Citigroup shareholders nix massive CEO bonus

Though the bank endured a painful stock drop last year, Vikram Pandit stood to collect a huge pay package. Not so fast, said shareholders.

By TheWeek.com Apr 18, 2012 5:09PM

Image: Piggy bank (© Corbis/Corbis)Citigroup (C) shareholders dealt a harsh blow to CEO Vikram Pandit on Tuesday, rejecting his $15 million pay package at Citi's annual meeting in Dallas.


The vote is non-binding -- meaning that Citi's board of directors could ignore it -- but it's still a rare slap in the face for the head of a major U.S. company, and the directors say they're going to take another look at pay for Pandit and four other senior executives.


What brought about this unprecedented display of investor rancor? Here, a guide.

Why did shareholders object?
Citi's directors had agreed to sweeten their CEO's pay package with a $5.3 million cash bonus -- a cool $2 million more than Goldman Sachs (GS) CEO Lloyd Blankfein got -- even though the bank's shares lost 44% of their value in 2011. Shareholders refused. Many investors "feel the incentive compensation at Citigroup is ludicrous, that there's an artificially low hurdle," CLSA analyst Mike Mayo tells Bloomberg. "Are you going to give the manager of the New York Yankees an incentive bonus if he wins one-third of his games?"


How does Citi plan to respond?
Technically, it doesn't have to abide by the shareholders' vote. But outgoing Citi chairman Richard Parsons says the board will still meet with shareholders and try to address their complaints. Other companies that have faced similar votes have simply slashed CEO pay. "This is a milestone for corporate America," Mayo tells The New York Times. "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?"

What did take so long?
These so-called "say on pay" votes are new, required as part of the 2010 Dodd-Frank financial overhaul.

How big a problem is this for Citi, really?
No doubt about it -- this is a "stinging rebuke," say Jessica Silver-Greenberg and Nelson D. Schwartz at The New York Times, marking the first time a majority of a banking giant's shareholders have put their foot down so firmly. This "warning shot" suggests that anger over CEO pay -- and not just Pandit's -- "has spread from Occupy Wall Street to wealthy institutional investors like pension fund and mutual fund managers." And the "smackdown" was a surprise, says David Hall at The Wall Street Journal, given that Pandit had been reaching out to shareholders and got a vote of support last year. But with lots of boards "getting tough on linking pay and performance," Pandit's whopping "payout bucked that trend a little too hard."


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Tags: CGS
10Comments
Apr 18, 2012 6:44PM
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It's about time! May many more shareholders have the courage to reject ludicrous bonuses going forward!
Apr 18, 2012 6:59PM
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what about banks and gm motor and chysler  I dont get paid for screwing up I get fired so what works for me should work for them. I think they should lose All bonuses and should be fired.....
Apr 18, 2012 7:35PM
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About time the stockholders got wise.  Why give someone a bonus when they have produced, just to keep them from going somewhere else.  OMG let them go, and get someone in that can produce.
Apr 18, 2012 7:27PM
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I am hopeful that the future might bring reason for a reasonable bonus. Until that time the 'bonus situation' is not 'on the table' or even in the room.
Apr 18, 2012 8:15PM
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Big companies are extracting the life of the shareholders and the working man. This must stop and we as shareholders have the power due to our votes as shareholders to terminate the policies and incentive prorgrams these CEO's without questions imagine they earned. We are the company, and without the shareholders, there nothing. It's time we defended ourselves, make them aware  the shareholders will not accept there daily or yearly practices in regards to  there bonuses or any other incentives. Were tired!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Apr 19, 2012 2:33AM
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Citi down 10$ since the 10 for 1 reverse split .Why isn't the vote binding?
Apr 18, 2012 7:46PM
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Ceo's of comapanies are crooks, I'm glad that share holders have stepped on his neck. The arrogance and behavior of all CEO's are to be delt with by the share holders. There arrogance and behavior are unacceptable for the share holders and the common working man. Share holders, be firm and send the message that were exhausted of dealing with these CEO's who think they are gods.
Apr 18, 2012 8:15PM
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Big companies are extracting the life of the shareholders and the working man. This must stop and we as shareholders have the power due to our votes as shareholders to terminate the policies and incentive prorgrams these CEO's without questions imagine they earned. We are the company, and without the shareholders, there nothing. It's time we defended ourselves, make them aware  the shareholders will not accept there daily or yearly practices in regards to  there bonuses or any other incentives. Were tired!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Apr 18, 2012 7:30PM
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Smile Anyone deserves to get paid a bit  higher than others but no more than a million a year  if they founded the business and running it but if someone rise in the corporate ladders a pretender to the throne still just an employee maybe they should get paid no more than 350,000 dollars total compensations. You're always making a monster of a rat that's been the whole problems all along...
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