NEW YORK—Shareholders of Citigroup Inc.. rejected a proposed pay package for Chief Executive Officer Vikram Pandit at its annual meeting this week. This is the first time shareholders of a Wall Street bank have rejected executive compensation.
About 55 percent of Citigroup’s shareholders—including institutional shareholders such as mutual funds and pension funds—rejected a $15 million pay package for Pandit.
The shareholder vote is advisory in nature, with the ultimate decision still resting with the board of directors. The board can still approve the compensation package.
Nevertheless, the vote sent a powerful message to the board of one of the country’s biggest banking firms, underscoring the current disconnect between Wall Street—with its outsized pay packages—and Main Street, including retail investors. Executive pay has been one of the most controversial topics and has galvanized populist movements such as the recent Occupy Wall Street.
“This is a milestone for corporate America,” wrote Credit Agricole Securities research analyst, Mike Mayo, according to CNBC. “When shareholders speak up about issues on which they’ve been complacent, it’s definitely a wake-up call. The only question is what took so long?”
According to CNBC, Calpers—California’s state pension fund and one of the biggest single shareholders of Citigroup stock—voted against the pay package.
A Citigroup spokesperson said that the board takes the vote seriously and will consider it in its decision.
The proposed $14.8 million pay package for Pandit comes on the heels of Citigroup’s announcement of $2.9 billion in quarterly earnings, which was released on Monday. The net income was 2 percent lower than the same period in 2011.
Pandit, who oversaw Citigroup’s restructuring following its 2008 federal bailout, has returned the company to profitability. He also took a token $1 annual salary in both 2009 and 2010.
Shareholder rejection of executive pay packages historically has been rare among large corporations. In 2011, shareholders of less than 50 of the 3,000 biggest publicly traded companies voted down their executive pay proposals.