Citigroup Vote Not the Start of a Trend
The vote against CEO Vikram Pandit's pay package is more about Citi's performance than outrageous executive pay
The financial world is buzzing about the news that a majority of Citigroup shareholders on Tuesday voted against CEO
"The company should not be surprised. Investors are rightly concerned about last month's report from the Federal Reserve that Citigroup had failed the Fed's latest round of stress tests," wrote
The vote was made possible by the Dodd-Frank Act's "say-on-pay" provision, which allows firms' shareholders to vote on executive compensation. Though nonbinding, the vote constitutes a sharp blow to Citigroup.
In other words, says Jackson, shareholders saw an imbalance between Pandit's compensation and his effectiveness. "It's really about performance. That's what makes this so interesting. These are people with skin in the game."
Compared to compensation for other financial CEOs, Citi's proposed
"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders,"
Other banks' shareholders may very well follow suit, says Jackson, but those institutions will also likely work overtime on communicating with shareholders to forestall such a surprise vote.
"A good board of directors, knowing that this vote is coming, will be in touch with those institutional shareholders and they will ask what they need to do in order to convince them that the pay plan is worth approving," he says. "The failure of the Citi group board to understand the vote and plan for it is one of the most striking developments here."
For its part, Citi appears to already be learning its lesson on this count. Citigroup Chairman
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Citigroup Vote Not the Start of a Trend | Politics
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