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needs a new chairman who will better represent shareholders interest, according to CLSA Banking analyst Mike Mayo.

"Dick Parsons should go," Mayo said before a gathering of hedge fund managers last week in New York. "For Citigroup, it is all part of a larger puzzle regarding the lack of corporate governance."

His comments come amid reports that current chairman Richard Parsons is planning to step down. Parsons has been chairman since 2009 and has overseen the bank's restructuring since the crisis. However, critics have argued that Parsons was the wrong choice as Chairman, as he was a director on the board as early as 2006 when the bank was barreling towards crisis.

Mayo said his rationale for pushing for Parsons' ouster is tied to his long tenure at the firm. Parson's was chairman of Citigroup's compensation committee from 2002 to 2007 when then CEO Charles Prince and Chairman Robert Rubin earned $180 million leading up to the financial crisis, Mayo said.

"The CEO of Citigroup got paid more than anyone else in the past decade, during a time when the stock performed the absolute worst," Mayo argued. "That's no capitalism. That's entitlement."

Mayo, who recently authored a book "Exile on Wall Street", is no fan of Citigroup. When CEO Vikram Pandit was appointed co-chair at the World Economic Forum at Davos recently and spoke at a panel on the reshaping of a global financial system, Mayo quipped, "Asking Vikram Pandit about the crisis in capitalism is like asking Alec Baldwin about airplane etiquette."

In a Feb.23 report, Mayo calls for a series of changes at Citi, starting with a replacement of Parsons as a necessary first step to "help better evolve Citi's culture, controls, conduct, costs, conservatism, and communication."

"If a change were to occur, our hope would be that the new person would be more than a figurehead, acting as somebody who could better "mind the store" and act as a true agent on behalf of investors," he wrote.

Ideas for a new chairman range from current Citi director Michael O'Neill, ex-Bank of New York CEO, Robert Kelly and Ex Wells Fargo CEO Dick Kovacevich. Ex-IBM CEO Sam Palmisano, Bill Gates, and chairman of Hewlett Packard, Ray Lane were some suggestions from CLSA tech analyst Ed Maguire.

The new chairman should focus on acting on behalf of investors rather than defending senior executives or making excuses on why the bank should have been bailed out, referring to Parsons' previous statements.

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Citi should revamp its compensation plan, which Mayo says is still not closely linked to performance and argues for tougher

clawbacks, including imposing a multiplier for regulatory and legal settlements that will make regulatory mishaps expensive for bonuses. "Otherwise, regulatory and legal fines will continue to provide little disincentive to behavior, in our view," he wrote.

CLSA also believes Citigroup should address its accounting policies, which he says is too aggressive, and consider changing its auditors, KPMG, who have been with the firm since 1969.

Mayo has an underperform rating on the stock with a price target of $32.36. Not all analysts are bearish on the bank. In fact, Credit Suisse just added the stock to its focus list on Monday.

Shares of Citigroup were up 1.1% on Monday at $32.74.

--Written by Shanthi Bharatwaj in New York

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