Citigroup investors give thumbs down to Vikram Pandit's $15 mn pay

Citigroup has become the first Wall Street bank to get a thumbs-down from shareholders over outsized executive pay. At its annual meeting on Tuesday, 55 per cent of the bank's shareholders voted against the pay packages that have been granted to Citigroup's top executives, including CEO Vikram Pandit.

Pandit was paid $15 million for last year along with a $10 million retention pay.

The vote is advisory and won't force the bank to change its pay practices, but it did send a powerful message of discontent to Citi's leadership.

"This vote is historic," said Eleanor Bloxham, CEO of The Value Alliance, a board advisory firm. "None of the Wall Street firms have received this kind of a review yet."

Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives.

Bonuses became a flashpoint of public outrage after the 2008 financial meltdown, which was caused in large part by those same Wall Street firms.

Nonetheless, compensation on Wall Street has remained high, even after a taxpayer-funded bailout of the industry and the Great Recession that followed and left one in 10 Americans unemployed.

Until Tuesday, shareholders haven't voted in large enough numbers against Wall Street pay packages to make a difference. Under the Dodd-Frank financial overhaul law, major US companies are required to allow shareholders to have a "say on pay" vote at least every three years. The votes are not binding.

Besides Citi so far this year, only three companies - KB Home, International Game Technology Inc and Actuant Corp - have failed to muster shareholders' approval of its pay practices. Last year, 41 companies failed.

For Citigroup's CEO Vikram Pandit, the lost vote at the annual meeting comes at a bad time. Last month the bank's chief regulator - the Federal Reserve - dealt Citi a huge setback by barring the company from paying a higher dividend, saying the bank wasn't financially strong enough.

The Fed's decision came soon after Pandit had been promising to raise dividends.

Pandit's large pay package for 2011 and a large retention pay is not going over well with shareholders. He received $14.8 million in total compensation for 2011, up from his token $1 compensation in 2010.

Pandit was also awarded $10 million in retention pay, which vests after 2013. Paid as an incentive for Pandit to stay on as CEO, Citi's compensation committee will assess him not on financial performance, but on non-quantifiable measures such as talent management, organisational culture and risk management.

In a statement late on Tuesday, Citigroup said its board and senior management will consult with "representative shareholders" to hear their concerns.

The board's compensation committee "will carefully consider their input as we move forward," the Citi statement said.