My feeling about shareholder proxy statements had long been: why bother? The small print, massive word count and abstruse language seemed meant to sow confusion and the deck was completely stacked. Just vote against management, lose in a landslide and get on with life. Irresponsible advice, cynical perhaps, and, it turns out, wrong. For yesterday the shareholders of Citigroup voted down the $15-million pay package for the bank’s chief executive officer in perhaps the first time stockholders have so defied the management of a giant corporation.
It’s about time. Citigroup has delivered little but heartache for its shareholders. Five years ago, in the heyday of Ponzi schemes and self-dealing collateralized debt obligations, the company’s shares were worth over $500 apiece and paid a dividend of $5.40. Today, after being pulled from the edge of bankruptcy by a huge federal bailout, the stock sells for $35; its quarterly dividend is one cent. According to one analyst, “Citigroup has had the worst stock price performance among large banks over the last decade but ranked among the highest in terms of compensation for top executives.”
I have no illusion that small shareholders swayed the nonbinding vote. Big institutions such as Calpers, the California pension fund, voted its 9.7 million shares against the proposal, and ISS Proxy Advisory Services recommended a no vote. Still, the outrage at corporate malfeasance and offensive pay packages clearly is having an impact.
When the modern corporation emerged a little over a century ago, many hailed it as the democratization of capitalism in a world of monopolies. It hasn’t worked out that way recently, but this is a good step.