Charles Prince and Robert Rubin have had no hand in Citigroup Inc. of late, but their names and their past compensation were still very much on shareholders' minds at the company's annual meeting Tuesday.
More than a few irate stockholders, once they managed to wrestle the microphone away from legendary corporate gadfly Evelyn Y. Davis, used their time on the floor to excoriate the board for allowing the two men to walk away in the midst of crisis with multimillion-dollar pay packages.
"They said they were sorry, with their crocodile tears, but I noticed they didn't offer to repay" the company, one shareholder said. Others summarized the coverage of Prince and Rubin's recent appearances before the Financial Crisis Inquiry Commission, noting that neither man claimed knowledge of some of the riskier practices that led to the meltdown.
Saying that no board member should claim the excuse of being in the dark, shareholder Russell Forenza — a regular at Citi's annual meetings — blasted directors and even asked them to raise their hands to prove to the audience that they were not sleeping through the meeting.
Citigroup Chairman Richard Parsons defended the board, which has been largely reconstituted since the fall of 2008. He apologized that most of the directors left last year's six-and-a-half-hour marathon meeting about halfway through to attend a regularly scheduled board meeting and promised to run a tighter ship this time. He delivered on that promise — this year's meeting in the New York Hilton was far less crowded and contentious than last year's — by starting to wind it down about four hours after its 9 a.m. start time. But Parsons won little approval from shareholders while giving the rationale for Prince and Rubin's pay packages.
The executives, "on the one hand, earned those monies in the view of the company, at the time," Parsons said, to boos from around the ballroom.
He calmed the room by promising that claw-back clauses, missing from Prince and Rubin's employment agreements and therefore in the board's view a power unavailable to it, are included now in executive contracts. But he riled the crowd back up when he suggested to shareholders that "they, like you, have suffered" because of the loss of dividends and market value for the substantial portion of their pay that was in stock.
Another hot-button issue for shareholders: the potential for a reverse stock split. Citi asked shareholders to vote on a management proposal to extend for one year an authorization for a reverse stock split that would give the company the option to combine outstanding shares by ratios ranging from 1-for-2 to 1-for-30.
A shareholder who identified himself as a former stock broker at Smith Barney Shearson — a predecessor of the Smith Barney joint venture that Citi created last year with Morgan Stanley & Co. — said a reverse split would be "a coup de grace" for stockholders already stung by a plunge in share price and the stripping away of the dividend.
Parsons said a reverse split is not an idea on the front burner; the extension request would simply give the board flexibility, he said. He allowed that Citi would prefer to bring its number of shares outstanding — more than 28 billion — more into line with peers such as Bank of America Corp., with 10 billion shares outstanding, or JPMorgan Chase & Co., which has fewer than 4 billion.
The split authorization passed by a wide majority. The "yes" votes included those of the U.S. government, which owns 27% of Citi's common stock.