by Richard A. Bennett - President and CEO,
Reports from today's Citigroup meeting indicate that, led
by public pension funds, investors rebuffed the company's board in their compensation
decisions. In the non-binding vote, only 45% of shares apparently approved
board's pay report. Chairman Dick Parsons called the rejection a "serious
matter" and pledged to engage with shareholders. The company should not
Investors are rightly concerned about last month's report
from the Federal Reserve that Citigroup had failed the Fed's latest round of
stress tests. As a result, in a severe economic downturn, Citi may be
forced to raise more capital or postpone their dividend plans. Additionally, a
host of investigations and settlements have been hitting the news. For
example, two months ago Citigroup was one of five U.S. banks that agreed to pay
the government $25 billion to end an investigation into abusive foreclosure practices.
As we noted a month ago,
"[E]ffective January 18, 2011, CEO Vikram Pandit's base
salary was increased to $1.75 million, or 75% over the IRC tax deductibility
limit. Additionally, the CEO received an aggregate mega-grant of 500,000
time-vesting stock options valued at more than $7.8 million in fiscal 2011.
Equity awards should have performance-vesting features in order to assure full
alignment with shareholder interests and market- priced stock options may
provide rewards due to a rising market alone, regardless of individual
And in the face of all this, Mr. Pandit received a bonus
of over $5 million, making his total pay in 2011 nearly $15 million.
Share price has declined over 20% in the past year.
GMI Ratings has characterized Citigroup's accounting as
"very aggressive" for 11 of the past 12 quarters, and gives it an ESG rating of
Read more articles on corporate governance and other topics
at the GMI Blog
For more information about LexisNexis
products and solutions connect with us through our corporate site.