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C » Topics » Supporting Statement:

These excerpts taken from the C DEF 14A filed Mar 13, 2008.

Supporting Statement

 

We believe the adoption of this resolution will ensure that when the Company employs a NEO, whether by entering into an employment contract, or in absence of one, the terms of employment will contain provisions that protect the interests of long-term investors.

 

Employment contracts set the terms of an executive’s salary, bonus, benefits, and stock awards, and define payouts. We believe executive contracts and other agreements frequently favor the executive and run counter to the interests of shareholders.

 

As a result, many corporate governance experts now increasingly question the efficacy of employment agreements for executive officers. The Council of Institutional Investors (CII) has

recommended that employment contracts should have a specified termination date and should not “roll” on an open-ended basis. CII also recommends companies should not compensate executives for any taxes payable upon receipt of severance, change-in-control or similar payments. Institutional Shareholder Services (ISS) recommends that employment contracts by companies expire after a short period of time.

 

In addition to employment contracts, poorly designed equity plans may provide extraordinary payments to departing executive officers. All too often, executive-friendly employment contracts and poorly designed and administered equity plans provide excessive payouts even when an executive fails and are almost always the primary culprits of massive “golden-goodbyes” or “pay-for-failures”.

 

We feel the adoption of this resolution will ensure that the company’s employment agreements and equity plans are designed so as to avoid rewarding poorly performing departing executives with generous compensation packages. Finally, we believe the adoption of this set of responsible employment principles will focus the Board’s attention on the importance of succession planning and limit the need for the Company to conduct outside searches to fill future senior executive positions at the company.


 

MANAGEMENT COMMENT

 

Executive compensation at Citi is overseen by the board through the personnel and compensation committee. The personnel and compensation committee consists exclusively of independent directors who make decisions they believe are in the best long-term interests of Citi and our shareholders. The board believes that the personnel and compensation committee should retain the flexibility to make compensation decisions based on a review of all relevant information in order to be in the best position to attract, motivate and retain talented executives in the highly competitive market in which we compete for talent.

 

The proposal requests that the board adopt three compensation principles relating to Citi’s named executive officers regarding (i) employment agreements; (ii) accelerated vesting of equity awards and (iii) tax gross-ups or make-whole provisions.

 

In October 2006, Citi’s board approved the Senior Executive Compensation Guidelines providing more detailed information about the factors considered when determining executive compensation. The guidelines are posted on Citi’s website at www.citigroup.com/citigroup/corporategovernance/index.htm. As stated in the


 

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guidelines, generally Citi does not enter into employment agreements with our executive officers and key employees. If an employment agreement is entered into with an executive officer, the guidelines require that the agreement have the shortest term possible. Citi believes that our guidelines address any concerns raised by the proponent’s first principle relating to employment agreements.

 

The proposal’s second principle requests that Citi prohibit accelerated vesting of stock options, restricted stock and other equity-based awards of Citi’s named executive officers. As described in the Compensation Discussion and Analysis section of this proxy statement, Citi’s broad-based equity program provides for accelerated vesting of all or a portion of a participant’s award upon certain types of termination of employment, including death, disability, or involuntary termination, other than for gross misconduct, for participants who do not meet certain age and service rules. If a participant resigns or is involuntarily terminated, other than

for gross misconduct, and meets certain age and years of service rules, all or a portion of the participant’s CAP awards will continue to vest on schedule. The terms and conditions of CAP awards, including the vesting periods and provisions regarding termination of employment, are the same for senior executives as for other eligible employees.

 

The proponent also requests that the Company adopt a principle that prohibits “tax gross-ups or other make-whole arrangements” to Citi’s named executive officers. As indicated in the chart relating to personal benefits of named executive officers on page 50 of this proxy statement, Citi did not provide tax gross-up payments to any named executive officers in 2007 or 2006. Citi believes that the concerns raised by this proposal have been addressed by our Senior Executive Compensation Guidelines and our current practices. The board believes that it is to the benefit of Citi to retain flexibility with respect to executive compensation rather than to commit in advance to arbitrary principles that could place the Citi at a competitive disadvantage in recruiting and retaining top talent.


 

SUPPORTING STATEMENT

 

In our view, senior executive compensation at Citigroup has not always been structured in ways that best serve stockholders’ interests. For example, in 2006 all five named executive officers were paid more than $78 million in total compensation. Additionally, Robert Rubin’s previous contract guaranteed him a bonus for the years 1999 to 2005.

 

We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide stockholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practice, in the United Kingdom, public companies allow stockholders to cast an advisory vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote isn’t binding, but gives shareholders a clear voice that could help

shape senior executive compensation. A recent study of executive compensation in the U.K. before and after the adoption of the shareholder advisory vote there found that CEO cash and total compensation became more sensitive to negative operating performance after the vote’s adoption. (Sudhakar Balachandran et al., “Solving the Executive Compensation Problem through Shareholder Votes? Evidence from the U.K.” (Oct. 2007).)

 

Currently U.S. stock exchange listing standards require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have any mechanism for providing ongoing feedback on the


 

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application of those general standards to individual pay packages.

 

Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered

compensation plans and policies in the previous year.

 

Accordingly, we urge Citigroup’s board to allow stockholders to express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote could provide Citigroup with useful information about stockholders’ views on the company’s senior executive compensation, as reported each year, and would facilitate constructive dialogue between stockholders and the board.

 

We urge stockholders to vote for this proposal.


 

MANAGEMENT COMMENT

 

Citi has in place a comprehensive, performance-based executive compensation program. Citi’s executive compensation program, described in the Compensation, Discussion and Analysis section of this Proxy Statement and in the Senior Executive Compensation Guidelines, emphasizes pay for performance in a competitive marketplace. The personnel and compensation committee, which is composed entirely of independent directors, none of whom has an interest in the compensation decisions the committee makes, oversees Citi’s executive compensation. Citi and the personnel and compensation committee continually monitor the executive compensation program and adopt changes to reflect the dynamic, global marketplace in which Citi competes for talent. Citi will continue to emphasize pay-for-performance and equity-based incentive programs that reward executives for results that are consistent with stockholder interests and require them to retain ownership of the vast majority of Citi stock they receive as compensation.

 

In conformance with SEC rules, the CD&A supplements Citi’s compensation disclosures by setting forth Citi’s approach and philosophy with respect to executive compensation. The CD&A, along with the Senior Executive Compensation Guidelines, fully and fairly disclose the relevant details of Citi’s executive compensation, so stockholders can evaluate Citi’s approach to rewarding its executives. Stockholders can and

do communicate their views about Citi’s compensation decisions directly to the personnel and compensation committee by letters and emails and at the Annual Meeting, in addition to communication through meetings that management holds with investors.

 

Accordingly, the proposal is unnecessary and the vote would be ineffective as a way to communicate shareholder concerns about compensation. The advisory vote on compensation would be held at the Annual Meeting, which necessarily takes place months after the compensation decisions respecting senior executives have been made. The timing of these compensation decisions cannot be changed because of constraints imposed by the tax laws and the competitive marketplace. Certainly no one would suggest that the compensation decisions Citi made and communicated to its senior executives be changed retroactively; and there would in any event be significant legal and competitive issues with trying to do so. And a shareholder advisory vote at the Annual Meeting about the prior year’s compensation would provide no reliable guidance to the board about the decisions it has to make for the current year.

 

Indeed, an advisory vote on compensation would not provide any meaningful guidance at all to the board about any of the compensation decisions it has to make, for any year. No one could tell whether an advisory vote disapproving the


 

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compensation decisions, should that occur, reflected shareholder concerns about one or a few named executive officers, or all of them; whether the vote represented dissatisfaction with one element of compensation — salary, bonus or equity awards — or all of them, and if so in what way; or whether the vote reflected shareholder desire for changes in certain aspects of the compensation system or a desire for an entirely different approach to compensation, and if so, what that approach should be. Citi has two million shareholders. It is virtually inevitable that these shareholders will have differing views on all of these and other compensation issues. That is why these compensation decisions are properly left to the independent directors on the board’s personnel and compensation committee, with full disclosure to the stockholders of the results and the principles that were followed. This is a particularly compelling point for a company, like Citi, that has adopted majority voting for the election of directors, providing full accountability for the board to the stockholders. In addition, the proposal could well result in the shifting of decision-making authority regarding compensation from the board members — who have fiduciary duties to the stockholders, and who the stockholders can vote for or against every year — to people who owe no such duties to the stockholders and whom the stockholders cannot vote of out office — namely, the proxy committees at a few large institutions and the proxy advisory firms. The fact that the vote is advisory in form does not negate this point: the adverse impact of a “no” vote on compensation could lead companies to clear proposed compensation in advance with these entities, as is apparently the case in other countries that are the model for this proposal.

 

The proponent urges adoption of the advisory vote proposal based on its asserted success in the United Kingdom. However the advisory vote process in both the UK and Australia is mandated by law and applies to all public companies. The vast majority of U.S. companies do not have an advisory vote on compensation. Therefore, the proposal would subject Citi to an advisory vote requirement without any assurance

that other public companies, particularly our industry peers, would be subject to a similar requirement. The proposal, if adopted by Citi, but not widely applied to all U.S. public companies, could significantly hinder Citi’s ability to attract and/or retain top talent because the advisory vote requirement could result in putting their compensation at Citi at risk in a way that it would not be at risk at other companies. Adoption of the proposal could therefore put Citi at a competitive disadvantage vis-à-vis our competitors whose compensation reports are not subject to an advisory vote and negatively affect stockholder value.

 

If it were desirable to have stockholders vote in an advisory capacity on executive compensation, it should be done within a legal and regulatory framework that is developed after full analysis of the public policy and economic issues involved, and on a uniform basis for all public companies, as in the UK and Australia. A uniform legal and regulatory framework would reduce the chance that any company would be at a competitive disadvantage. Legislation to accomplish this result is pending in the US Congress. The development of that legal and regulatory framework would provide an opportunity to deal with such questions as the international competitive impact of adopting an advisory vote requirement, whether the advisory vote process would work in the United States where shareholding is more dispersed than in other countries, how companies would be expected to assess the meaning of the vote given the number of topics covered in the CD&A (see the CD&A on page 36 of this proxy statement) the practical and legal issues around discussing compensation decisions with stockholders in advance of annual meetings and many other significant issues.

 

Citi makes every effort to be responsive to concerns expressed by our stockholders by engaging in dialogues, participating in issuer/investor work groups and adopting polices or initiatives responsive to stockholder concerns when we felt it was in the best interest of all

stockholders. In fact, in the past year Citi adopted a


 

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by-law amendment allowing stockholders holding at least 25% of Citi’s outstanding common stock to call a special meeting and agreed to post its political giving on its website in response to stockholder proposals. Last year Citi eliminated the super-majority provisions contained in its charter, adopted a confidential voting policy and adopted a policy on recouping unearned compensation all in response to proposals submitted by stockholders. Citi also actively participated in a joint effort involving trade union pension funds and public

companies to explore majority voting for directors and with another such group to explore various issues relating to executive compensation. We encourage our stockholders to communicate with management and the board of directors. Any stockholder wishing to communicate with management, the board of directors or an individual director should send a request to the Corporate Secretary as described in this proxy statement.


 

Because the proposal is unnecessary, will not accomplish its asserted goals, could put Citi at a competitive disadvantage, and at best is premature, and because Citi’s existing compensation and corporate governance policies and programs meet the objectives on which the proposal is based, the board recommends that you vote against this proposal 12.

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These excerpts taken from the C DEF 14A filed Mar 13, 2007.

Supporting Statement:

 

Citigroup’s assets belong to its shareholders. The expenditure or distribution of corporate assets, including charitable contributions, should be consistent with shareholder interests. Accordingly, the Company’s rationale for charitable contributions should be disclosed to shareholders.

 

Company executives exercise wide discretion over the use of corporate assets for charitable purposes.

Absent a system of transparency and accountability for charitable contributions, Company executives may use Company assets for objectives that are not shared by and may be inimical to the interests of the Company and its shareholders.

 

Current disclosure is insufficient to allow the Company’s Board and its shareholders to fully evaluate the charitable use of corporate assets, especially for controversial causes.

 

Details of contributions only sometimes become known when publicized by recipients. Two Company contributions to the Rainbow/PUSH coalition, in amounts of $100,000 or more, were disclosed in Rainbow/PUSH conference programs in 2006.

 

Company contributions to the Mexican American Legal Defense and Educational Fund (MALDEF) are disclosed in MALDEF annual reports in recent years. MALDEF sued the Commonwealth of Virginia to allow illegal immigrants to attend state colleges and universities at the in-state tuition rate. MALDEF opposed the nominations of Judge John Roberts and Judge Sam Alito to the Supreme Court.


 

MANAGEMENT COMMENT

 

In light of the comprehensive information already publicly available about Citigroup and the Citigroup Foundation’s charitable giving, including the annual report published by the Citigroup Foundation, implementation of the proposal would cause Citigroup to incur unnecessary costs and expenses without providing a discernible benefit to stockholders.

 

Citigroup has a long history of charitable giving, encouraging employees to volunteer through its Volunteer Incentive Program, whereby employees who’ve volunteered at least 50 hours with a charitable organization are eligible to have $500 donated to the charity; through its volunteer day program, allowing employees to take a day off to volunteer; and through its matching gift program. On November 18, 2006 at Citigroup’s first Global Community Day, over 45,000 Citigroup employees across the world joined together to participate in

efforts to help needy children and families and to improve local communities.

 

The Citigroup Foundation, funded by contributions from Citigroup Inc., directs its grant making in three major areas: financial education, educating the next generation and building communities and entrepreneurs. Information about the Citigroup Foundation, including the eligibility criteria for grants, information on submitting proposals, annual reports listing charitable organizations that have received grants or contributions, and the Foundation’s award policies and procedures, is readily available to Citigroup stockholders and the public on the Citigroup Foundation’s website at www.citigroupfoundation.org, in the Foundation’s annual Form 990-PF that it files with the IRS, and by contacting the Citigroup Foundation at 850 Third Avenue, 13th Floor, New York, NY 10022-6211.


 

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Since Citigroup and the Citigroup Foundation already provide the essential information that would be included in the report requested by the proposal, the adoption of the proposal is

unnecessary and would result in increased costs without providing any additional meaningful information to our stockholders.


 

SUPPORTING STATEMENT

 

In our view, senior executive compensation at Citigroup has not always been structured in ways that best serve stockholders’ interests. For example, in 2005 Chairman and CEO Charles Prince received $87,710 for tax gross-ups, while former Chairman Sanford Weill received tax gross-ups of $900,981. Mr. Prince’s 2005 pay package included a $12 million bonus and a restricted stock award valued at nearly $10 million.

 

We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide stockholders with enough mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practices, in the United Kingdom, public companies allow stockholders to cast an advisory vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote isn’t binding, but gives stockholders a clear voice that could help shape senior executive compensation.

 

Currently U.S. stock exchange listing standards require stockholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Stockholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages. (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49 (2004))

 

Similarly, performance criteria submitted for stockholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.


 

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Accordingly, we urge Citigroup’s board to allow stockholders to express their opinion about senior executive compensation at Citigroup by establishing an annual referendum process. The results of such a vote would, we think, provide Citigroup with useful information about whether

stockholders view the company’s senior executive compensation, as reported each year, to be in stockholders’ best interests.

 

We urge stockholders to vote for this proposal.


 

MANAGEMENT COMMENT

 

Citigroup has in place a thoughtful, performance-based executive compensation program. Citigroup’s executive compensation program, described in the Compensation Discussion and Analysis (CD&A) section of this proxy statement and in the Senior Executive Compensation Guidelines, emphasizes pay for performance in a competitive marketplace. The personnel and compensation committee, which is composed entirely of independent directors, none of whom has an interest in the compensation decisions the committee makes, oversees Citigroup’s executive compensation. Citigroup and the personnel and compensation committee continually monitor the executive compensation program and adopt changes to reflect the dynamic, global marketplace in which Citigroup competes for talent. Citigroup will continue to emphasize pay-for-performance and equity-based incentive programs that reward executives for results that are consistent with stockholder interests and require them to retain ownership of the vast majority of Citigroup stock they receive as compensation.

 

In compliance with the new SEC rules, the CD&A supplements Citigroup’s compensation disclosures by setting forth Citigroup’s approach and philosophy with respect to executive compensation. The CD&A, along with the Senior Executive Compensation Guidelines, fully and fairly disclose the relevant details of Citigroup’s executive compensation, so stockholders can evaluate Citigroup’s approach to rewarding its executives.

 

The proponent urges adoption of the advisory vote proposal based on its asserted success in the United Kingdom and Australia. However, the advisory vote process in both the U.K. and Australia is mandated by law and applies to all

public companies. We are not aware of any U.S. company that has an advisory vote on compensation. Therefore, the proposal would subject Citigroup to an advisory vote requirement without any assurance that other public companies, particularly our industry peers, would be subject to a similar requirement. The proposal, if adopted by Citigroup, but not widely applied to all U.S. public companies, could significantly hinder Citigroup’s ability to attract and/or retain top talent because the advisory vote requirement could result in putting their compensation at Citigroup at risk in a way that it would not be at risk at other companies. Adoption of the proposal could therefore put Citigroup at a competitive disadvantage vis-à-vis our competitors whose compensation reports are not subject to an advisory vote and negatively affect stockholder value.

 

If it were desirable to have stockholders vote in an advisory capacity on executive compensation, it should be done within a legal and regulatory framework that is developed after full analysis of the public policy and economic issues involved, and on a uniform basis for all public companies, as in the U.K. and Australia. A uniform legal and regulatory framework would reduce the chance that any company would be at a competitive disadvantage. The development of that legal and regulatory framework would provide an opportunity to deal with such questions as the international competitive impact of adopting an advisory vote requirement, whether the advisory vote process would work in the U.S. where shareholding is more dispersed than in other countries (Citigroup has two million shareholders), how companies would be expected to assess the meaning of the vote given the number of topics covered in the CD&A (see the CD&A on page 36 of this proxy statement), the practical and legal issues


 

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around discussing compensation decisions with stockholders in advance of annual meetings and many other significant issues.

 

Citigroup makes every effort to be responsive to concerns expressed by our stockholders by engaging in dialogues, participating in issuer/investor work groups and adopting polices or initiatives responsive to stockholder concerns when we felt it was in the best interest of all stockholders. In fact, last year Citigroup eliminated the super-majority provisions contained in its charter, adopted a confidential voting policy and adopted a policy on recouping unearned compensation all in response to proposals submitted by stockholders. Citigroup also actively participated in a joint effort involving trade union pension funds and public companies to explore majority voting for directors and is working with another such group to explore various issues relating to improving executive compensation

disclosure. We encourage our stockholders to communicate with management and the board of directors. Any stockholder wishing to communicate with management, the board of directors or an individual director should send a request to the Corporate Secretary as described in this proxy statement.

 

Given the inequities and uncertainties that would arise from implementation of an advisory vote on a company by company basis, following a model designed for use where the law is applied uniformly and in which the ownership structure of companies differs vastly from that in the U.S., adopting the proposal would be premature, unwise and detrimental to Citigroup’s stockholders. In addition, the concerns raised by this proposal have been addressed by the current design of the CD&A and by the Senior Executive Compensation Guidelines; therefore adopting this proposal is unnecessary and unduly restrictive.


 

Because of the inequities and uncertainties that would arise from an advisory vote and because Citigroup’s existing equity incentive policies and programs meet the objectives outlined in the proposal, adoption of an advisory vote resolution is unnecessary and the board recommends that you vote against this proposal 6.

 

These excerpts taken from the C DEF 14A filed Mar 14, 2006.

Supporting Statement:

 

Current disclosure is insufficient to allow the Company’s board and its shareholders to fully evaluate the charitable use of corporate assets.

 

There is currently no single source providing shareholders the information sought by this resolution.

 

Details of contributions only sometimes become known when publicized by recipients. Two Company contributions to the Rainbow/PUSH coalition, ranging in amounts from $100,000 to $150,000, were disclosed in Rainbow/PUSH conference programs.

 

Company support in the range of $10,000-$49,000 for the Mexican American Legal Defense and Education Fund (MALDEF), an organization that sued the state of Virginia to allow illegal immigrants to attend state universities at the in-state tuition rate and that announced its

opposition to the nomination of Judge John Roberts as Chief Justice of the U.S. Supreme Court, was disclosed in MALDEF’s 2003-2004 Annual Report.

 

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MANAGEMENT COMMENT

 

In light of the comprehensive information already publicly available about Citigroup and the Citigroup Foundation’s charitable giving, including the annual report published by the Citigroup Foundation, implementation of the proposal would cause Citigroup to incur undue cost and expense without providing a discernible benefit to stockholders.

 

Citigroup has a long history of charitable giving, encouraging employees to volunteer through its Volunteer Incentive Program, whereby employees who’ve volunteered at least 50 hours with a charitable organization are eligible to have the Citigroup Foundation donate $500 to the charity; through its volunteer day program, allowing employees to take a day off to volunteer; through its matching gift program; and through the numerous grants made by the Citigroup Foundation. This year, in addition to funding traditional grants, Citigroup, its employees and the Citigroup Foundation, have donated millions of dollars to help those affected by the tsunami, Hurricane Katrina and the South Asia Earthquake. Citigroup’s Chairman, Sandy Weill was asked by President Bush to lead a private sector effort with other prominent executives to solicit donations from corporations and the public to help the victims of the South Asia Earthquake. To date, the Fund established by this group has raised $18.7 million to assist those in need.

 

The Citigroup Foundation, funded by contributions from Citigroup Inc., directs its grant making in three major areas: financial education, educating the next generation and building communities and entrepreneurs. Information about the Citigroup Foundation, including the eligibility

criteria for grants, information on submitting proposals, annual reports listing charitable organizations that have received grants or contributions, and the Foundation’s award policies and procedures, is readily available to Citigroup stockholders and the public on the Corporate Citizenship page of Citigroup’s corporate website at www.citigroup.com, on the Citigroup Foundation’s website at www.citigroupfoundation.org, in the Foundation’s annual Form 990-PF that it files with the IRS and by contacting the Citigroup Foundation at 850 Third Avenue, 13th Floor, New York, NY 10022-6211.

 

Since Citigroup and the Citigroup Foundation already provide almost all of the information that would be included in the report requested by the proposal, the adoption of the proposal is unnecessary and would result in increased costs without providing any additional meaningful information to our stockholders.

 

SUPPORTING STATEMENT

 

As shareholders, we support compensation policies for senior executives that provide challenging performance objectives and motivate executives to achieve long-term shareholder value. We are concerned that this is not happening at Citigroup.

 

Citigroup has underperformed both the S&P 500 index and the Dow Jones U.S. Financials Index for the three- and five-year periods ending November 11, 2005. The last two years in particular have been marked by a number of negative developments.

 

In 2004 Citigroup saw the loss of its private banking license in Japan, a $2.5 billion settlement of litigation growing out of the WorldCom accounting scandal, and what the Company referred to in last year’s proxy as “other reputational risk issues that arose during 2004.”

 

The year 2005 brought more bad news, including an agreement to pay $2 billion based on Citigroup’s role in the Enron collapse, an SEC investigation into deficiencies in disclosures and dividends paid to shareholders, an investigation into discriminatory consumer lending practices, and a suspension of certain trading privileges in Europe for violating regulations governing its domestic Italian bond-trading platform.

 

Despite this steady drumbeat of bad news, senior executives remain well compensated. According to last year’s proxy statement, the negative developments in 2004 prompted 15% reductions in incentive and retention awards for Messrs. Weill, Prince and Willumstad. Even so, Mr. Prince’s bonus increased over the prior year, although there was a reduction in the value of restricted shares awarded.

 

Senior executive compensation appears to be disproportionate to the results achieved for

shareholders. A 2005 report by Equilar found that the level of total direct compensation for Citigroup’s CEO over the most recent three-year period was second only to that at Merrill Lynch and ahead of compensation levels at Hartford Financial Services, J.P. Morgan Chase and Morgan Stanley. By contrast, Citigroup’s stock underperformed the stock of each of these companies during a three-year period ending November 11, 2005.

 

We recognize that Citigroup has moved away from straight grants of stock options and towards great

reliance on incentive compensation such as restricted shares or deferred stock. We believe, however, the alignment of pay with performance is not as close as it could be, particularly as many of the problems that Citigroup is now moving to address could be seen as self-inflicted wounds.

 

We believe that the Board of Directors should adopt a more rigorous standard for senior executives’ incentive compensation, one that considers more closely not just to the Company’s performance, but also how that performance compares to its peers and the broader market.

 

We urge you to vote FOR this proposal.

 

MANAGEMENT COMMENT

 

Citigroup’s incentive compensation programs are designed to attract and retain a talented global workforce. To accomplish this goal, Citigroup is willing to provide competitive compensation commensurate with superior performance.

 

When making compensation decisions, the personnel and compensation committee considers the performance of the individual, the business unit and Citigroup as a whole, based on a wide variety of factors. These factors, which are described in the committee’s report included in this proxy statement, include net income, earnings per share, return on equity, return on capital, return on assets, balance sheet and capital strength, risk management, effectiveness of controls, regulatory compliance, franchise expansion, customer satisfaction, employee feedback, corporate governance, diversity and adherence to company values.

 

Citigroup’s compensation philosophy aims to provide pay for performance by providing a mix of cash and long-term equity incentives appropriate

 

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to each business unit and each employee’s skills, level of expertise and contribution. As a result, the value of each executive’s cash and equity incentives will increase or decrease based on a consistent approach towards evaluating individual and company performance.

 

Citigroup’s equity incentive programs provide incentives to eligible employees in the form of restricted or deferred stock under CAP. In accordance with Citigroup’s compensation philosophy, at higher compensation levels, CAP awards comprise a higher percentage of an individual’s incentive award, ranging from 35% to 40% for the most senior executives. Stock options are only granted to those participants who choose to receive them as part of their incentive award. Under current program guidelines, stock options, when elected, may not be “cashed out” because following an exercise the shares are subject to a 2-year sale restriction.

 

Restricted and deferred stock awards under cap are already granted with time vesting conditions reflecting a long-term performance orientation. The vesting schedule for CAP awards is 25% per year over 4 years.

 

The terms and conditions of CAP awards, including the vesting periods and provisions regarding termination of employment are the same for senior executives as for other employees. In January 2006, approximately 34,000 employees in 80 countries around the world participated in CAP.

 

The proposal suggests that vesting of equity awards should be linked to specific performance measures. It is our belief that tying vesting to specific performance measures can have the

unintended consequence of skewing results to the specified performance factors, rather than focusing executives on the long-term view. Similarly problematic is the practice of linking performance based incentives awards at one company to the results of another company — as the possibility of unusual events may also produce unintended consequences.

 

In addition, performance vesting can often result in a higher cost to the company reflected in the need to compensate the executive for the potential risk by awarding more shares than would otherwise be necessary, in order to remain competitive.

 

Adding performance vesting conditions to Citigroup’s existing incentive award program is unnecessary in that incentives are currently awarded based on a variety of performance measures as described above. At Citigroup, with its diverse portfolio of businesses, we believe the better approach would be to continue to award incentive compensation based on a variety of overall performance factors.

 

As an additional measure of Citigroup’s long-term orientation, approximately 110 members of Citigroup senior management are subject to our senior executive stock ownership commitment, which requires them to hold 75% of the Citigroup stock they acquire through Citigroup’s equity programs while they remain directors or members of senior management. The program was expanded in 2006 to cover a group of senior managers who are now subject to a 25% stock ownership commitment. After the expansion of the program, approximately 3,000 employees are subject to a stock ownership commitment. The interests of these executives and managers remain closely aligned with our stockholders as they have a continuous personal financial incentive to improve and maintain Citigroup’s performance.

 

By awarding restricted and deferred stock based on a variety of overall performance factors, coupled with time-based vesting and the stock ownership commitment described above, we believe that our existing equity incentive programs meet the objectives outlined in the proposal.

 

SUPPORTING STATEMENT

 

In our opinion, the power of stockholders to elect directors is the most important mechanism for ensuring that corporations are managed in stockholders’ interests. Under the law of Delaware, where Citigroup is incorporated, this power is supposed to act as a safety valve that justifies giving the board substantial discretion to manage the corporation’s business and affairs.

 

The safety valve is ineffective, however, unless there is a meaningful threat of director replacement. We do not believe such a threat currently exists at most U.S. public companies, including Citigroup. Harvard Law School professor Lucian Bebchuk has estimated that there were only about 80 contested elections at U.S. public companies from 1996 through 2002 that did not seek to change control of the corporation.

 

The unavailability of reimbursement for director election campaign expenses for so-called “short slates” — slates of director candidates that would not comprise a majority of the board, if elected - contributes to the scarcity of such contests. (Because the board approves payment of such expenses, as a practical matter they are reimbursed only when a majority of directors have been elected in a contest.) This proposal would provide reimbursement for reasonable expenses incurred in successful short slate efforts — but not contests aimed at ousting a majority or more of the board — with success defined as the election of at least one member of the short slate. The proposal would also provide proportional reimbursement for contests in which no short slate candidates were elected, but only if the most successful short slate candidate

received at least 30% of the vote received by the elected director with the lowest number of “for” votes.

 

We urge stockholders to vote for this proposal.

 

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MANAGEMENT COMMENT

 

The stated purpose of the proposal is to encourage proxy contests by requiring all of Citigroup’s shareholders to bear the expense of any stockholder who seeks to elect candidates of their own choosing to the board. The proposal asks the board not only to adopt a standard for reimbursing proxy solicitation expenses that is wholly inconsistent with Delaware law, but its implementation would also cause the board to abdicate its fiduciary responsibility to determine whether insurgents should be reimbursed for such expenses. The board believes that those stockholders should pay their own proxy expenses. Individual stockholders are not bound by the fiduciary duties that require directors to nominate director candidates who will serve all of Citigroup’s stockholders and pursue Citigroup’s best interests. Individual stockholders may pursue their own personal interests and are free to nominate director candidates without regard to whether those candidates are committed to the long-term best interests of other stockholders. Hence, adoption of the proposal could require Citigroup to fund a proxy contest even where those instigating the contest are seeking to advance a special cause or to gain a voice on the board to advocate the goals of a particular constituency.

 

The board also disagrees with the apparent premise underlying the proposal: that proxy contests designed to elect representatives of particular constituencies are a good thing for the company, its stockholders, employees and other stakeholders. To the contrary, proxy contest of this type can lead to a balkanized board of directors where competing factions make it difficult for a company to pursue a successful business model. The board believes that the best results for stockholders are obtained when directors act together constructively and collegially to create shareholder value.

 

The board is also concerned that fostering proxy contests may deter capable men and women from agreeing to join the board. Through its nomination and governance committee, the board is regularly engaged in considering persons suggested by stockholders and others as potential directors. Most highly qualified people have significant demands on their time that limit the number of directorships they are willing or able to accept. In addition, Citigroup, through its corporate governance guidelines, strives to ensure that its board members and candidates do not serve on so many boards as would hinder their ability to spend adequate time on Citigroup board matters. The board believes that some attractive director candidates would not be interested in standing for election to the board if they believe that the nominating process will give rise to a proxy contest. Hence, adoption of the proposal could impair Citigroup’s ability to attract accomplished candidates to serve it as directors.

 

In addition, the SEC has recently indicated that it will conduct rulemaking that would permit corporations to satisfy their proxy statement delivery requirements by electronic delivery rather than paper delivery. One significant feature of the proposed rulemaking is that those wishing to propose competing slates to those offered by the board will be able to run their slates without incurring the expense normally associated with a proxy contest. They will be able to solicit stockholders electronically as well. Since this matter is under consideration at the SEC and its adoption would render the proposal unnecessary, Citigroup believes adoption of the proposal is premature and may ultimately be rendered superfluous.

Because adoption of the proposal would require the board to abdicate its financial responsibility to determine whether or not to reimburse expenses of a proxy solicitation, and because the SEC has proposed rulemaking that would allow stockholders to conduct proxy solicitations on the internet, adoption of the Proposal would not be in Citigroup’s best interests and the board recommends that you vote against this Proposal 10.

 

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This excerpt taken from the C DEF 14A filed Mar 15, 2005.

Supporting Statement:

 

Our resolution is based on these premises:

 

1.   Unless internally anchored, market-based compensation methods tend to produce excessive CEO compensation;

 

2.   Very high CEO pay should require shareholder approval since it tends to produce sub par share performance long-term; and

 

3.   Very highly paid CEOs should realize that they might share some pain when choosing job reductions as a means to achieve corporate goals.

 

Our resolution would introduce an internal foundation for CEO compensation—the company’s CEO/average-worker ratio. Commentators note that on the average for U.S. companies this ratio has gone from about 42 in 1980 to several hundred today and that it tends to be much lower in foreign companies that compete successfully with U.S. companies. Consistent with these facts, the Blue Ribbon Commission of the National Association of Corporate Directors has urged compensation committees to use such a ratio as a factor in setting CEO compensation. Our resolution follows this advice.

 

Our resolution would not arbitrarily limit CEO compensation. Rather, it would offer the board the opportunity to persuade the shareholders that very high CEO compensation would make the company more competitive and would be in their interest.

 

At Citigroup, CEO Compensation in 2001, 2002, and 2003 was 30.3, 8.9, and 44.6 million dollars. The 2003 Compensation was 1,749 times the $25,501 that the average U.S. worker makes according to the AFL-CIO’s Executive Paywatch (http://www.aflcio.org/corporateamerica/paywatch/). In its 2004 analysis of executive pay versus shareholder return, Business Week gave the CEO its worst rating (http://www.businessweek.com/pdfs/2004/0416_execpay.pdf).

 

 

MANAGEMENT COMMENT

 

Citigroup’s incentive compensation programs are designed to attract and retain talented executives. To accomplish this goal, Citigroup must be able to provide competitive compensation commensurate with superior performance.

 

When making incentive compensation decisions, the personnel and compensation committee of the board evaluates the performance and contribution of each individual executive and his or her business unit, seeks advice from an outside compensation consultant and reviews relevant market data. Performance is measured at the individual level, the business unit level and company-wide, based on a variety of factors, including earnings, earnings per share, return on equity, return on capital, return on assets, balance sheet and capital strength, risk management, franchise expansion, customer satisfaction, corporate governance, compliance and control results and adherence to company values. The committee reviews these current results and results

 

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over time and compares these results to similar data for comparable companies, to the extent such data is available.

 

Citigroup’s pay for performance philosophy aims to provide a mix of cash and equity incentives appropriate to each business unit and each employee’s level of expertise and contribution. The committee needs flexibility in designing compensation programs that are adaptable to a global employee population operating several different business units in the financial services industry.

 

The proposal would require the board to establish an arbitrary cap on the total compensation of the CEO, thereby diminishing the significance of more pertinent factors, such as corporate and individual performance and marketplace compensation, which ordinarily and logically must be taken into account when making such decisions.

 

Citigroup’s subsidiaries and affiliates conduct business and maintain offices and operations in over 100 countries on six continents and have done so for decades. Currently, almost one-half of Citigroup’s 280,000 employees are located outside the United States. A request to reduce CEO compensation in the event of the “outsourcing” of jobs from the United States is unworkable because reductions in the number of jobs in any one country and increases in jobs in any one or more of the other 99 countries in which Citigroup operates is not necessarily the result of “outsourcing.” As such, there would be no clear criteria on the basis of which Citigroup could determine that a reduction in CEO compensation would be required.

 

Requiring Citigroup to limit the compensation of the CEO as proposed would place Citigroup at a substantial disadvantage in recruiting, motivating and retaining talented senior executives.

 

 

EXCERPTS ON THIS PAGE:

DEF 14A (2 sections)
Mar 13, 2008
DEF 14A (2 sections)
Mar 13, 2007
DEF 14A (3 sections)
Mar 14, 2006
DEF 14A
Mar 15, 2005

RELATED TOPICS for C:

"Supporting Statement:" elsewhere:

Capital One Financial (COF)
American Express Company (AXP)
JPMORGAN CHASE & CO (JPM)
Goldman Sachs Group (GS)
Wells Fargo (WFC)
Scotiabank (BNS)
Royal Bank Of Canada (RY)
The Travelers Companies (TRV)
Legg Mason (LM)
State Street (STT)
PNC FINANCIAL SERVICES GROUP INC (PNC)
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