Saturday, January 20, 2018
Business

Citi shareholders vote against executives' high pay

NEW YORK — Citigroup has become the first Wall Street bank to get a thumbs-down from shareholders over outsized executive pay.

At its annual meeting Tuesday, 55 percent of the bank's shareholders voted against the pay packages that have been granted to Citigroup's top executives, including CEO Vikram Pandit's $15 million for last year and $10 million retention pay. The vote is advisory and won't force the bank to change its pay practices, but it did send a powerful message of discontent to Citi's leadership.

"This vote is historic," said Eleanor Bloxham, CEO of the Value Alliance, a board advisory firm. "None of the Wall Street firms have received this kind of a review yet."

Wall Street's huge pay packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. Bonuses became a flashpoint of public outrage after the 2008 financial meltdown, which was caused in large part by those same Wall Street firms.

Still, pay on Wall Street has remained high, even after a taxpayer-funded bailout of the industry and the recession that followed.

Until Tuesday, shareholders haven't voted in large enough numbers against Wall Street pay packages to make a difference. Under the Dodd-Frank financial overhaul law, major U.S. companies are required to allow shareholders to have a "say on pay" vote at least every three years.

"Citigroup is one of the most egregious examples of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA.

"It's a loud clarion call and an embarrassment to the directors, who now have to clarify compensation metrics they use," said Jeffrey Sonnenfeld, senior associate dean for executive programs at Yale University's School of Management.

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