Election fraud attempt by Citigroup points to the need for more participation in decision-making by employees to ensure ethical conduct. Citigroup tries to cheat by telling us we need to meet SEC rules today for the 2021 AGM that don’t become effective until 2022. With a market cap of more than $82B, don’t tell me their Assistant Secretary and Associate General Counsel made a mistake. Her behavior fits a pattern of wrongdoing by Citigroup.
When the CEO earns 482 times what the typical employee at the company earns, can they make the rules? Citibank recently agreed to pay a $400 million fine to settle enforcement actions by the Federal Reserve Board and Office of the Comptroller of the Currency (OCC). Unfortunately, the SEC is not likely to go after Citigroup for jumping the gun on regulations that will not take effect until 2022. That is all the more reason why we need to enact our proposal. Who do shareholders and other stakeholders trust; the CEO and Board members from the same 1% or a director drawn from typical employees? They need a voice at the table.
Election Fraud Attempt by Citigroup: The Proposal We Filed
Increase Diversity of Director Nominees
Resolved: Shareholders of Citigroup Inc. (‘Citigroup’ or ‘Company’) urge the board to adopt a policy (‘Policy’) of promoting significant representation of employee perspectives among corporate decision-makers by requiring the initial list of candidates from which new director nominees are chosen (‘Initial List’) by the Nominations and Governance Committee include (but need not be limited to) non-management employees. The Policy should provide that any third-party consultant asked to furnish an Initial List will be requested to include such candidates.
Whereas: There is growing consensus that employees on corporate boards can contribute to long-term corporate sustainability. Policymakers note, having companies run exclusively to benefit shareholders contributes to “stagnant wages, runaway executive compensation and underinvestment in research and innovation.” The Business Roundtable asks corporations to align with stakeholder interests, including employees.
Employee representation grows long-term value of companies in several ways. According to the National Bureau of Economic Research, giving workers formal control rights increases female board representation and raises capital formation. Employees are also often more diverse than boards in terms of race, gender, and wealth. The German “co-determination” model of shared governance provides a check against short-term capital allocation practices.
The 2018 UK Corporate Governance Code encourages boards to establish a method for gathering workforce views. Options include a director appointed from the workforce, a formal workforce advisory panel or designating a director to liaise with workers.
Senators Baldwin and Warren introduced legislation codifying employee representation on corporate boards, noting that modern corporate governance needs to be accountable wider interests, notably employees. Polling demonstrates bipartisan public support (over 53%) for employee representation.
Anticipated benefits include reduced turnover as employees are more empowered to influence firm-specific investments, better informed decision-making because employees have specialized knowledge, better monitoring of management with increased information channels, and reduced myopia since employees often take a longer-term view.
While our Board satisfies independence requirements and strives for a culture of participation, it lacks formal representation from non-management employees, who bring a different understanding of operations than typical directors. Additionally, Citigroup’s CEO to median employee pay ratio is 482:1 and our Company has no employee stock ownership plan (ESOP) to help grow employee wealth and engagement.
The Policy we propose resembles the Rooney Rule, which requires teams to interview minority candidates for head coaching and senior operations openings. By adopting the Rooney Rule, National Football League teams increased diversity and set a precedent for other industries. Policies similar to the Rooney Rule have been adopted by Amazon, Costco, Home Depot, Activision Blizzard, Dover, Expedia, Fastenal, Hilton Worldwide Holdings, L Bands, Robert Half International, Ross Stores and others.
Also consider the Office of the Comptroller of the Currency levied a $400 million penalty on our Company on October 7, 2020.
Increase Long-Term Shareholder Value
Vote to Increase Diversity of Director Nominees
Election Fraud Attempt by Citigroup
In response to our submission, Citigroup’s Assistant Secretary and Associate General Counsel wrote to tell us our submission was deficient:
Rule 14a-8(b) requires that in order to be eligible to submit a proposal, as stockholder must submit proof of continuous ownership of at least $2,000 of the company’s securities for at least three years, $15,000 of the company’s securities for at least two years; or $25,000 of the company’s securities for at least one year.
The election fraud attempt by Citigroup was a vain attempt to convince shareholders they had already lost their rights before they had been taken away. The SEC’s amendments to “modernize” shareholder proposal rules take effect 60 days after publication in the Federal Register. That has not happened yet, so the rule Citigroup quoted is not the rule that applies. Additionally, the final amendments will apply to any proposal submitted for an annual or special meeting to be held on or after January 1, 2022.
Election Fraud Attempt by Citigroup: Takeaway
Shareholders should be on the lookout for companies trying to jump the gun. Know your rights. Don’t be intimidated by companies or their attorneys misstating the facts.