Despite the fact that the vote is strictly advisory and not binding, approximately 55 percent of shareholders voted against the compensation plan for Citibank’s top five executives, including Pandit, suggesting that investors are unhappy with the company’s performance. Pandit promised to raise the bank’s one cent dividend but was blocked from doing so by the Federal Reserve, which indicated in March that the bank did not score well enough on the recent stress tests to increase investor rewards, City A.M. reports.
“The company has been flatlining,” Mike McCauley, a senior officer of the Florida State Board of Administration who voted its shares against the pay package, said, according to DealBook. “The plan put forth reveals a disconnect between pay and performance.”
Initially, beginning in 2009 after the financial crisis, Pandit accepted a salary of just $1 per year as a symbol of commitment to the company. In 2011, however, Pandit received a $1.67 million salary, $5.3 million cash bonus and a $40 million retention package to be paid out through 2015. Shareholders do not generally vote on pay packages, but the 2010 Dodd-Frank Act stipulates that shareholders in public corporations must express an opinion through a vote on compensation.
Out of the largest banks in the U.S., Citigroup has maintained the worst stock performance over the past 10 years while its executives have seen the highest compensation. Analysts say that excessive pay is an issue for Citigroup that goes back to before the financial crisis and the appointment of Pandit as CEO in 2007, DealBook reports.