No reason was given in the press release announcing that Mr. Pandit had stepped down. And while the reports of what happened behind the scenes will slowly emerge as each side spins its story, there is no doubt that this was an unexpected and abrupt resignation.
He left without the words that you usually see in such press releases about "spending more time with your family" or even language about "retirement" — and just as his compensation was beginning to rise again into the tens of millions of dollars.
(Read More: Pandit's Departing Memo to Employees)
The new show of power by the board is a remarkable turn of events. In the years leading up to the financial crisis, boards were criticized for letting chief executives rule unchecked. Remember, Citigroup was the place where Sandy Weill reigned supreme for years. It led to Charles O. Prince who lacked the ability to run the financial uber-conglomerate but also lacked a board that could appropriately supervise and monitor his actions let alone make a decision about the direction of the company. (Mr. Prince was the one, you may recall, who said in the years leading up to the financial crisis that "as long as the music is playing, you've got to get up and dance.")
Board supremacy is a general trend. In the wake of the financial crisis, the big banks have been forced to reconstitute their boards with Citigroup and Bank of America at the top of the list. But others like Goldman Sachs have also been pushed to bring in more competent people. The new directors are much more aware of what happened in the years leading up to the financial crisis, and to take action.
Not only have boards been pushed to bring in new, more active people, political and market forces are pushing boards into a greater role in the banks themselves. The Dodd-Frank Act charges boards with an enhanced duty to monitor systemic risk at financial institutions and requires the creation of risk management committees made up of independent directors for these banks.
(Read More: Wall Street's Boardroom Bloodletting)
Corporate governance advocates, meanwhile, are pushing boards to take a more active role not only in the hiring and firing of the chief executive but in the operation of the company.