[caption id="attachment_107257" align="alignright" width="300" caption="Citi Headquarters, New York"]
“Say on Pay” has been put to the test once again, this time at Citi. Say on Pay
, one part of the complex Dodd-Frank Act, allows a non-binding vote by shareholders of publicly traded companies to approve or disapprove an executive compensation program.
Citi’s Vikram Pandit is the first CEO in the banking industry to be told “no” for a raise. This is the first time a major bank’s shareholders have voted against such a compensation program since the rule took effect last year. It was also a surprise for Pandit, who was paid only $1 during the previous year. With two dozen similar votes denying executive pay raises at other companies last year, the rebuke from Citi’s shareholders is a sign that they are taking corporate governance issues far more seriously than they had in the past.
At least 55 percent of Citi’s shareholders voted no on the company’s executive compensation plan for this year. Whether Citi will honor that vote is a matter of debate. The company is not obligated
to carry out the shareholders’ recommendation, but Citi issued a statement saying that its board of directors will take the vote “seriously.”
While say on pay votes have been somewhat successful in pushing companies to lower their executive compensation packages, banks are generally unresponsive despite the lingering fallout over the 2008-2009 fiscal crises. Investment banks, for example, have recently switched to stock
as an incentive rather than year-end cash bonuses. Glass Lewis, a proxy advisory firm, has recommended that shareholders vote against executive pay increases
for several financial companies including Citi.
For shareholders and stakeholders who have long felt corporate executives and boards of directors have not been holding themselves accountable for their firms’ performance, but were quick to increase their salaries and bonuses, a sea change may be underway. Shareholder resolutions are on the upswing
, and more companies are taking notice. Last year saw a record number
of environment related resolutions and expect to see even more this year, too. Whether they want chemicals out of their beverage products
or want increased executive pay only for strong business performance, investors are calling out companies and demanding that they conduct themselves more responsibly.
Leon Kaye, based in California, is a sustainability consultant and the editor of GreenGoPost.com. He also contributes to Guardian Sustainable Business and Inhabitat. You can follow him on Twitter.
Photo courtesy Wikipedia