Citigroup CEO Pandit Hangs On

Updated from 11:20 a.m. EST

Citigroup (C Quote) CEO Vikram Pandit ceding as much as a 36% stake of his company to the federal government, but he likely doesn't need to worry about his job security, at least in the near-term.

Citi on early Friday said it had reached a deal to exchange common stock for preferred securities the U.S. government holds. The move is intended to lighten the amount of preferred dividends Citi must pay and improve its tangible common equity, an accounting measure investors have increasingly relied on to determine the health of financial companies.

In return, Citi pledged to further shake up its board, by bringing in a majority of new independent directors, but made no mention of Pandit. While there have been grumblings that Pandit was not the right man for the job since he replaced ex-CEO Charles Prince in late 2007, the same problem that confronted Citi then remains now: the list of attractive alternatives is limited.

"He probably is not the right guy for sure, but they're hard-pressed to find the right guy," says Carter Burgess, a managing director and head of board recruiting practice at RSR Partners in Greenwich, Conn. "I just don't think there is a better option right now," Burgess says.

Citi shares declined 39% to $1.51 in afternoon trading.

Former NYSE Euronext (NYX Quote) CEO and Goldman Sachs (GS Quote) alum John Thain, who was once considered an option for the Citi job, instead went to run Merrill Lynch in late 2007. He's available again, but only because he was forced out of the Merrill job by new owner Bank of America (BAC Quote) after being tainted by revelations of grandiose spending and the decision to move up Merrill bonuses right before the merger closed. New York State Attorney General Andrew Cuomo is probing the bonuses.

Analysis	Discussion	Stock Rating
No Silver Lining Yet For Financials	Discuss Your Take on Citi (Add comment)	HOLD (Get Report)

Other previous candidates, including Robert Willumstad, a former Citi executive and former chairman of troubled insurance giant AIG (AIG Quote), are also out of the picture.

Burgess adds that if Pandit goes then it's likely the company will also see more executives -- many of which Pandit hired -- also leave. After just repositioning the company's executive ranks, it probably won't be comforting to see a new team put in place, he says.