Citigroup shareholders voted to reject the company's executive compensation plan during an annual stockholders meeting in Dallas on Tuesday after critics complained that top officials including CEO Vikram Pandit collect rewards all too easily.
The proposal received just 45 percent of votes cast and followed Citigroup's announcement on Monday it made $2.9 billion in earnings, or net income, during the first quarter, down 2 percent from a year ago, missing analyst expectations.
Citigroup is only the third company this year to have a failed vote from shareholders about executive compensation, according to Ted Allen, spokesman for ISS Proxy Advisory Services. Actuant Corp., an industrial manufacturer and distributor, and International Game Technology, a gaming machines company, were the other two.
Most companies with publicly traded stock had to hold "say-on-pay" votes in 2011 according to the Dodd-Frank financial regulatory reform law. The U.S. Securities and Exchange Commission exempted smaller companies with less than $75 million in publicly traded stock from holding these votes until 2013.
Only 41 out of the 3,000 companies in the Russell 3000 Index had failed "say-on-pay" votes last year, Allen said.
"It is unusual for a big firm to lose a vote and it has been very unusual for a financial service firm to lose," Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y. said. "This wasn't a near miss."
Foley called the vote a "very interesting indication of unhappiness" among shareholders.
He said it was significant that Citigroup had a failed pay proposal the third year in which it held a say-on-pay vote.
"When you stumble the first time out of gate it's one thing," he said. "When you stumble the third time out of gate, it's very interesting."
Included in the compensation package detailed in Citigroup's 2012 annual proxy were multi-year retention award packages for the senior management team. Pandit's "executive long-term performance retention award," Pandit's could be worth $40 million, Bloomberg reported.
Citigroup's CEO Pandit, 55, had $15 million in compensation for 2011, which included a base salary of $1.7 million, a cash bonus of $5.3 million, almost $4 million in deferred stock and another near $4 million in deferred cash.
Pandit had an annual salary of $1 for most of 2009 and 2010 while the bank dug out from a government bailout.
Pandit, 55, had the 45th highest compensation among CEOs last year, according to Equilar, an executive compensation research firm. Tim Cook, CEO of Apple, had the highest pay at $378 million.
A spokeswoman for Citigroup said, "Citi's Board of Directors takes the shareholder vote seriously, and along with senior management will consult with representative shareholders to understand their concerns."
The spokeswoman said the Personnel and Compensation Committee of the Board "will carefully consider their input as we move forward."
Proxy advisory firms, which issue recommendations for institutional shareholders, have hit Citigroup for designing pay packages that don't do enough to increase shareholder value.