* Only 45 pct of shareholders for compensation plan
* CEO Pandit's pay jumped to $14.8 mln from token $1 in 2010
* Chairman Parsons calls outcome "serious matter"
* "Say on Pay" referendum required by SEC Dodd-Frank rule
(Adds data on past votes, analyst comment)
By David Henry and Ross Kerber
DALLAS, April 17 Citigroup Inc
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 may have upset shareholders by increasing Pandit's
pay to $14.8 million last year, similar to executive pay levels
before the credit crisis struck, despite the challenges that the
bank still faces. Last month, Citigroup was one of only a
handful of large financial institutions that failed to win
approval from regulators for a dividend increase or share
Pandit received only a symbolic $1 in 2010 and just $128,741
Citigroup's failed "say on pay" measure is also the latest
signal that shareholders are turning up the pressure on top
executives who have failed to deliver improved performance.
Goldman Sachs Group Inc 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 more than 33 percent
so far this year, closed 3.2 percent higher at $35.08 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, they would not be in a position to go to a meeting and
have a negative investor vote," said Beth Young, a senior
research associate for GMI Ratings in New York.
Shareholders are also expected to pressure executives of
other companies at annual meetings in the coming weeks,
including Janus Capital Group and US Steel. Last
week, casino equipment maker International Game Technology
got only 44 percent shareholder support for its pay
Only a handful of major companies last year, including
Hewlett-Packard and Janus, failed to get majority
shareholder support for their pay contests, the first year in
which the contests were widely required. Just 41 companies in
the Russell 3000 Index lost "say on pay" votes last year,
according to ISS, a research firm that advises institutional
investors on corporate proxy issues.
But the races appear to be tightening in 2012, said Deborah
Lifshey, a managing director at Pearl Meyer & Partners, an
executive-compensation consulting firm in New York. In addition
to Citi's loss, she noted several others including at IGT and
industrial products maker Actuant.
In many cases, pay increases have outstripped market gains
for investors, Lifshey said.
This year, "people are more discontent with execs being paid
when they are not being paid," she added.
For the Citigroup vote, proxy adviser ISS recommended siding
against the board and voting "no" on the 2011 pay plan. Glass
Lewis & Co, another governance advisory firm, also recommended
voting against the compensation plan.
In addition to Pandit's pay increase, another area of
concern to proxy advisers was the bank's 2011 retention awards,
stock grants aimed at convincing executives not to jump ship,
noted Todd Sirras, a partner at compensation consulting firm of
Semler, Brossy, which tracks the "say on pay" votes.
"Retention awards in the current environment tend to be
viewed negatively," Sirras said.
The majority of Citigroup shares are held by institutional
investors, but professional money managers were not an obvious
presence at the meeting. Only a few hundred people were in the
half-filled ballroom in Dallas.
The shareholders who spoke were small investors or
representatives of groups promoting social causes. No
representatives of major investment management firms spoke.
(Reporting by David Henry in New York and Ross Kerber in
Boston; editing by Aaron Pressman, Andre Grenon and Maureen