You are hereNY Times: Citigroup’s Chief Rebuffed on Pay by Shareholders

NY Times: Citigroup’s Chief Rebuffed on Pay by Shareholders


-By Jessica Silver-Greenberg and Nelson D. Schwartz

April 17, 2012- In a stinging rebuke, Citigroup shareholders rebuffed on Tuesday the bank’s $15 million pay package for its chief executive, Vikram S. Pandit, marking the first time that stock owners have united in opposition to outsized compensation at a financial giant.

The shareholder vote, which comes amid a rising national debate over income inequality, suggests that anger over pay for chief executives has spread from Occupy Wall Street to wealthy institutional investors like pension fund and mutual fund managers. About 55 percent of the shareholders voting were against the plan, which laid out compensation for the bank’s five top executives, including Mr. Pandit.

“C.E.O.’s deserve good pay but there’s good pay and there’s obscene pay,” said Brian Wenzinger, a principal at Aronson Johnson Ortiz, a Philadelphia money management company that voted against the pay package. Mr. Wenzinger’s firm owns more than 5 million shares of Citigroup.

While the vote at Tuesday’s annual meeting in Dallas is not binding, it serves as a warning shot to other banks that have increased the pay of their top executives this year despite middling performance.

After the vote, Richard D. Parsons, who is retiring as Citigroup chairman, said that he takes the vote seriously and Citi’s board will carefully consider it.

Mike Mayo, an analyst with Credit Agricole Securities, said: “This is a milestone for corporate America. When shareholders speak up about issues on which they’ve been complacent, it’s definitely a wake-up call. The only question is what took so long?”

Shareholders rarely vote against compensation plans. The votes are part of the Dodd-Frank financial overhaul that mandates that public companies include “say on pay” votes for shareholders to express opinions about compensation. Last year, only 2 percent of compensation plans were voted against, according to ISS Proxy Advisory Services. In some instances, boards responded by reducing executives’ pay.

In Citigroup’s case, ISS itself recommended that shareholders vote against the pay proposal, citing concerns that the compensation package lacked “rigorous goals to incentivize improvement in shareholder value.” At Tuesday’s meeting, 75 percent of the shareholders voted.

Excessive pay has been a long-running problem at Citigroup, dating to well before Mr. Pandit became chief executive in 2007, analysts said. Citigroup has had the worst stock price performance among large banks over the last decade but ranked among the highest in terms of compensation for top executives, Mr. Mayo said.

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