Don't look now, but Sandy Weill is image-polishing again at

Citigroup

(C) - Get Report

.

The big banking company, stung by the IPO-spinning scandal at investment banking unit Salomon Smith Barney, said late Tuesday that its chairman would step down from two corporate boards he sits on. The move comes as the company seeks to "eliminate the interlocking directorates on the Citigroup board" and become a leader in adopting "best business practices."

The decision also shows how answering critics of Wall Street business practices has become a top priority at companies like Citi. With CEOs paraded before Congress daily and investors quaking under the threat of shareholder lawsuits, the reform movement on the Street grows stronger by the day. The move also signals a remarkable reversal for Weill, who has built his career as a well-connected wheeler-dealer.

Shares of Citi, which have lost more than 30% of their value this year, rose $1.35, or 4.6%, to $31. The stock's strong gain helped spark a 4% rally in the Philadelphia KBW Bank Index.

Attention

Weill will resign from the boards of

AT&T

(T) - Get Report

by year-end and

United Technologies

by next spring. He had joined the AT&T board in 1998 and the United Tech board in 1999. AT&T Chairman Mike Armstrong and United Technologies CEO George David currently sit on Citigroup's board.

In recent weeks, there's been renewed attention in the media and by securities regulators on the potential conflict of interest that's inherent in that kind of cozy corporate relationship.

In fact, one of the things New York Attorney General Eliot Spitzer is said to be looking into is whether Weill's position on the AT&T board helped Salomon Smith Barney win a bond underwriting job from AT&T in 1999.

On Monday, Spitzer's office, as part of its investigation into Citi's business practices, filed a civil complaint that detailed numerous examples of Salomon stock analysts giving overly favorable coverage to some of the firm's investment banking clients. The allegations were made in lawsuit filed by Spitzer against five telecom executives who made a combined $28 million by investing in several hot initial public offerings led by Salomon.

Improving

Weill, in a prepared statement announcing his decision, didn't address the Spitzer inquiry. But he said the move was intended to bolster Citi's corporate governance policies.

"My decision to step down from these two boards and thus end interlocking directorships at Citigroup is part of our continuing effort to assure that our corporate governance reflects best practices," said Weill.

In a related move, Weill announced that Michel Masin, a

Verizon

(VZ) - Get Report

executive, would be joining Citi as the bank's new chief operating officer and vice chairman. Masin also will head a new committee on business practices that Citi has formed in response to the many regulatory inquiries into its business practices.

In forming that group, Citi joins scandal-ridden

Tyco

(TYC)

in focusing on a structural reform of business practices. Tyco recently hired the University of Pennsylvania's Michael Useem to oversee its internal revamping. In keeping with the spirit of the day, Masin will resign his seat on Citi's board and all his Verizon posts.