Made Off Like a Pandit

We’ve written before about how disagreement can be healthy for organizations. Evidently, that’s not always true.

Vikram Pandit exited Citigroup this week after what Reuters described as “simmering tensions . . . came to a boil” between the high-profile CEO and the chairman of Citi’s board, Michael O’Neill.

“O’Neill criticized Pandit for being too detached from the bank’s day-to-day operations,” Reuters reported, “and told him to get more involved.” Pandit, in turn, walked.

Now, we don’t know exactly what O’Neill said to Pandit, whose tenure, according to Reuters, has been “marked by a series of high-profile snafus such as the bank’s failure to win regulatory approval to buy back shares or boost its dividend in March.” But we do see a chance to continue the discussion, which we started Monday and revisited Tuesday, of how hands-on higher ups should be.

Peter Drucker felt that boards should stay far away from operations. “The board cannot and must not be the governing organ that the law considers it to be,” Drucker wrote in The Practice of Management. “It is an organ of review, of appraisal, of appeal.”

Vikram Pandit (Photo: Haraz N. Ghanbari)

Of course, in times of crisis, the board could become more directly involved, Drucker noted, but then “only to remove existing executives that have failed, or to replace executives who have resigned, retired or died.”

In this respect, O’Neill seems to have followed the Drucker principles: He called Pandit to account but did not get the board actively involved in daily governance. That said, how reasonable was O’Neill’s request that Pandit himself attend more to operations?

Certainly, Pandit had a responsibility to hold accountable those reporting to him, and as the leader of Citi should have maintained a buck-stops-here standard. Nonetheless, Drucker felt a top decision maker should generally avoid involving himself in the execution, the “doing,” of day-to-day matters.

“Otherwise he does not make decisions, and the ‘doing’ does not get done either,” Drucker warned in The Age of Discontinuity. Top management must “concentrate on decision making and direction by sloughing off the ‘doing’ to operating managements, each with its own mission and goals, and with its own sphere of action and autonomy.”

Based on what we know, who do you think had the most legitimate view of the role of the CEO: Pandit or O’Neill? Why?