In an almost unprecedented display of corporate anger aimed at senior management, shareholders of Citigroup (NYSE:C) rejected the proposed 2012 $15 million pay package for chief executive Vikram S. Pandit and five additional senior executives of the banking giant.
Nearly 55% of shareholders voted against the plan, including major shareholders like the Florida State Board of Administration (6.4 million shares), and CALPERS, the California state pension fund (9.7 million shares) according to the New York Times.
While the vote is non-binding, Citicorp’s board is now on notice that shareholders are unhappy with Pandit’s pay relative to the bank’s performance, and they are expected to review and revise the compensation package accordingly.
Pandit’s pay package from 2011 included $1.67 million in salary along with a $5.3 million cash bonus. Additionally, Pandit obtained a $40 million retention package which will be awarded through 2015. Meanwhile, Citigroup’s stock price slumped 44% during the year.
In 2009-2010, years in which Citigroup borrowed $45 billion under the Troubled Asset Relief Program (TARP), Pandit’s salary amounted to $1 per year. Citigroup has since paid off the TARP loans in full.
Shareholder rejection of executive pay compensation plans are rare: in 2011 only 2% of such plans were voted against, and only 41 firms in the Russell 3000 had their executive pay packages rejected. One of the very few notables was Hewlett-Packard (NYSE:HPQ), where shareholders rejected the compensation package for chief executive Meg Whitman
Executive pay package votes are part of the Dodd-Frank financial reforms that require publicly held company’s to incorporate “say on pay” provisions for shareholders to weigh in on executive compensation.