By Andrew Ackerman And Joann S. Lublin
WASHINGTON-- Citigroup Inc. wants to ease its investors' ability
to choose board members at the bank, joining a group of U.S.
companies in opening up corporate elections.
In a reversal from late last year, Citigroup plans to support a
nonbinding "proxy access" resolution allowing certain groups of
shareholders to advance nominees to the company's board.
Shareholders must own at least 3% of Citigroup's shares for at
least three years to nominate a director. The company had
previously planned to push its own, more limited form of proxy
access. Shareholders will vote on the resolution at the firm's
annual meeting in April.
The bank is the second major U.S. company to embrace proxy
access in recent weeks, after General Electric Co. said earlier in
February it would alter its bylaws to adopt a similar measure. Two
other firms, fertilizer manufacturer CF Industries Holdings Inc.
and HCP Inc., a health-care real-estate investment trust, have
disclosed they too would adopt more narrow forms of proxy
access.
Mark Costiglio, a Citigroup spokesman, said the bank "has always
worked to stay at the forefront of good governance, and we value
robust engagement with our shareholders." The bank's commitment to
the proposal suggests it would likely incorporate the nonbinding
measure into its bylaws if it garners majority support.
Citigroup's maneuvering reflects continuing fallout from a
Securities and Exchange Commission decision last month to stop
giving companies a green-light to exclude shareholder resolutions
that conflict with management's own proposals. The SEC move
eliminated the typical corporate "playbook" in which companies seek
permission to ignore shareholder resolutions they find unworkable,
said Avrohom J. Kess, a partner at Simpson Thacher & Bartlett
LLP.
Another factor, management attorneys said, are warnings from
proxy-advisory firms Institutional Shareholder Services and Glass,
Lewis & Co. that they may recommend that shareholders vote
against management's preferred directors if companies omit properly
submitted shareholder proposals from their corporate ballots. A
"no" recommendation from those advisers can make the difference in
close votes over director elections.
James McRitchie, an activist investor who runs
corporate-governance website CorpGov.net, negotiated with Citigroup
over the proposal, which he originally filed in the fall. Mr.
McRitchie said the company's decision is "a clear victory to
Citigroup shareholders."
The proposal comes more than three years after a federal court
shot down an SEC effort to impose so-called proxy access on U.S.
firms, leaving shareholders to push the issue company by company.
Citigroup's proposal mirrors the court-scuttled SEC rule, which
would have allowed an investor or group of investors owning at
least 3% of a company's stock for at least three years to win the
right to nominate.
While proponents say proxy access should improve returns by
forcing boards to be more responsive to shareholders, the issue has
caught on at relatively few firms. In 20144 corporate annual
meetings, only 17 similar measures were voted on, and of those,
just six received a majority of the vote, according to ISS.
Some attorneys said the flurry of companies endorsing proxy
access could have a domino effect. By the end of this year's proxy
season, 40 companies "will have adopted a form of proxy access or
supported a proxy-access proposal vote," predicted Mr. Kess, who
advises some corporate clients on proxy access.
The resolution Citigroup supports is slightly amended from one
originally filed by Mr. McRitchie. It would allow groups of as many
as 20 investors to nominate up to 20% of the bank's board. Mr.
McRitchie initially sought no limits on the number of investors and
the ability to nominate a quarter of the bank's board.
New York City Comptroller Scott Stringer, who last fall began an
initiative to ease the ability of shareholders to nominate
directors at 75 companies, said companies like GE and Citigroup
"recognize that meaningful proxy access is rapidly becoming
inevitable."
Meanwhile, Monsanto Co. directors are weighing whether to
approve proxy access after shareholders approved a nonbinding
proposal late last month requesting its adoption. The
agriculture-products company has said its board would consider the
shareholder vote and seek additional input from investors.
The SEC decision to stop providing guidance to companies was
sparked by another proxy-access resolution Mr. McRitchie submitted,
to Whole Foods Market Inc. The SEC initially said the high-end
grocer could ignore that proposal but effectively reversed itself a
month later after investors complained Whole Food's counterproposal
set the bar unduly high for investors, requiring them to own 9% of
the company before they could gain proxy access.
In light of the pushback, SEC Chairman Mary Jo White directed
staff to review an agency rule that has allowed firms to exclude
shareholder proposals if management plans to offer similar changes
to its governing documents.
Write to Andrew Ackerman at andrew.ackerman@wsj.com
Access Investor Kit for CF Industries Holdings, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1252691001
Access Investor Kit for Citigroup, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1729674242
Access Investor Kit for General Electric Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US3696041033
Access Investor Kit for HCP, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US40414L1098
Access Investor Kit for Whole Foods Market, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US9668371068
Subscribe to WSJ: http://online.wsj.com?mod=djnwires