's resignation.

Mr. Parsons said different times required different chief executives - and chairmen.

“My job was to be a headquarters general and provide air cover after the financial crisis,” Mr. Parsons said. “Michael O'Neill is a lifelong banker and a field general for a different time.”

“Vikram was the right guy for the right time and his skills and deep understanding of the market was right for getting us through the crisis,” Mr. Parsons said. “Now it is about execution, and they need someone different for that, and Vikram understands that.”