Citigroup gets employee bonus plan through, as Pandit defies his critics
Wednesday 21 April 2010
Chief executive Vikram Pandit said yesterday that Citigroup has proved its doubters wrong and is now "positioned for growth".
Addressing the Wall Street banking group's annual general meeting, he said: "I feel a whole lot better than I did a year ago. We are doing what many of the critics and pundits said could not be done."
This followed news the previous day that Citigroup had posted a profit of $4.4bn (£2.9bn) in the first quarter. This marked the bank's best return in three years, swinging from a $7.5bn loss in the last three months of 2009.
Shareholders at the AGM approved a plan to issue employees with $1.7bn in stock instead of a cash bonus and also voted to approve a potential "reverse stock split" at the company.
The US Treasury Department, which owns 7.7bn shares in the group, announced it had voted at the AGM, but had not changed the outcome of the votes, in a statement yesterday.
The US government backed all 15 directors nominated to serve on the board. It also said it had voted proportionally to not influence the vote on the "say on pay" resolution. The move gives shareholders the right to cast an advisory vote on approving the remuneration package for executives. The Treasury statement said that it "strongly supports the concept that shareholders should have the ability to vote on executive compensation".
The US Treasury also voted in favour of the potential split, saying the company had "a much larger number of shares outstanding than is necessary to ensure adequate trading liquidity".
A reverse split reduces the number of outstanding shares and lifts the price of those remaining accordingly.
Richard Parsons, Citigroup's chairman, said yesterday that the board had still not decided whether to carry out the split, after first gaining approval for the move last year.
Smaller shareholders at yesterday's meeting also called for the reinstatement of the dividend, in a stock that has been diluted 81 per cent in the past year. The company has been forced to issue shares in a bid to stabilise its precarious financial position.
The US government took the stake in Citigroup – currently a holding of 27 per cent of the total outstanding stock – under its Troubled Assets Relief Program (Tarp) in the autumn of 2008. It said yesterday: "The Treasury is a reluctant shareholder in private companies and intends to dispose of its Tarp investments as quickly as is practicable." The government said it would only vote on "core shareholder issues" including the election of directors and substantial asset sales.
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