FacebookTwitterGoogle+RedditEmail

Citigroup Shareholder Revolt on CEO Pay

by EILEEN APPELBAUM

In a wake-up call to corporate boards across the United States, Citigroup’s shareholders recently took advantage of the new “say-on-pay” provisions of the Dodd-Frank law to vote down CEO Vikram Pandit’s $15 million pay package. Shareholders have been surprisingly quiet as corporate executives, investment bankers, and investment fund managers have captured a huge and rapidly growing slice of corporate profits. The massive increase in inequality in the United States over the past three decades as the nation’s gains in productivity have gone to further enrich the top 1 percent has been well-documented. Less well known is that the lion’s share of those income gains have gone to the 0.1 percent at the tippy top. The shareholders at Citigroup have said, “Enough!”

Many of the practices of American corporations—from moving production offshore to cutting employment, holding down wages, and reducing benefits—have been carried out in the name of maximizing shareholder value. Yet the institutional investors who control most of the shares in public companies have stood quietly by as shareholder returns have been reduced by the outsized pay packages of corporate executives. Given the opportunity to vote on CEO pay, Citigroup’s shareholders have made clear that they find it exorbitant.

It’s fitting that this effort to rein in executive excess should occur at Citigroup. The company was formed in 1998 through the merger of Travelers Group (with its investment banking division) and Citibank (a commercial bank), in defiance of Glass-Steagall’s prohibition against merging investment and commercial banks while the law was still in effect. The newly formed Citigroup got a temporary waiver from the Federal Reserve under Alan Greenspan while it waited for its lobbyists to persuade Congress and the president to pass the measure that reversed Glass-Steagall in 1999 and made the merger legal. Glass-Steagall is the Depression-era law that prevented investment bankers from gambling on high risk investments with deposits insured by the federal government. The law served successfully for half a century to ensure that problems that arose from trading stocks, bonds, and later, derivatives didn’t spill over into the rest of the financial system. Deregulation set the stage for the no-holds barred version of capitalism that let the top 1/10th of 1 percent capture so much of the nation’s income growth and led to the financial crisis from which the country is still only slowly emerging.

It is too soon to tell whether the shareholder revolt at Citigroup over executive compensation will be repeated at other major companies. But the new “say-on-pay” provision of Dodd-Frank, in force since Jan. 21, 2011, certainly makes this more likely. Tuesday’s shareholder vote is not binding on Citigroup’s board of directors, but it is likely that they—and boards at other corporations—are hearing the message.

As for Dodd-Frank, lobbyists for corporate executives, bankers, and investment fund managers are working hard to get around the law’s clear intent to place mild restrictions on the activities of banks and CEOs as federal regulators write the rules that interpret its provisions. If this end-run around the law is to be stopped, the 0.99 percent will have to join the 99 percent in standing up for a more equitable division of the economic pie.

Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research.

This article originally appeared on Economic Intelligence.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

January 19, 2017
Melvin Goodman
America’s Russian Problem
John W. Whitehead
Nothing is Real: When Reality TV Programming Masquerades as Politics
Mike Whitney
The Trump Speech That No One Heard 
Conn Hallinan
Is Europe Heading for a “Lexit”?
Stephen Cooper
Truth or Twitter? Why Donald Trump Is No John Steinbeck
Binoy Kampmark
Scoundrels of Patriotism: The Freeing of Chelsea Manning
Ramzy Baroud
The Balancing Act is Over: What Elor Azaria Taught Us about Israel
Josh Hoxie
Why Health Care Repeal is a Stealth Tax Break for Millionaires
Kim C. Domenico
It’s High Time for a Politics of Desire
Shamus Cooke
Inauguration Day and Beyond
Clark T. Scott
More and More Lousy
David Swanson
Samantha Power Can See Russia from Her Padded Cell
Yoav Litvin
Time to Diss Obey- The Failure of Identity Politics and Protest
Kevin Carson
Right to Work and the Apartheid State
Malaika H. Kambon
Resisting the Lynching of Haitian Liberty!
January 18, 2017
Gary Leupp
The Extraordinary Array of Those Questioning Trump’s Legitimacy (and Their Various Reasons)
Charles Pierson
Drone Proliferation Ramps Up
Ajamu Baraka
Celebrating Dr. King with the Departure of Barack Obama
David Underhill
Trumpology With a Twist
Chris Floyd
Infinite Jest: Liberals Laughing All the Way to Hell
Stansfield Smith
Obama’s Hidden Role in Worsening Climate Change
Ron Leighton
Trump is Not Hitler: How the Misuse of History Distorts the Present as Well as the Past
Ralph Nader
An Open Letter to President-Elect Donald Trump
Binoy Kampmark
NATO and Obsolescence: Donald Trump and the History of an Alliance
Zarefah Baroud
‘The Power to Create a New World’: Trump and the Environmental Challenge Ahead
Julian Vigo
Obama Must Pardon the Black Panthers in Prison or in Exile
Alfredo Lopez
The Whattsapp Scandal
Clancy Sigal
Russian Hacking and the Smell Test
Terry Simons
The Truth About Ethics and Condoms
January 17, 2017
John Pilger
The Issue is Not Trump, It is Us
John K. White
Is Equality Overrated, Too?
Michael J. Sainato
The DNC Hands the Democratic Party Over to David Brock and Billionaire Donors
John Davis
Landscapes of Shame: America’s National Parks
Andrew Smolski
Third Coast Pillory: Politicians and Rhetorical Tricks
Chris Busby
The Scientific Hero of Chernobyl: Alexey V. Yablokov, the Man Who Dared to Speak the Truth
David Macaray
Four Reasons Trump Will Quit
Chet Richards
The Vicissitudes of the Rural South
Clancy Sigal
“You Don’t Care About Jobs”: Why the Democrats Lost
Robert Dodge
Martin Luther King and U.S. Politics: Time for a U.S. Truth and Reconciliation Commission
Jack Sadat Lee
I Dream of Justice for All the Animal Kingdom
James McEnteer
Mourning Again in America
January 16, 2017
Paul Street
How Pure is Your Hate?
Jeffrey St. Clair - Alexander Cockburn
Did the Elites Have Martin Luther King Jr. Killed?
Robert Hunziker
Global Warming Clobbers Ocean Life
Patrick Cockburn
The Terrifying Parallels Between Trump and Erdogan
FacebookTwitterGoogle+RedditEmail