New York: Citigroup's India-born CEO Vikram Pandit and its directors have been sued by a shareholder, saying that the board spent funds in an "unwarranted and excessive" manner on compensation packages for its executives.
The lawsuit was filed on April 20 in Manhattan Federal Court by Citigroup shareholder Stanley Moskal, who said Pandit and other Citi directors breached their fiduciary duties by awarding more than USD 54 million in compensation to the executives in 2011, a year when the bank had an "extremely disappointing" performance.
"This is a failed 'say on pay' shareholder derivative action, arising from the Board's unwarranted and excessive spending of company (ie stockholders') funds on executive compensation --- namely, the Board's recent authorisation of excessive 2011 compensation for executives who have presided over extremely disappointing company performance," the lawsuit said.
It added that of the total USD 54 million of compensation awarded to top Citigroup executives in 2011, USD 14.9 million was for Pandit, a "raise of 1,499,999,900 per cent over his 2010 compensation."
Pandit was paid USD 15 million in 2011, which included a base salary of USD 1.7 million and a cash bonus of USD 5.3 million. At the height of the financial crisis, he had taken an annual salary of just USD 1 for most of 2009 and 2010.
Citigroup plans to get the suit dismissed saying it is baseless.
The suit came just days after Citi's shareholders rejected a proposal on executive compensation at the bank's annual meeting.
It is filed under the "say on pay" provision of the Dodd Frank reform act which gives shareholders the right to vote on executive pay.
In the April 17 vote at Citi's annual shareholder meeting in Dallas, 55 per cent of shareholders voted against the proposal on executive compensation, which included approving Pandit's USD 15 million pay package.
The vote "cast doubt on the board's decision-making process, as well as the accuracy and truthfulness of its public statements", the complaint said, adding, "Absent this (lawsuit), the majority will of the company's stockholders shall be rendered meaningless."
With the financial crisis eating into profits and revenues of firms and resulting in large scale lay-offs, there has been outrage among people over the millions of dollars of bonus and pay packages that Wall Street firms have doled out to their executives.