« | Home | »

How much money do CEOs really deserve?

By Lauren | April 20, 2012

Citigroup stockholders made headlines this week when they voted down the Board of Directors’ proposal to award CEO Vikram Pandit a compensation package totalling a cool $15 million. The vote came under the “say on pay” provision of the newly-enacted Dodd-Frank Act, which requires publicly traded companies to allow their shareholders to vote on executive compensation. The vote is non-binding – we can’t allow the owners of a corporation to have too much power, now can we? – but it still sent shockwaves through the financial services industry. (And it appears that the fun is just beginning; earlier today, it was announced that a Citigroup shareholder had sued Pandit and the Board of Directors for breach of fiduciary duty, arguing that Citigroup had paid unjustifiably high salaries in 2011 to the company’s top executives.)

This is one of the first times that Dodd-Frank’s “say on pay” provision has resulted in a “no” vote from stockholders, so the negative vote has attracted a lot of media attention. Personally, I’m only mildly interested in the fact that the shareholders voted Pandit’s package down. What interests me much more is why they chose to do so. There seem to be two schools of thought in the media as to why Citigroup’s stockholders voted thumbs-down on Pandit’s pay. Some commentators see the vote as an important sally in the war to whittle down outrageous executive compensation. Others think that the shareholders were reacting to Citigroup’s poor first-quarter performance and piddling dividends; in other words, shareholders expected to receive a better return on their investment in Citigroup and voted against Pandit’s pay package out of self-interest, not on principle.

While I’ve seen enough greed on Wall Street to suspect that stockholders voted against Pandit’s pay package to punish him for failing to produce better returns, I’d really love to be wrong in my suspicions. The stock market meltdown of 2008 and recession that followed inflicted appalling pain on so many people. I’d love to think that investors have listened to the other 99% and recognized that no one needs to pull down tens of millions of dollars year after year, even if they’re extremely good at what they do. The fact that Pandit wasn’t able to lead Citigroup to a more successful 2011 might be a secondary reason not to lavish money on him, but the primary reason should be that our society will prosper better if our collective riches are distributed more equitably. CEOs should make good money, but they don’t need to receive the equivalent of a national lottery win every year.

Be Sociable, Share!

Topics: Business Ethics, corporate responsibility, ethics, Lauren Recommends, Social Ethics | 1 Comment »

One Response to “How much money do CEOs really deserve?”

  1. Latest-Report.com Says:
    April 21st, 2012 at 9:00 pm

    Citi Shareholders Give Thumbs Down to CEO Pay…

    Who states there is no good news on Wall Street? On Tuesday, Citigroup shareholders rejected a board-of-directors recommended $15 million compensation package for Chief Executive Vikram S. Pandit.The “say on pay” vote was nonbinding, in keeping with …