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DALLAS (Reuters) - Citigroup Inc (C.N) shareholders gave a vote of no confidence to the bank's executive compensation plan on Tuesday, dealing a surprise embarrassment to Chief Executive Vikram Pandit.
Only 45 percent of shareholders endorsed the pay plan in an advisory vote required under the Dodd-Frank law, Michael Helfer, general counsel and corporate secretary, said at Citi's annual meeting, citing preliminary vote totals.
Citigroup's failed "say on pay" measure is the latest signal that shareholders are turning up the pressure on top executives who have failed to deliver improved performance. Goldman Sachs Group Inc (GS.N) struck a compromise with shareholder activists last month to avoid a similar showdown over board leadership at its annual meeting.
On Monday, Citigroup posted a 2 percent decline in net income for the first quarter from a year earlier, reflecting the bank's difficulties as it works to boost profits in a sluggish global economy. Still, Citigroup shares, up over 33 percent so far this year, were up 3.5 percent at $35.18 in afternoon trading on the New York Stock Exchange.
Richard Parsons, chairman of the board, called the outcome "a serious matter" and said directors would meet shareholder representatives to discuss their objections.
The Citigroup vote tally surprised some analysts who follow corporate governance issues.
"I would think that, given the amount of public and regulatory attention that Citigroup has had for the last four years, that they would not be in a position to go to a meeting and have a negative investor vote," said Beth Young, senior research associate for GMI Ratings in New York.
ISS, a research firm that advises institutional investors on corporate proxy issues, recommended siding against the board and voting no on the 2011 pay plan. Glass Lewis & Co, another governance advisory firm, recommended voting against the compensation plan.
(This story corrected to show that ISS recommended voting against the pay plan)
Reporting by David Henry in New York and Ross Kerber in Boston; editing by David Gregorio, Aaron Pressman and Andre Grenon