This excerpt taken from the C DEF 14A filed Mar 20, 2009.
Yes on 13
In light of the potential inequalities that can result from cumulative voting, and the uncertainty of what cumulative voting means in the context of board elections at a company that, like Citi, has adopted a majority vote standard, adoption of cumulative voting would not be in the best interests of Citi or its stockholders.
Like most other U.S. corporations, each share of Citis common stock permits the holder to cast one vote in the election of each nominee. All classes of stock at Citi have the same voting rights. Cumulative voting would allow stockholders to pool all of their votes (total shares held multiplied by the number of director
nominees) and theoretically vote them in whatever proportions they choose among the director nominees. Cumulative voting has the potential to create great inequities among stockholders and to magnify the impact larger holders or groups of holders with similar, highly specific goals including goals that are inconsistent with the views of most shareholders can have on the composition of a companys board. Under a cumulative voting structure, such holders or groups of holders could vote most or even all of their shares to elect directors willing to advance the positions of the group responsible for their election, rather than the positions that are in the best overall interests of Citi and its stockholders. In addition, the support by directors of the special interests of the constituencies that elected them could create partisanship and divisiveness, and impair the boards ability to operate effectively as a governing body, to the detriment of all stockholders.
Most importantly, the Companys by-laws provide for majority voting in uncontested elections. This assures that a majority of stockholders can reject a candidate and thereby prevent his or her reelection to a new term. Under the Companys majority voting by-law, a director is reelected only if the votes cast for his or her election exceed the votes cast against his or her election. Cumulative voting is fundamentally inconsistent with majority voting. In addition, it is unclear whether Delaware law allows for cumulating against votes. To the extent Delaware law is interpreted not to permit cumulating against votes, cumulative voting would, by permitting the cumulating of for but not against votes, enable a minority of stockholders to defeat an against campaign supported by a majority of the stockholders. And if Delaware law permitted stockholders to cumulate against votes, cumulative voting could allow a minority group of stockholders to block the will of the majority frustrating the very purpose of majority voting.
Citis nomination and governance committee, which is responsible for identifying candidates for the board, and the independence criteria contained in Citis Corporate Governance Guidelines protect the interests of all stockholders by ensuring that Citi has an independent and effective board of directors. The membership of Citis board is over 70% independent and the nomination and governance committee is comprised of only independent directors. This degree of independence among board members ensures that directors will remain accountable to all stockholders, not just the constituencies that supported their elections, and provides greater protection for the interests of smaller stockholders than cumulative voting, which could drown out the voices of small stockholders.
Finally, Citi has adopted a series of corporate governance initiatives in addition to majority voting. In 2007, Citi adopted a by-law amendment permitting the holders of at least 25% of its outstanding common stock to call a special meeting and adopted a Political Contributions Policy under which it now compiles and publishes a list of its political contributions. In 2006, Citi, with stockholder approval, eliminated the super-majority provisions contained in its charter. In addition, Citi adopted a policy on recouping unearned compensation and adopted confidential voting. Citi has eliminated interlocking directorships between Citis executive officers and companies affiliated with Citis directors. The board is elected annually and conducts self-evaluations of its effectiveness and that of each of its committees.
To protect the interests of all stockholders by ensuring that directors are not beholden to particular stockholders or groups of stockholders who ensured their elections, by recognizing the uncertainties surrounding the operation of cumulative voting when combined with majority voting, and in light of the protections afforded stockholders by the great degree of independence of Citis board, stockholders should reject this proposal.