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Wednesday, April 18, 2012

Citigroup’s Shareholder Revolt Reverberates On Wall Street

Citigroup CEO Vikram Pandit was rebuffed Tuesday by shareholders. (AP)

Now that Citigroup’s shareholders have become the first at a major Wall Street firm to reject their CEO’s lavish pay package, the bank says it will listen to what its shareholders are saying. But will the rest of Wall Street?

Citigroup shareholders voted Tuesday against the $15 million pay package with a $10 million retention bonus that was granted to chief executive Vikram Pandit last year.

“C.E.O.’s deserve good pay but there’s good pay and there’s obscene pay,” Brian Wenzinger told the New York Times. He is a principal at Aronson Johnson Ortiz, a Philadelphia money management company that voted against the pay package. (The firm owns more than 5 million shares of Citigroup.)

Citigroup nearly collapsed during the financial meltdown in 2007, it took government bailout money, and Pandit took a salary of $1 until the bank returned to profitability.

The vote by Citigroup shareholders is non-binding, but shareholders at a number of other businesses not on Wall Street have rejected CEO pay in the past year, which is something that Dodd-Frank financial overhaul law allows.

Guest:

  • Joann Lublin, management news editor for the Wall Street Journal

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  • BHA in Vermont

    I’m sorry, but PUUULLEEEAAASSSEEE.

    Do these boards and execs REALLY expect us believe that, long term,  the execs won’t be right back with the big pay and perks, raised to an even greater level even if they DO follow the non binding shareholder vote against the compensation packages?

    I doubt they will follow the vote. We’ll hear the standard “You have to pay big to get good people” line of bull. They might grant a slightly smaller but still outrageous package. Those “good people” were at the helm when their companies needed taxpayer bail outs but of course “It wasn’t their fault”, “It was not in their control” and “It would have been worse if THEY were not at the helm”. They are All ego, All entitlement, All self important. And little real value; none of them brings in anywhere near what they are paid for their “great leadership”.

    Pandit has already proved that he is nothing special. He received $165 million for his low performing hedge fund which was purchased by Citi in 2007. The fund has since been shuttered. What about a guy who runs a low perfoming hedge fund, later bought in a nepotism deal by the company he  heads, suggests he is “good people”?

     His 2007 compensation was $3,164,320, His 2008 compensation jumped 10 fold to $38,237,437. And what brilliant moves did he make to deserve that kind of pay raise?  The price of Citi stock dropped by 87% through 2007. Recall that was well before the market tanked. The price then dropped another 33% until the market crashed in October 2008. It sat at less than 10% of its early 2007 price until the 1:10 stock split a year ago. Even that didn’t bring it back to the early 2007 per share price and a share is currently worth 10% less than the post split price.  If you owned 10 shares of Citi in Jan 2007, it was worth $551. 30.  You now have 1 share worth $36.40. How does this performance suggest Pandit is a “must have” leader who is greatly improving the company and worthy of the $15 Million compensation package the board wanted to give him? NOTHING! And WHY would you want to give him a $10 Million retention bonus? The history of the stock price suggests his “leadership” is worth far less than the $128,000 he was paid in 2009 when his “total compensation” was supposedly $1.

Robin and Jeremy

Robin Young and Jeremy Hobson host Here & Now, a live two-hour production of NPR and WBUR Boston.

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