America’s business community fought hard to kill off Dodd-Frank’s “say on pay” legislation, which forces companies to put remuneration policies to a shareholder vote. The overwhelming rejection by Citigroup investors of Vikram Pandit’s $15m pay award shows they were right to be nervous. The legislation is beginning to have an effect.
It may be too soon to declare that these votes will radically alter attitudes on executive pay in a country where investor rights are weak. The vote is only advisory, so boards can still press ahead with unpopular pay awards whatever shareholders think. But Citi’s slap will resound across Wall Street and beyond. After all, Mr Pandit gave up his salary and bonus for two years running, earning just $1 for what is a round-the-clock job.
It could be that shareholders are just fed up with Citi’s poor record on pay. Over the past decade it has paid its chief executives handsomely compared with peers, regardless of its relatively poor performance. Such behaviour will no longer be tolerated.