Citigroup investors rejected the bank’s executive pay plan, a first among the six largest U.S. lenders, amid criticism the pay plan lets CEO Vikram Pandit collect millions of dollars in rewards too easily.
About 45% of the votes favored the plan, which Citigroup had argued would help attract and retain top talent, according to a preliminary tally at the company’s annual meeting Tuesday in Dallas. While the vote isn’t binding, outgoing Chairman Richard Parsons said changes will be made.
“That’s a serious matter,” Mr. Parsons said. The board will seek a more quantitative, formula-based method for setting top executives’ pay, he said. “We’re going to have some more conversation with our shareholders, make sure we understand their concerns and then fix it.”
The Citigroup vote followed last month’s rejection by U.S. regulators of Mr. Pandit’s capital plan that included rewards for shareholders — possibly including a higher dividend — and the company’s disclosure that Mr. Pandit received compensation and retention packages that could be worth about $55 million.
The board awarded Mr. Pandit about $15 million in total compensation for 2011, a year in which the bank’s shares slumped 44%. That included a $5 million bonus and a separate, multiyear retention package that may pay about $40 million.
Proxy advisory firms ISS and Glass Lewis faulted Mr. Pandit’s payouts and recommended that investors reject the bank’s executive compensation plan for 2011.
Mr. Pandit’s “2011 incentive pay and multiple retention awards are substantially discretionary in nature or lack rigorous goals to incentivize improvement in shareholder value,” analysts for ISS, a unit of MSCI, wrote in their report.
“Creating shareholder value and also making sure that’s reflected in our book value is our No. 1 goal,” Mr. Pandit said Tuesday. Returning some of that value is a priority, he said, whether it’s a dividend or a share buyback.