By Christina Rexrode
ST. LOUIS-- Citigroup Inc. shareholders voted to approve the pay
packages of the bank's top executives, giving a shot of confidence
to Chief Executive Michael Corbat in a year in which his firm has
suffered setbacks.
At the annual shareholder meeting here, investors voted by an
85% margin to approve the compensation packages of Mr. Corbat and
other top executives, according to preliminary company calculations
of the nonbinding advisory vote. The pay packages approved included
those of co-president Manuel Medina-Mora, risk and strategy head
Brian Leach, and Chief Financial Officer John Gerspach.
Citigroup calculated Mr. Corbat's 2013 pay at $14.5 million.
Shareholders also re-elected all of Citigroup's directors and
approved the appointment of its longtime auditor, KPMG. The votes
capped a two-hour meeting in which shareholders generally gave
Citigroup's management signs of support following a difficult
period.
The bank is grappling with two major issues. In February, the
bank revealed what it described as a fraud against its Mexico unit,
where Mr. Medina-Mora also serves as chairman. Mexican authorities
and the New York office of the Federal Bureau of Investigation have
been investigating the matter.
Then in March, the Federal Reserve rejected Citigroup's request
to expand its dividend and share buyback program during the
stress-test process, which until recently had been overseen by Mr.
Leach and Mr. Gerspach.
While many of the questions Tuesday focused on the stress-test
rejection and the alleged fraud against the Mexico unit, known as
Banamex, the meeting was largely cordial. Held in a hotel ballroom
with seats for about 600, the meeting was less than half full.
Almost all of the questions came from a handful of the
attendees, including CLSA analyst Michael Mayo and Jesse Jackson,
who asked about low-income lending.
The votes give the bank, the country's third-largest by assets,
a much-needed win. Two proxy-advisory firms, Glass Lewis & Co.
and Egan-Jones, had advised shareholders to vote against the
executive pay packages.
The so-called "say-on-pay" proposal is nonbinding, meaning the
bank wouldn't have been required to make any changes even if it
passed. But such a vote can serve as a key gauge of investor faith
in a company's management. The bank and other companies have been
required to put such a measure on the ballot in the wake of the
financial crisis.
In 2012, with Vikram Pandit at the helm as CEO, the bank got its
capital plan rejected by the Fed. That same year, shareholders
voted against Mr. Pandit's $15 million pay package. By the end of
the year, he had been pushed out of the firm.
Citigroup took pains to respond to shareholders' concerns after
the 2012 vote, revamping its pay practices to more closely tie the
executives' pay to the bank's performance. In 2013, 91% of
shareholders approved the company's pay packages, up from 45% in
2012.
Mr. Corbat kicked off Tuesday's meeting by vowing that passing
next year's stress test would be his "highest priority" for the
rest of 2014. He said the bank's rejected request, where it asked
to expand the quarterly dividend to five cents a quarter from one
cent and the annual buyback program to $6.4 billion from $1.2
billion, had been "moderate and appropriate."
The company gave updates on a plan to move more of its offices
from midtown Manhattan to lower Manhattan. The company's chairman,
Michael O'Neill, also committed to webcasting the firm's next
annual meeting.
The bank's recent problems have raised deeper concerns about
reining in risk in a company as sprawling as Citigroup. But Mr.
Corbat and Mr. O'Neill cautioned against conflating the stress-test
rejection as a sign that regulators have a problem with the bank's
underlying business model.
Mr. O'Neill said he didn't think there was "a huge amount of
overlap" between the stress-test rejection and the bank's overall
strategy.
But the executives also gave a nod to the difficulty of
overseeing a large global bank like Citigroup. When Mr. Mayo, the
analyst, asked if Citigroup was too big to manage, Mr. O'Neill
replied that "it's certainly harder" to manage a bigger company.
But, he added, Mr. Corbat's job "is to demonstrate that it can
be."
"I can't simply sit in New York and declare a single strategy
for the company," Mr. Corbat added. "We need to make sure that it's
adhered to and that it's thought of in all the places" where the
bank does business.
Still, when Mr. Mayo pressed for more details on the Fed's
rejection, Mr. O'Neill replied that the conversations with
regulators were subject to confidentiality.
As for the Banamex issue, Mr. Corbat told shareholders that
Citigroup had fired one employee involved in what the bank has
described as a billing fraud. He also said he expected that "others
will be disciplined." Citigroup is continuing to investigate.
Citigroup shares rose 0.8% in afternoon trading and have fallen
7.6% so far this year, compared with small gains for the S&P
500 index and the KBW Bank Index.
Write to Christina Rexrode at christina.rexrode@wsj.com
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