Citigroup Inc shareholders gave a vote of no confidence to the bank's executive compensation plan Tuesday, dealing a surprise embarrassment to Chief Executive Vikram Pandit.
Only 45 percent of shareholders endorsed the pay plan in an advisory vote at the annual meeting in Dallas required under the Dodd-Frank law, Michael Helfer, general counsel and corporate secretary, said at Citi's annual meeting, citing preliminary vote totals.
About 75 percent of eligible votes were cast. Last year, shareholders overwhelmingly approved Citigroup's say-on-pay vote.
The proposal boosted Vikram Pandit's 2011 pay to $14.9 million from $1 a year earlier. The shareholder vote is nonbinding and won't require Pandit or Citigroup's other executives to give back pay they have already received, the Wall Street Journal reported.
Citigroup's failed "say on pay" measure is the latest signal that shareholders are turning up the pressure on top executives who have failed to deliver improved performance, Reuters reports. Goldman Sachs Group Inc struck a compromise with shareholder activists last month to avoid a similar showdown over board leadership at its annual meeting.
On Monday, Citigroup posted a 2 percent decline in net income for the first quarter from a year earlier, reflecting the bank's difficulties as it works to boost profits in a sluggish global economy.
Richard Parsons, chairman of the board, called the outcome "a serious matter" and said directors would meet shareholder representatives to discuss their objections.
Citigroup is the first major bank and the biggest company by market value to have suffered a no vote on executive compensation.
The setback followed negative recommendations by two proxy-voting firms widely followed by institutional investors, and could foreshadow increasing shareholder activism. The California Public Employees' Retirement System, a major shareholder, voted against Citigroup's executive-pay practices because "the bank has not anchored rewards to performance," spokesman Brad Pacheco said.
The Citigroup vote tally surprised some analysts who follow corporate governance issues.
"I would think that, given the amount of public and regulatory attention that Citigroup has had for the last four years, that they would not be in a position to go to a meeting and have a negative investor vote," Beth Young, senior research associate for GMI Ratings in New York, told Reuters.
ISS, a research firm that advises institutional investors on corporate proxy issues, recommended siding against the board and voting no on the 2011 pay plan. Glass Lewis & Co, another governance advisory firm, recommended voting against the compensation plan.
Citigroup was trading at $35.04 after hours Tuesday night, down 4 cents from the close.