Lots of excitement at Citigroup’s annual meeting today, as recounted in Crain’s New York Business. Shouting shareholders, wailing employees, an angry, overflowing crowd. New chief exec Vikram Pandit tried to calm everyone down: We’re now closer to the end of the write-down cycle than we are to the beginning, he said. With more than $40 billion of mortgage-related write-downs and losses at Citi so far, not exactly confidence-instilling stuff. No wonder the board of directors only got re-elected with about two-thirds of the vote. (Remember that in calmer times, anything less than near-unanimity is practically unheard of.)
The part of Citi’s annual meeting that I was paying particular attention to was Shareholder Proposal No. 12: a “say on pay” proposal that would give shareholders (i.e., the company’s owners) an advisory vote on executive compensation practices. The idea is to better align firm performance with top-executive pay. No more of this multi-million-dollar-pay-package-while -earnings-take-a-dive scam.
“Say on pay” has become quite the movement. Someone recently wrote a very interesting article on the topic. Since then, activist investors have really been turning up the heat, popping up at annual meetings to rally for the cause; last week, the AFL-CIO debuted a web site so that we all might better track the money being made by executives at companies which are writing off tens of billions of dollars in mortgage-related losses and wiping out years of earnings. Barack Obama, who last year introduced a Senate bill that would mandate “say on pay” provisions like in the U.K., has started talking about the idea again. A similar bill already passed the House.
But as the Citi annual meeting showed, “say on pay” is hardly in the bag. At the meeting, Citi threw out an early figure of 38% voting in favor. The American Federation of State, County and Municipal Employees, the union that submitted the proposal, thinks that the number will easily cross the 40% threshold once abstentions are teased out. That, though, could still fall short of last year’s result of 46% voting in favor.
Are shareholders actually okay with how Citi compensates its executives ($15 million for former CEO Chuck Prince; $19 million for CFO Gary Crittenden) in light of its recent performance (dividend cut by 40%; $150 billion of market value gone)? Doubtful. But maybe, like the man at the annual meeting who demanded the directors rise so that everyone could see them, they’d rather find another way to express their rage.