Executive Compensation: Is the Glass Half Full or Half Empty?
As reported in the current issue of The Pomerantz Monitor, shareholders of Citigroup made news in April when 55% of them voted against the pay package awarded to CEO Vikram Pandit. Citi’s shares have plummeted by over 80% the past few years, and yet Pandit was set to receive not only a $12 million salary but a bonus package worth just as much. As a Wall Street Journal columnist pointed out, shareholder outrage was probably piqued by the fact that the financial targets that must be met to trigger incentive awards are preposterously low: Pandit and four other senior executives would be entitled to incentive compensation totaling $18 million even if Citigroup loses $7 billion this year.
The negative shareholder vote was the first time that investors had rejected a compensation plan at a major U.S. bank. The WSJ calls the vote “more than a stinging rebuke for its board and management. It is a shot across Wall Street’s bow.”
A subsequent WSJ article stated that “Vikram Pandit is looking awful lonesome,” because influential shareholder advisory firms Institutional Shareholder Services and Glass Lewis recommended votes in favor of executive-compensation plans at Bank of America, Morgan Stanley and Wells Fargo; and ISS subsequently gave its stamp of approval to Jamie Dimon’s $23 million 2011 compensation package at J.P. Morgan Chase. As the WSJ opined, “That leaves Lloyd Blankfein as Mr. Pandit’s last hope for some company in his misery.”