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Nay on Pay: A majority of voting Citigroup shareholders cast their ballots against the board-approved 2011 compensation package for CEO Vikram Pandit at yesterday’s shareholder meeting. We’re hesitant to use the verb “reject,” since strictly speaking, this was an advisory vote only, not a veto or clawback. Still, it’s a big deal at least symbolically, as Citi is the largest company yet to suffer the embarrassment of losing a say-on-pay vote, and departing chairman Richard Parsons indicated the board will take the outcome seriously. Last year Citi shareholders overwhelmingly approved Pandit’s 2010 pay, but that was probably an easy sell since for a second year he only got $1, per his pledge to collect only a nominal amount until after the company returned to profitability. (Was that dollar divvied up over 52 paychecks, we wonder?) This time, with Citi firmly in the black and the threat of nationalization a fading memory, the board awarded him a proper salary and bonus totaling $14.9 million for 2011. Big investors like Calpers complained that the package wasn’t tied well enough to performance or risk management. Wall Street Journal, Financial Times, New York Times, Daily Telegraph (U.K.)
The “No” Heard Round the World …: …or at least across the country. Under Dodd-Frank, “say on pay” votes are now mandatory for public companies in the United States, so the revolt at Citi is likely blowing “chill winds” into executive suites, according to an analytical story in the FT. “If this can happen at Citi, it can happen anywhere,” an anonymous Citi shareholder who voted for Pandit’s pay package tells the newspaper. “Investor relations [departments] at every U.S. company are going to have to rethink how they approach the issue.” The “BreakingViews” column in the Times approves: “Citi’s say-on-pay defeat puts bank bosses and their boards on notice. … It’s a good sign that ballots are starting to be used to send a strong message.” Interestingly, a Calpers official quoted in the FT story holds up Wells Fargo as an example of better executive pay practices, since its long-term performance targets “include a measure of the quality of capital.” Financial Times, New York Times
B of A’s Garage Sale: Citing anonymous sources, the Times and the Journal both report that Bank of America is considering a sale of its overseas wealth management business. Also, B of A has reached a deal to sell one of its Manhattan office buildings to an investor group, according to a Journal story we missed yesterday. (Not that shiny skyscraper in Midtown, completed in 2009, which B of A leases and partly owns through a joint venture.) The bank would get about $230 million from the sale and leaseback of a comparatively unprepossessing “1960s boxy tower” in lower Manhattan. It’s unclear how much the non-U.S. wealth business would fetch, but every little bit probably helps when you need to build capital.
Wall Street Journal
“Left hand, meet right hand: Washington edition.” The State Department is pressing some banks to resume doing business with foreign embassies and missions. But the reason the institutions stopped banking those clients is because post-9/11 anti-money laundering regulations have made serving embassies “almost impossible,” according to the ABA. A Nepalese diplomat tells the Journal that the United States is “the worst country” to bank in. As we’ve seen in other contexts recently, it’s awkward for banks to be conscripted as agents of foreign policy — not least of all when, as in this case, that policy has sometimes-conflicting objectives (diplomacy vs. “the war on terror”).