Selker Leadership

What do Citibank’s CEO Vikram Pandit, the Christian Science Monitor and the Harvard Kennedy School have in common?

In late November 2008, just 2 days after Citibank reached a deal with the U.S. Treasury, the Federal Reserve, and the FDIC to inject $45 billion into Citi to increase the corporation’s liquidity, $20 billion provided by the Troubled Asset Relief Program (TARP) to purchase Citi preferred shares - insurance against the $306 billion face value of the high-risk loans owned by Citi - the bank’s CEO, Vikram Pandit, appeared for a 60 minute interview on PBS’ “The Charlie Rose Show”. Throughout the interview, Rose asked Pandit to comment on the past decisions Citibank made regarding the firm’s leverage of mortgage backed securities in their risk profile, and beyond offering an explanation of what happened, as the CEO of our 2nd largest banking institution, to convey some sense of responsibility for what has occurred.

While it is true that Pandit has been the CEO of Citibank for one year and was not at the helm when many of their high-risk portfolio decisions were made, his previous employment was leading the investment banking arm of Morgan Stanley. As such, he certainly is no stranger to the world of investing in high-risk derivatives typified by the relatively new instrument of collatorized debt obligations (CDOs) that are a major component of our financial collapse. To top it all off, the real value of the $306 billion in high-risk assets we have purchased and insured with our (the taxpayer’s) $45 billion investment into Citi is unknown. What we can surmise with a high degree of certainty is that it is certainly not $306 billion given that some percentage of the securities contained in Citi’s toxic waste heap have reduced in value to zero, and many have been reduced by 40% or more.

However, instead of delivering any palpable insight into our current situation, or straight talk about the value of the assets securitized, Pandit tip-toed his way through a maze of answers over the hour interview. Simply put, even though he wasn’t the top individual with his hand on the rudder of the bank when most of the high-risk investments were made by Citi, given that he is the CEO now, he shirked responsibility for what has occurred, and avoided any statement of accountability for the bank’s current situation. The closest he came to even acknowledging the gap between Wall Street and the rest of the country was the comment that he “can completely understand how people on Main Street, people who are not close to this industry would be furious at what’s happened and furious at kind of where we’ve gotten to.”

Now I know that a majority of Americans are not staying up to watch Charlie Rose, his show is broadcast at midnight on my local PBS station. But here we have the CEO of the 2nd largest US Bank being interviewed days after his institution accepts $45 billion in bail out money, and he cannot even offer a statement accepting responsibility for his bank’s actions. This is not to say that Vikram Pandit is a bad CEO, rather that he is not being held to a standard of accountability that reflects the best leadership.

What does this have to do with the Christian Science Monitor and the Harvard Kennedy School?

In October 22 of last year, the Monitor ran a story titled, “America’s Other Deficit: Leadership.” This article, written by David Gergen and Andy Zellke, chronicled the results of the Confidence In Leadership 2008 survey conducted by the Harvard Kennedy School and the Merriman River Group. Begun in 2005, this survey measures confidence in the leadership across seven sectors, business, the Executive Branch, Congress, religious, educational, the Supreme Court, and state government. Not surprisingly, this past year saw the steepest decline in the confidence level Americans have with their leadership and the largest decrease since the survey began. The survey’s results point to that 80% of Americans believe that we face a leadership crisis today. In fact, confidence in business leaders dropped more than did the confidence level in leadership of any other sector.

Given the steady stream of events leading to our financial crisis, and the gap in accountability by many of today’s leading business executives typified by Charlie Rose’s interview with Vikram Pandit, is it any wonder?

However, underneath this obvious connection between these two events there is another more subtle thread to be teased out. Accountability gaps with our leaders persist because we do not demand accountability from them. Accountability is the ability to account for “what has happened.” It is not blame or finger pointing. It is the recounting and telling of a story, owning the particulars of the circumstances and its results in their entirety.

In both of these instances, the news of the crisis of confidence in leadership and Citi’s CEO not demonstrating accountability for his bank’s status in the wake of accepting a $45 billion bailout, the general reaction by the media, the blogosphere and the public has been the same - virtual silence with an undertone of blame. Here is the nasty truth: the shareholders, and now as a tax-paying citizens of the United States we all are shareholders of Citibank, have been complicit in helping to create an overall environment in which our leaders are not held accountable for their actions, or the actions of their organizations.

This endemic culture lacking accountability has afflicted our institutions across the seven segments noted in Harvard’s Kennedy School and Center for Public Leadership, and is one of the dominant unspoken factors underneath our economic and leadership crisis.

While there are many structural issues that need to be addressed, from stopping the revolving door between Wall Street and the SEC, to striking a better balance between regulatory oversight and creativity, to stronger governance with many public company’s boards of directors, and to hiring and developing better leaders; like most cultural change, it begins at an individual level or it doesn’t begin at all.

So as we enter this New Year, I encourage all of us to look in our lives, our businesses and our organizations and ask, “Where are you not holding yourself or your leaders accountable? And what would change if you started to do that?”