How I Voted: Citigroup (C) – Proxy Score 41%

Citigroup ($C) is one of the stocks in my portfolio. Their annual meeting is coming up on 4/24/2013. had collected the votes of three funds when I checked on 4/21/2013.  I voted with management 41% of the time.  View Proxy Statement. Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world.

Citigroup’s Summary Compensation Table (p. 68) shows CEO Michael Corbat was the highest paid named executive officer (NEO) at about $12.4M in 2012. I’m using Yahoo! Finance to determine market cap ($137B) and Wikipedia’s rule of thumb regarding classification. Citigroup is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at large-cap corporations was $10.8 million in 2010.

Even factoring inflation, Citigroup ’s pay is above median. I voted against the compensation plan, the stock plan, and all members of the compensation committee: Michael E. O’Neill (Chair), Joan E. Spero, Diana L. Taylor, William S. Thompson, Jr., and Ernesto Zedillo Ponce de Leon

I voted in favor of Ken Steiner’s proposal that executives be required to hold significant stock awards until retirement age to align incentives with the long-term. I had a similar proposal at Apple this year. I also voted in favor of CtW’s proposal to disclose specified political expenditures. We should have this at every company. I also voted in favor of John Harrington’s proposal for a study on possibly amending director indemnification to exclude illegal or criminal behaviors. I know this may seem to be radical, but I support the idea that indemnification has gone too far. Given regulatory actions and scandals at Citigroup, this is worth at least study.  How I voted (CorpGov) below:

1aElect Director Michael L. CorbatForForForFor
1bElect Director Franz B. HumerForForForAgainst
1cElect Director Robert L. JossForForForFor
1dElect Director Michael E. O’NeillAgainstForForFor
1eElect Director Judith RodinForForForAgainst
1fElect Director Robert L. RyanForForForFor
1gElect Director Anthony M. SantomeroForForForFor
1hElect Director Joan E. SperoAgainstForForAgainst
1iElect Director Diana L. TaylorAgainstForForAgainst
1jElect Director William S. Thompson, Jr.AgainstForForFor
1kElect Director Ernesto Zedillo Ponce de LeonAgainstForForAgainst
2Ratify AuditorsForForAgainstFor
3Advisory Vote to Ratify Named Executive Officers’ CompensationAgainstForForAgainst
4Amend Omnibus Stock PlanAgainstForForAgainst
5Stock Retention/Holding PeriodForForForFor
6Report on Lobbying Payments and PolicyForForForFor
7Amend Indemnifications ProvisionsForAgainstAgainstAgainst

Mark your calendar: Requirements for Shareholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials.

Under SEC Rule 14a-8, a stockholder who intends to present a proposal at the next Annual Meeting of stockholders and who wishes the proposal to be included in the proxy Statement for that meeting must submit the proposal in writing to the Corporate Secretary of Citi at the address on the cover of this proxy Statement. The proposal must be received no later than November 14, 2013. The proposal and its proponent must satisfy all applicable requirements of Rule 14a-8.

 Looking at, I see it takes 25% of shares to hold a special meeting. I’d rather see that at 10%.

Looking at other sources, given Citigroup’s poor corporate governance profile, litigation, fines and settlements for misleading investors, abusive practices, and current investigations, and relatively poor performance it looks like a good candidate for proxy access.

Citigroup, Inc.’s ISS Governance QuickScore as of Apr 1, 2013 is 9. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 3; Compensation: 9. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosure. ISS, so far, has provided no detail on the relative distribution of the scores. Again, I see the board’s poor rating as further support for a proxy access proposal. Additionally, in 2012 more than 17% of shares were voted against two directors.

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