By Christina Rexrode
ST. LOUIS-- Citigroup Inc. shareholders Tuesday voted to approve
the pay packages for the bank's top executives, giving the
company's management a shot of confidence in a year in which it has
struggled to stay in the good graces of regulators and
investors.
At the annual shareholder meeting here, investors voted by an
85% margin to approve the compensation packages of Chief Executive
Officer Michael Corbat and other top executives, according to
preliminary company calculations of the nonbinding advisory vote.
The pay packages approved were for all top executives, including
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 approved Citigroup's directors and the
appointment of its auditor, KPMG. The votes capped a two-hour
meeting in which shareholders generally gave Citigroup's management
signs of support during a difficult period.
In February Citigroup revealed what it described as a fraud
against the 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.
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.
Two proxy-advisory firms, Glass Lewis & Co. and Egan-Jones,
had advised shareholders to vote against the company's executive
pay. The proposal is nonbinding, meaning the bank would not have
been required to make any changes even if it passed. But the
so-called say-on-pay proposals, which big companies have been
required to put on the shareholder ballot in the wake of the
financial crisis, serve as a key gauge of the amount of faith that
investors are willing to place in a company.
Mr. Corbat's predecessor, Vikram Pandit, got his pay package
rejected by shareholders in 2012 and was ousted before the year was
over. But the bank also took pains to respond to shareholders'
concerns, revamping its pay practices to more closely tie the
executives' pay to the bank's performance. In 2012, just 45% of
shareholders approved of the CEO's pay. In 2013, 91% did.
Mr. Corbat kicked off the meeting addressing the Federal
Reserve's rejection of the company's request to raise its dividend
and expand its share buyback plan.
Mr. Corbat said making sure the bank passes next year's Federal
Reserve stress test would be his "highest priority" for the rest of
2014. For the March test, the bank had proposed what it believed
was a "moderate and appropriate level of capital to return" to
shareholders, he added.
The statements came in front of about 150-200 people at the
firm's annual meeting. Citigroup shareholders at the meeting and
not in attendance also voted on an array of topics including the
election of directors.
The company gave updates on a plan to move more of its offices
from Midtown Manhattan to offices in lower Manhattan. The company's
chairman, Michael O'Neill, also committed to webcasting the firm's
next annual meeting.
The shareholder session for the third-largest U.S. bank by
assets comes amid a choppy year for the firm's top executives. On
April 14, the bank reported better than expected first quarter
earnings, giving Mr. Corbat a much needed win.
At the meeting Tuesday, Mr. Corbat repeated statements he made
during the bank's first-quarter earnings report: He doesn't believe
that the Fed has problems with the bank's underlying business
model, strategy or capital levels. But just what the Fed's problems
might be, he didn't make clear. Mr. Corbat said the bank is
"consulting close with the Fed" to identify "exactly where they
believe our procedures fell short."
CLSA analyst Michael Mayo pressed for more details on the Fed's
rejection. Mr. O'Neill, Citigroup's chairman, replied that the
conversations with regulators were subject to confidentiality.
"You're never going to find out chapter and verse what we
learned from the Fed," said Mr. O'Neill.
Mr. O'Neill also cautioned against conflating the Fed's
stress-test rejection into a broader statement about the bank, or a
sign that regulators want the bank to shake up its business
model.
"I'm not sure there's a huge amount of overlap" between the
stress-test rejection and the bank's overall business model, Mr.
O'Neill said.
When Mr. Mayo asked if the bank had an adequate sense of urgency
for grappling with its problems, Mr. Corbat replied, "We have a
very intense sense of urgency."
Mr. Corbat also discussed the alleged fraud affecting the
company's Mexico unit, Banamex.
Mr. Corbat told shareholders that Citigroup had fired one
employee involved in what the bank has described as a billing fraud
against its Mexico subsidiary.
The bank CEO also said he expected that "others will be
disciplined." But he gave few specifics about the bank's reaction
to the scandal, except to say that Citigroup is continuing to
investigate "what took place in Mexico" and is investing in control
processes and training.
Mr. Corbat called the fraud "a damaging example of how ethical
failures can jeopardize everything we work for."
"It takes just one person to jeopardize our credibility," said
Mr. Corbat.
Citigroup shares rose 1.4% in afternoon trading and have fallen
6.6% so far this year, compared with small gains for the S&P
500 index of large companies and the KBW Bank Index.
Write to Christina Rexrode at christina.rexrode@wsj.com
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