Federal regulators have been pressuring Chief Executive Vikram Pandit and Chairman Richard Parsons to overhaul management and improve performance after a series of federal bailouts, including $45 billion of taxpayer money, to address massive loan losses and writedowns.
The changes come as the government prepares next week to take a 34 percent equity stake in New York-based Citigroup, the third-largest U.S. bank by assets.
Citigroup's new directors include Diana Taylor, 54, the former New York banking superintendent who is now a managing director of fund manager Wolfensohn Capital Partners.
The others are Timothy Collins, 52, chief executive of private equity firm Ripplewood Holdings LLC, and Robert Joss, 68, the dean of Stanford University's business school and a former Wells Fargo & Co
Citigroup's board has been a part of the bank's failed strategy for a long time, said Sydney Finkelstein, a professor at Dartmouth College's Tuck School of Business. The government has been exerting the same sort of pressure at General Motors and Bank of America
Finkelstein added that the new directors will not be beholden to Pandit and Parsons, and I expect them to take a much more critical, and even realistic, view of Citigroup's future, and Pandit's role in it.
Citigroup also said Jerry Grundhofer, who joined its board in April, will become nonexecutive chairman of Citibank NA, its retail banking unit. He will work with Eugene McQuade, the unit's new chief executive. William Rhodes, who had held both titles, said earlier this month that he would step down.
Many analysts consider Grundhofer, a former chief executive of U.S. Bancorp
Citigroup, Pandit, Parsons and the various appointees were not immediately available for further comment.
The most prominent of the new board appointees is Taylor, the companion of New York City Mayor Michael Bloomberg.
Taylor was once considered a top candidate to run the Federal Deposit Insurance Corp. That job instead went to Sheila Bair, who has become a prominent critic of Citigroup's business practices and governance.
In a statement, Parsons said each of the new directors brings deep and valuable experience in various dimensions of financial services. Parsons has pledged to install a majority of new independent directors on Citigroup's board.
The bank also announced other governance changes.
Among these, Grundhofer will chair the board's audit and risk management committee. He replaces John Deutch, a professor at the Massachusetts Institute of Technology who in April got just 72 percent of votes favoring his reelection to the board.
Citigroup also named a board oversight committee for Citi Holdings, which has toxic assets and several businesses that the bank wants to shed.
Michael O'Neill, who became a director in April and is a former Bank of Hawaii Corp
Finkelstein, a co-author of Think Again: Why Good Leaders Make Bad Decisions and How to Keep It from Happening to You, questioned why Citigroup needs 17 directors, when typical large, publicly traded companies get by with 10 or 11.
Seventeen is usually beyond the optimal size for a board to be an effective decision-making and oversight body, he said. It is fine if you're bringing in great people, but if it becomes the steady state over a few years, it's a problem.
Citigroup shares fell 7 cents, or 2.5 percent, to $2.70 in morning trading.
(Reporting by Jonathan Stempel, editing by Gerald E. McCormick and Lisa Von Ahn)