Citigroup has made what some analysts have called “the biggest corporate governance decision” at the bank in six years.
The third-biggest US bank by assets on Monday named the former US regulator John Dugan to be its next chairman of the board after Mike O’Neill decided to retire from the position earlier than expected.
The choice of Dugan rather than Citi CEO Mike Corbat preserves a split role for chairman and CEO that has existed at Citigroup since the financial crisis but is rare across Wall Street. It comes as Citi has undergone a slew of changes over the past several months, including the departures of key executives and restructurings within their business lines. It also comes amid investor f rustration with the bank’s stock price, which has lagged peers’, analysts have said.
The bank is in the midst of a plan to return at least $60 billion in capital to shareholders over three years and to raise its return-on-equity into the low teens. The activist investor ValueAct owns a $1 billion stake.
There was some thought leading up to Citi’s decision that Corbat, who has run the bank since 2012, could consolidate his power by taking over the chairmanship from O’Neill. O’Neill asked Corbat last year if he wanted the board to consider him for the chairman’s job, according to a person familiar with the board’s decision. But after several months of deliberation, Corbat decided to stay focused on the CEO role, the person said. Avoiding shareholder outrage factored into his thinking, the person said.
Citi has had a split role for more than 10 years, in contrast to rivals JPMorgan, Morgan Stanley, and Bank of America who all have the roles of chairman and CEO placed in the hands of one person. That change at Citi happened after Chuck Prince, who oversaw a rush into collateralized debt obligations that brought the bank to its knees, stepped down as chairman and CEO in November 2007.
O’Neill, chairman since April 2012, was set to give up his role next year after hitting the mandatory retirement age of 72. This announcement accelerates the process, largely to give Dugan time to settle in before the firm’s annual meeting, according to a person briefed on the decision. The board made the decision on Sunday, the person said.
Dugan will become chairman on Jan. 1, 2019, according to a statement. He’ll oversee a 16-person board.
He has served on Citi’s board since November 2017 and as an adviser for several years earlier He ran the Office of the Comptroller of the Currency from 2005 to 2010 and was previously a partner at Covington & Burling LLP.