"It's a big, diversified financial services institution, and the heads of its various businesses have the opportunity to get the expertise, experience and exposure that makes boards comfortable hiring them as CEOs of other businesses," says Steven Eckhaus, a Wall Street compensation advisor and a partner at Katten Muchin Rosenman LLP. "What you're really observing more than anything else is a platform where they have an opportunity to learn."
Several industry members also point out one more practical reason for companies to poach Citigroup executives: shorter "gardening leaves" for defectors. Citi typically only requires a 75-day advance notice from senior executives who leave to work for rivals, compared with the standard of 180 days at most other big financial companies, according to recruiters. That means that Citigroup executives hired away by a competitor could start work again in less than three months, instead of keeping their new employer waiting for half a year. (Citi spokesman Costiglio declined to comment.)
To be sure, other banks and financial companies tend to have their own recruiting and training impact on the industry; American Express (AXP) alums, for example, are now running consumer businesses at both Citigroup and JPMorgan Chase. But among the other large banks, "you don't hear as much about their senior executives going off and heading up other companies as you do at Citi," says Rossi, now a teaching fellow at the University of Maryland's Robert H. Smith School of Business.
The financial crisis accelerated some of those departures, as executives fled to companies that appeared farther from the brink of failure or better able to pay for their skills. But Rossi sees Corbat's takeover as a step in the right direction for Citigroup's future executive retention.
"There's certainly been a brain drain of sorts in various positions," he says. But "tapping Corbat as the successor to Pandit may actually put them back on track to cultivating that kind of leadership, because he grew up Citigroup and has that built into him — how effective a process that is. Tapping an insider will certainly help stabilize things going forward."