Shareholder anger over perceived runaway Wall Street pay hit a high point yesterday when it was disclosed that a Citigroup plan to pay CEO Vikram Pandit $15 million was voted down.
In a shot across the bow of Citi’s board, 55 percent of shareholders voted against the non-binding measure.
Citi becomes the first big bank to see a pay plan get the thumbs-down.
In fact, more than 98 percent of corporate pay plans passed last year. Just 41 of 3,000 companies that put up a pay plan for a vote last year were rebuffed, said shareholder advisory firm ISS.
“It’s a very rare occurrence, and Citigroup is clearly one of the biggest names in the US to fail to get that support,” said David Eaton of shareholder services firm Glass Lewis. “What it says to me is that shareholders have been dissatisfied with the direction of the company and the direction of the share price. “
Departing Citi Chairman Dick Parsons called the vote of no-confidence “a serious matter” and promised to meet with shareholders to “make sure we understand their concerns, and then fix it.”
Shareholders also approved the appointment of Michael O’Neill as chairman, replacing Parsons.
Included in the defeated pay plan was a measure to award Citi’s president and head of capital markets, John Havens, compensation of $13 million.
Pandit received several retention awards last year worth an estimated $34.4 million, according to ISS. As such, his total pay could hit $49 million for 2011, including base pay of $1.6 million and a $5.3 million cash bonus.
That’s up from pay of $1 in 2010.
Talks with shareholders could result in Pandit seeing his stock awards pared back.
Citi’s investor vote, known as “say-for-pay,” was announced yesterday at its annual meeting in Dallas. It was mandated by Congress.
Pandit was unavailable for comment, said Citi spokesman Jon Diat, who reiterated Parsons’ promise that the board will consult with shareholders.
No date has yet been set for the board’s discussions with investor reps, Diat said.
Because the vote is non-binding, Citi is not required to alter its pay practices.
Still, the board could choose to pare Pandit’s generous stock awards or better tie pay to performance for 2012. Ignoring shareholders’ wishes could put Citi directors on the hot seat during next year’s elections.
Both ISS and Glass Lewis advised shareholders to reject Citi’s pay plan, saying that the firm failed to explain how its awards are determined relative to performance.
Indeed, the most recent blow to Citi shareholders came just last month when the Federal Reserve rejected the firm’s plan to hike its dividend, saying the bank isn’t financially sound enough to start handing out money to its shareholders.