Washington: The Securities and Exchange Commission has launched an informal investigation to determine if Citigroup misled shareholders when it claimed former CEO Vikram Pandit ‘resigned’ on October 16.
Citigroup Chairman Michael O'Neill told investors in conference calls and interviews that the decision to step down was Pandit’s alone. “Vikram chose to submit his resignation and the board accepted it,” O’Neill said.
According to Bloomberg and the Wall Street Journal, just after the market closed a day earlier, the board, which had allegedly lost confidence in Pandit, told him to step down later that day. O'Neill failed to mention this during the company’s third-quarter earnings call, which, along with O'Neill's statement that Pandit left of his own volition, is a potential regulatory infraction, the report said.
"If the board pushed Pandit out, then Citigroup issued a false statement," former SEC chairman Harvey Pitt said. "The reason for the CEO''s departure is material, and Citigroup had an obligation to disclose any information necessary to render its statements fair, accurate and complete. If the board forced Pandit out, Citigroup didn't do that," Pitt added.
Whether Citigroup did anything illegal remains to be seen. But it does bring up another question: Should CEOs be allowed to say they quit when, in fact, they were forced out? After all, unless they have done something terrible, most employees are allowed to say they quit when they were really asked to leave.
Should a CEO be held to different rules? "What often happens when companies do layoffs or want to push an individual out the door, they will do a ''mutual consent resignation'' whereby they agree that the employee will go without a fight, and in turn they will not fight unemployment benefits," Good Morning America workplace contributor Tory Johnson said.
"It will also look better on your record that you were not terminated or fired," he added. According to the report, outplacement expert John Hotard believes the issue is more about compensation and legal issues than anything else.
Michael Kaufman, managing partner at Kaufman Dolowich Voluck & Gonzo, which has a specialty in employment law on behalf of companies, agrees that barring some major offense, chief executives should be given the same opportunities as every other employee in America, the report said.
"There are a lot of market forces that aren't necessarily a CEO's fault," he said. However, he added, there is a difference with CEOs of public companies and their boards because they must also weigh their duties to their shareholders, it added.
First Published: Sunday, October 28, 2012, 21:03