Earlier this month, Citgroup (
C
) shareholders voted to reject a $15 million pay package for chief
executive officer Vikram Pandit, with 55 percent of the votes
against the compensation plan in a non-binding vote. Citi is
up about 29 percent this year, but it lost 44 percent last year and
is still down almost 25 percent since the end of last April.
The move came as a massive surprise - shareholders rarely rise up
to outright reject executive pay, even in non-binding votes. Of
course, the contrast between Pandit's pay and the performance of
the shares appears especially galling, though the bank - which
borrowed about $45 billion after the 2008 financial crisis - does
appear to be somewhat on the mend.
The winter of shareholder discontent
According to
FierceFinance
, Wells Fargo (
WFC
) could be the next target for activist shareholders. The
website cited Value Alliance, a corporate governance advisory
company, which pointed out that while Wells Fargo gave out $43.7
million in performance bonuses to its five highest-ranked
executives, "the definition of performance seems narrowly defined.
Foreclosure issues have scorched the bank's reputation, but the
justifications in the proxy for the CEO's pay don't reflect that."
Shareholder discontent isn't limited to the financial
sector
- it affects companies producing real goods as well. The
Financial Times
reports that
GE
shareholders nearly passed a vote which would give them the
power to propose corporate resolution "by written consent." The
vote failed, but it garnered 47.5 percent support despite claims of
GE's board of directors that the whole idea "would not serve the
best interests of shareholders."
Executive compensation at one of the world's largest manufacturers,
however, was left untouched.
?Trend or anomaly?
Do these actions comprise a distinctive trend? Not necessarily -
they will, however, embolden more shareholders and their advisors
to push back a bit more, though the practical results of that may
be limited. Interestingly, a few tech companies appear to be
getting out ahead of the trend with different tactics. Google (
GOOG
)
announced
a new voting structure for its shares shortly before the Citi
rebuke, creating a class of shares dubbed Class C
capital
stock
.
These shares lack voting rights, which effectively allows the
company to continue issuing new shares while founders Larry Page
and Sergey Brin retain control. The news was received negatively,
with shares briefly dropping below $600 before recovering somewhat;
still, Google is down more than 5 percent since the announcement.
While Google's founders decided to tighten their grip, over in
Cupertino, Apple (
AAPL
) may have given in a bit to shareholder pressure. The world's most
valuable company by
market
cap
decided to return
some of its massive cash reserves to shareholders through a $2.65
quarterly
dividend
starting in July 2012 and a $10 billion
share
buy-back beginning in September 2012.
Of course, investors must feel pretty happy with the company right
now. Apple
announced
record quarterly profits of $11.6 billion on $39.2 billion,
effectively doubling
earnings
since a year ago off the back of massive iPhone sales in emerging
markets like China.
Perhaps the message for executives is simple, then - keep making
profits, and you can buy shareholder happiness. Money, after all,
makes the investor's world go round.
