All eyes on the Wells Fargo annual meeting
The rejection by shareholders of Citigroup CEO Vikram Pandit's 2011 compensation was the shot heard round the banking industry. So who's next?
All banks are keenly aware that emboldened shareholders are locked in on this issue and perhaps other governance issues. For the moment, all eyes turn to Wells Fargo.
According to one governance advisory firm, The Value Alliance, "The Wells Fargo board awarded the bank's top five executives $43.7 million in discretionary bonuses this year, so–called "performance based" pay. But 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."
There are a host of other issues that shareholders will also address, notably a proposal for placing director nominees on the ballot via the Exchange Act Rule 14a–8 process and a proposal that would split the CEO and chairman job. The Wells Fargo board has the distinction of being the first to face shareholders in the wake of the Citigroup meeting. But these are issues that will play out at every bank annual meeting.
We will not likely get a lot of outright shareholders rejections, as we did with Pandit's pay for 2011, which was truly stunning. But if we see a high percentage of negative votes on certain proposals, that will be enough for shareholders advocates to claim victory. Banks certainly need to be attuned to working these issues through with resolution sponsors before the meeting. Goldman Sachs has been the most aggressive about this.
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