Citigroup Wins Shareholder Support for Compensation PlanDonal Griffin
Citigroup Inc. shareholders, who rejected the bank’s 2011 compensation plan, voted in favor of the latest round of payouts after the lender said it overhauled rewards for top executives.
The 2012 plan, which includes an $11.5 million package for new Chief Executive Officer Michael Corbat, received more than 90 percent of votes cast in the non-binding tally, Secretary Rohan Weerasinghe said at the annual meeting in New York.
The approval is a success for Corbat and Chairman Michael O’Neill, who said in February that the bank had changed how it paid top executives so that rewards would be tied to performance. Shareholders rejected the previous plan last April amid criticism that it allowed former CEO Vikram Pandit to collect millions of dollars too easily. The board ousted Pandit six months later and replaced him with Corbat.
“The company has taken significant, positive strides” to remedy concerns about the gap between pay and performance, shareholder advisory firm Glass Lewis & Co. said in a report prepared for the meeting. “What a difference a year makes.”
Corbat, 52, and O’Neill, 66, presided over their first annual meeting together since taking the New York-based bank’s most senior positions last year. O’Neill, a director since 2009, replaced Richard Parsons as chairman after the 2012 annual meeting.
The CEO and chairman have embarked on an overhaul of Citigroup’s operations, announcing plans to cut 11,000 jobs, shut branches, pull back from certain markets and exit more if results don’t improve.
The meeting was attended by about 150 shareholders. Investors have used the gathering in previous years as an opportunity to vent anger as Citigroup shares tumbled amid bailouts and multibillion-dollar losses tied to subprime mortgages. While the stock has outpaced other U.S. lenders since last year, it’s still down 84 percent since the end of 2007.
“We are by no means satisfied,” O’Neill said in response to a question from Vincent Russo, a shareholder who said the stock hadn’t performed well enough since a reverse split in May 2011. The split converted every 10 common shares into one new common share.
Citigroup has advanced about 6.7 percent since the reverse split, and are up 19 percent this year, after a 50 percent increase in 2012. They dropped 44 percent in 2011.
The shares advanced 1.4 percent to $47.12 at 4:15 p.m. in New York trading. Russell Forenza, who said he lost $1.5 million on Citigroup shares, said he needed the stock to reach $600 to break even. He offered to join the board to help boost the stock price.
“You’ll see some decisions on that board that will get that stock price back up,” Forenza said.
The vote on compensation was encouraged by Glass Lewis and ISS Proxy Advisory Services, a unit of MSCI Inc. The bank said in February that awards will be based on “pre-defined” goals - - including financial metrics --established at the beginning of the year, replacing the previous system of rewarding executives at the discretion of the compensation committee.
Glass Lewis said that there’s still a “disconnect” between executives’ pay and performance. The firm said it’s concerned that executives got large cash bonuses for 2012 not tied to any disclosed financial metrics.
Corbat’s 2012 package included a $4.2 million cash bonus. Manuel Medina-Mora, the head of consumer banking who received $11 million, including $4.2 million in cash.
Corbat is “decisive and he gets results,” O’Neill said. “I work closely with Mike, he briefs me on what’s going on, but I have a clear understanding of who’s running the bank and I’m not intrusive but I’m interested.”
Corbat told shareholders that he and fellow executives have turned the bank into a “simpler, smaller, sounder institution.” The lender manages its risks in a way that would avert the multibillion-dollar losses that JPMorgan Chase & Co. suffered in its chief investment office, Corbat said.
“The way we run our institution is different from JPMorgan in terms of managing risk in this particular instance,” Corbat said. “That’s not what that money is set aside to do.”
Shareholders elected 11 of the 12 directors, Weerasinghe said. Lawrence Ricciardi retired from the board after reaching the panel’s retirement age of 72, according to a March proxy filing.
Ricciardi’s retirement brought the number of directors on the Citigroup board to 11, fewer than the range of 13 to 19 in the bank’s corporate-governance guidelines.
“The range is intended to be a guideline, not a requirement,” Shannon Bell, a spokeswoman for the bank, said in an e-mailed statement. “The board’s intention is to add qualified directors to the board and will announce these appointments when they are made.”
The board hasn’t announced a replacement for Ricciardi, who joined in July 2008, months before Citigroup took a $45 billion U.S. bailout to avoid collapse. He headed the audit committee and also was a member of the executive committee. He previously held executive roles at International Business Machines Corp., RJR Nabisco Inc. and American Express Co., according to a biography in a 2012 Citigroup proxy filing.
Glass Lewis recommended that investors vote to remove directors Robert Joss and Judith Rodin. Joss, 71, has a consulting contract with the bank that pays him $350,000 a year in addition to fees and awards in return for advising on projects from “time to time,” Citigroup said in a filing.
“We view such relationships as potentially creating conflicts for directors as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions,” Glass Lewis wrote in its report.
Joss, a former Wells Fargo & Co. executive, received $662,500 in total 2012 compensation, according to the bank’s most recent proxy filing. The next highest-paid directors were O’Neill and Anthony Santomero, who each received $375,000, the filing shows.
Shareholders also should remove Rodin, 68, from the board because she “failed to adequately oversee the company’s risk controls” during the three years through 2009 when Citigroup’s share price tumbled, Glass Lewis said.