Citigroup's ( C) addition Friday of three board members with deep banking experience, particularly a former New York state banking regulator, underscores the ample work still needed to be done at the troubled institution. Citi's new directors include Diana Taylor, the former New York State superintendent of banks and current managing director of fund manager Wolfensohn Capital Partners; Timothy Collins, CEO of financial service-focused private equity firm Ripplewood Holdings; and Robert Joss, currently Stanford University's dean of its graduate business school and the former CEO of Australian bank Westpac Banking Corp. The additional directors bring Citi's total board members to 17. CEO Vikram Pandit, who has been criticized for not bringing change quick enough to the troubled institution, is the only board member who is also a member of Citi's management. Citi has also been criticized by regulators for not having enough commercial banking experience on its board and among its top ranks. The three board members join four other banking-specific directors who were named in March, including former US Bancorp ( USB) Chairman Jerry Grundhofer, who was seen as potential successor to Pandit. Bank of Hawaii's ( BOH) CEO Michael O'Neill, retired Pimco CEO William Thompson and Anthony Santomero, who was most recently a senior advisor at McKinsey & Co. and a former president of the Federal Reserve Bank of Philadelphia, were also named to Citi's board at the time. Separately, the company created a new Citi Holdings Oversight Committee, which will oversee management's strategy and execution for the disposition of assets of its so-called bad bank. O'Neill will head up the committee, along with former superintendent Taylor and Professor Joss, among the members.
Citi also said that Grundhofer had been named chairman of Citibank, the company's retail franchise. Grundhofer was also named chair of Citi's audit and risk management committee. Grundhofer is replacing long-time Citi veteran Bill Rhodes, who recently stepped down as CEO of Citibank and now is leaving the chairman post as well. Rhodes will remain Senior Vice Chairman of Citibank. Additionally, O'Neill and Santomero will become directors of Citibank. "The newly appointed directors are the latest additions to our group of exceptionally talented individuals," Chairman Richard Parsons said in a statement. "Like the other directors who have recently joined the board, each brings deep and valuable experience in various dimensions of financial services. Further, as we periodically rotate board assignments, we will be able to take optimal advantage of the specific skills of each new director." Parsons called the re-constituted board an "extraordinary resource" for the company "as it works to build on Citi's many strengths, address its challenges and capitalize on its great opportunities." A key priority will be to return the company to "sustained profitability and growth," he said. Citi has been shuffling its executive ranks in recent weeks as the government further pressures the company to get its act together. Earlier this month Edward 'Ned' Kelly, who had served as CFO, was named vice chairman of the company and given additional responsibility in terms of strategy and M&A. Kelly was hired by Pandit in early 2008. One could argue that with all the banking experts in the room there is potential for a clash in viewpoints at Citi. But the need for such banking experience at the board level is evident in how asleep at the wheel the board was during the housing boom years. As the credit crisis intensified, Citi racked up billions in losses from risky securities that went belly up, as well as losses from its large consumer portfolio due to a souring economy.
The company reported a surprise second-quarter profit on July 17, but it was primarily due to Citi's joint venture with Morgan Stanley ( MS), in which it sold 51% of one of its most profitable businesses, Smith Barney, to raise additional capital. Citi recorded an $11 billion pre-tax gain from the completion of the deal. If not for the gain, Citi would have once again recorded a loss for the quarter. Shares were falling 5 cents to $2.72.