Shareholders in Citigroup, one of the world's largest banks, gave a stinging rebuke to chief executive Vikram Pandit last night by rejecting his $50m pay package at their annual meeting.
Just 45 per cent backed the complex new remuneration deal under which Mr Pandit could reap tens of millions of dollars over the next three years, with what corporate governance campaigners said were far too few strings attached.
Although the vote is not binding on corporate boards Citigroup's chairman Richard Parsons told yesterday's meeting that changes would be made.
"That's a serious matter," he said. "We're going to have some more conversation with our shareholders, make sure we understand their concerns and then fix it."
Mr Pandit's package of cash and share bonuses, covering the period until the end of 2013, was signed last May after he took less than $150 in salary for the previous two years while Citigroup was struggling to survive. The company twice had to be bailed out by US taxpayers, but the board felt confident by last year that extensive restructuring and asset sales had repaired the balance sheet and Mr Parsons decided that this year's annual meeting would be his last as chairman, allowing him, he hoped, to go out on a high. Last month, though, the company failed a "stress test" by the US Federal Reserve and was refused permission to raise its dividend and return cash to shareholders, knocking confidence in Mr Pandit's recovery plan and rousing criticism of the $15m that he was paid for 2011 and the details of his multi-year incentive plan.
Two powerful corporate governance groups advised shareholders to vote against the package, which has been estimated at up to $53m in value. "Mr Pandit's 2011 incentive pay and multiple retention awards are substantially discretionary in nature or lack rigorous goals to incentivise improvement in shareholder value," analysts at advisers ISS wrote, ahead of the meeting.
Under Wall Street reform laws, an abstention in the vote on remuneration policy is counted as a rejection, meaning the package was rejected by 55 per cent to 45 per cent. Citigroup is the first major Wall Street bank to have suffered such a defeat.
On Monday, Citigroup posted a 2 per cent decline in net income for the first quarter from a year earlier, reflecting the bank's difficulties as it works to boost profits in a sluggish global economy. Still, Citigroup shares, up more than 33 per cent so far this year.Reuse content