Shareholders Revolt at Citibank
At Citibank, shareholders are in revolt against executive pay packages.
Stockholders say no to megabucks for CEO
Emerging from the United States Congress' feeble attempts to put a rein on Wall Street excesses in 2011 was the Dodd-Frank Financial Reform Act, which among other things stipulated that shareholders must vote to approve or reject proposed pay packages for top executives in the financial industry. Last Tuesday, April 16th, at Citibank's annual shareholder meeting, an executive pay package totaling $15 million for CEO Vikram Pandit was rejected by a vote of 55 percent to 45 percent. Stockholders were most likely sending the message that CEO pay should reflect performance, because the value of Citibank stock decreased 44 percent in the past year, and its first quarter profit this year fell by 2 percent.
In a separate action an individual stockholder brought a lawsuit against Pandit and other top executives that claims they breached their fiduciary duties by paying themselves more than $54 million in 2011. Brian Wenzinger, an executive at a money management firm in Philadelphia, told the New York Times that "CEO's deserve good pay, but there's good pay and there's obscene pay."
This is the only time since Dodd-Frank passed that shareholders have rebuked an executive pay package, and whether it is the first shot across the bow and a harbinger of things to come regarding the financial industry's habit of awarding its executives with megabucks is at present an open question.