Counterparties: Citi shareholders speak on pay

By Ben Walsh
April 18, 2012

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

The shareholders have finally spoken. In a move that rebuked Citigroup management and the board of directors, the bank’s shareholders rejected the proposed $15 million pay package for CEO Vikram Pandit, as well as pay for three other execs.

Just this week, Citi released first quarter earnings that beat expectations, but signs of a stronger balance sheet haven’t been enough to cover the broader story here. Citigroup’s stock is down 44% in 2011, and 89% under Pandit’s tenure. Only a month ago the bank failed the stress test and then defended its capital position by, in part, calling the Fed’s evaluation “hypothetical.”

Shareholder rejection of management pay is exceedingly rare, but in this case it was far from radical: the ever cautious ISS recommended voting against the package not on the size of Pandit’s pay but on its lack of performance incentives. It’s those incentives that make executive pay material to shareholders at a $100 billion institution.

Shareholders may have finally fought back against pay for Citi execs, but it is worth remembering that executive compensation is an original sin of Pandit’s tenure at Citi. Pandit’s compensation for joining Citi through the acquisition of the asset manager he co-founded may climb to $200 million. And that acquisition, which cost Citi $800 million at the time and has since been closed and almost entirely written off, was reportedly done for the purpose of bringing Pandit into the Citi leadership.

For all the grandstanding about Pandit’s 2009 salary of $1, Citi shareholder’s seem to be at long last realizing that their financial returns for the last five years are a far cry from Pandit’s. - Ben Walsh

On to today’s links.

New Normal
The economy is growing again — but so is income inequality – WSJ
“The world’s central banker” behind China’s massive money creation – FT Alphaville
A Chinese whistleblower’s frantic race for asylum in the U.S. embassy – NYT

Apple
Steve Jobs: The lost interviews – Fast Company

The Oracle
Warren Buffett has Stage I prostate cancer – Reuters

Facebook
The CEO of Instagram initially asked Zuckerberg for $2 billion – WSJ

Alpha
A high frequency trader’s apology – Chris Stucchio

TBTF
Michael Lewis would like to see a run on America’s biggest banks – Daily Beast

Remuneration
The CEO of America’s second-largest natural gas producer took opaque personal loans worth $1.1 billion - Reuters
Why Citigroup should definitely have seen the problems with Pandit’s pay coming – Deal Professor

EU Mess
Spain’s bailout really more of a “when” question than a “if” question – Reuters
Credit is shrinking at a record pace in Spain, and bad loans are getting worse – Bloomberg
Martin Wolf: Why the eurozone may actually survive – FT

UGH
Absolutely nothing will happen in the upcoming lame duck congress – Capital Gains & Games

Primary Sources
Tim Geithner: Please stop messing with Dodd-Frank – Politico

Oxpeckers
Some journalists may have to wait miliseconds longer for the jobs data – Bloomberg

Compelling
U.S., Europe and Japan have share one big problem: protecting incumbent creditors – Interfluidity
How Abbott Labs keeps the U.S. from saving $700 million year – The Incidental Economist

Adding Value
Improving thrift store paintings with monsters – Twister Sifter

More From Felix Salmon
Post Felix
The Piketty pessimist
The most expensive lottery ticket in the world
The problems of HFT, Joe Stiglitz edition
Private equity math, Nuveen edition
Five explanations for Greece’s bond yield
Comments
3 comments so far

Here’s hoping that the masses are waking up. I’m not a commie or socialist but there is something very wrong here that needs to be addressed. I work for Verizon which is a healthy, profitable company. The old CEO and incoming CEO pulled in 50 MILLION DOLLARS between them last year. So how is this profitable company treating the workers? By trying to take away pensions,healthcare and outsourcing American jobs overseas!
Do these CEO’s feel any obligation toward keeping the middle class alive in this country or is it all just “hooray for me, the heck with you? ” I’m pretty sure I already know the answer to that

question.

Posted by truedat | Report as abusive

@TrueDat –

You just have to see the light, TD. The CEOs and the Wise Guys on the Street and in government are actually the ethical peers of Mother Teresa. They need and deserve their 8-digit annual paydays, and only a churlish muppet would deny that to them. I’m not sure exactly why any of this is – but Danny Black will doubtless be along shortly to set us all straight about that.

OBTW – do you know how use a rifle?

Posted by MrRFox | Report as abusive

“Compelling
U.S., Europe and Japan have share one big problem: protecting incumbent creditors – Interfluidity”
(Counterparties item)

BW finds this “compelling” – that’s revealing in its own right. The author argues in favor of policies that promote the interests of those who have not yet demonstrated prudence (or have demonstrated its opposite), and in favor of policies that expropriate the savings of those who have.

To quote a famous man – “Include me out”.

Posted by MrRFox | Report as abusive
Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/