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

Weekend Edition
February 24, 2017
Friday - Sunday
Pierre M. Sprey - Franklin “Chuck” Spinney
Sleepwalking Into a Nuclear Arms Race with Russia
Ajamu Baraka
Malcolm X and Human Rights in the Time of Trumpism: Transcending the Master’s Tools
Jeffrey St. Clair
Roaming Charges: Exxon’s End Game Theory
John Laforge
Did Obama Pave the Way for More Torture?
Mike Whitney
McMaster Takes Charge: Trump Relinquishes Control of Foreign Policy 
Paul Street
Liberal Hypocrisy, “Late-Shaming,” and Russia-Blaming in the Age of Trump
Patrick Cockburn
The Coming Decline of US and UK Power
Louisa Willcox
The Endangered Species Act: a Critical Safety Net Now Threatened by Congress and Trump
Vijay Prashad
A Foreign Policy of Cruel Populism
John Chuckman
Israel’s Terrible Problem: Two States or One?
Matthew Stevenson
The Parallax View of Donald Trump
Norman Pollack
Drumbeat of Fascism: Find, Arrest, Deport
Stan Cox
Can the Climate Survive Electoral Democracy? Maybe. Can It Survive Capitalism? No.
Ramzy Baroud
The Trump-Netanyahu Circus: Now, No One Can Save Israel from Itself
Edward Hunt
The United States of Permanent War
David Morgan
Trump and the Left: a Case of Mass Hysteria?
Pete Dolack
The Bait and Switch of Public-Private Partnerships
Mike Miller
What Kind of Movement Moment Are We In? 
Elliot Sperber
Why Resistance is Insufficient
Brian Cloughley
What are You Going to Do About Afghanistan, President Trump?
Binoy Kampmark
Warring in the Oncology Ward
Yves Engler
Remembering the Coup in Ghana
Jeremy Brecher
“Climate Kids” v. Trump: Trial of the Century Pits Trump Climate Denialism Against Right to a Climate System Capable of Sustaining Human Life”
Jonathan Taylor
Hate Trump? You Should Have Voted for Ron Paul
Franklin Lamb
Another Small Step for Syrian Refugee Children in Beirut’s “Aleppo Park”
Ron Jacobs
The Realist: Irreverence Was Their Only Sacred Cow
Andre Vltchek
Lock up England in Jail or an Insane Asylum!
Rev. William Alberts
Grandiose Marketing of Spirituality
Paul DeRienzo
Three Years Since the Kitty Litter Disaster at Waste Isolation Pilot Plant
Eric Sommer
Organize Workers Immigrant Defense Committees!
Steve Cooper
A Progressive Agenda
David Swanson
100 Years of Using War to Try to End All War
Andrew Stewart
The 4CHAN Presidency: A Media Critique of the Alt-Right
Edward Leer
Tripping USA: The Chair
Randy Shields
Tom Regan: The Life of the Animal Rights Party
Nyla Ali Khan
One Certain Effect of Instability in Kashmir is the Erosion of Freedom of Expression and Regional Integration
Rob Hager
The Only Fake News That Probably Threw the Election to Trump was not Russian 
Mike Garrity
Why Should We Pay Billionaires to Destroy Our Public Lands? 
Mark Dickman
The Prophet: Deutscher’s Trotsky
Christopher Brauchli
The Politics of the Toilet Police
Ezra Kronfeld
Joe Manchin: a Senate Republicrat to Dispute and Challenge
Clancy Sigal
The Nazis Called It a “Rafle”
Louis Proyect
Socialism Betrayed? Inside the Ukrainian Holodomor
Charles R. Larson
Review: Timothy B. Tyson’s “The Blood of Emmett Till”
David Yearsley
Founding Father of American Song
FacebookTwitterGoogle+RedditEmail