Analysis: Citi's pay rejection a wake-up call to boards
By Dena Aubin and Ross Kerber
NEW YORK (Reuters) - Institutional investors are increasingly pressing boards to rein in outsized executive pay, and after Citigroup (C.N: Quote) shareholders rejected a compensation plan on Tuesday, more directors may start listening.
Shareholders on Tuesday handed Citigroup an embarrassing no confidence vote on a $15 million pay package for its Chief Executive Vikram Pandit. About 55 percent of shareholders rejected a plan to bring Pandit's pay back close to levels before the global financial crisis.
The no vote signals dissatisfaction with lucrative pay at companies that have not lived up to industry standards, governance experts said.
"As we struggle to come out of the recession, CEO packages have continued to increase at a rate that is much greater than the rate of economic performance of these companies," said James Post, a management professor at Harvard University.
That has become a flashpoint in a country that was already outraged over pay inequality, and many boards are paying attention, investors said.
"The culture of this country has shifted on this issue," said Eric Veiel, portfolio manager for T. Rowe Price's financial services fund.
Boards are following the public's lead and trends like last fall's "Occupy Wall Street" movement against wealth disparity, he said.
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