In a first for a major bank, shareholders rejected the pay increases at Citigroup for CEO Vikram Pandit and other top executives. The bad news: It’s a non-binding vote, although Chairman Dick Parsons called it “a serious matter.” It’s too bad corporate governance law doesn’t allow shareholders to rein in compensation and make it stick. Still, this is a symbolic moment and it will be interesting to see if angry shareholders at other banks follow the lead.
As Richard Bennett wrote on the GMI Blog, which focused on corporate governance, “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. As a result, in a severe economic downturn, Citi may be forced to raise more capital or postpone their dividend plans. Additionally, a host of investigations and settlements have been hitting the news.”
Faced with this, Citi’s compensation board paid Pandit $15 million last year. Citi’s share’s have declined 20 percent over the past year. And it’s a picture of health compared with, uh, say, Bank of America.
The problem of the Too Big To Exist banks is multi-faceted, involving huge sums of money spent lobbying to keep Congress fixed, captured regulators and incentives for bad behavior. But shareholders and boards must begin to hold management more accountable, too. The board of Washington Mutual comes to mind. When they are lapdogs for the top dog, eventually taxpayers get sent to the doghouse.
And Don’t Miss: Spain’s surging bad loans cast doubt in Europe cleanup || Bloomberg
Today’s Econ Haiku:
Apple’s stock is down
Granny Smith has sold her shares
Red delicious? No