These excerpts taken from the C DEF 14A filed Mar 13, 2008.
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 executives 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
These excerpts taken from the C DEF 14A filed Mar 13, 2007.
Citigroups assets belong to its shareholders. The expenditure or distribution of corporate assets, including charitable contributions, should be consistent with shareholder interests. Accordingly, the Companys rationale for charitable contributions should be disclosed to shareholders.
Company executives exercise wide discretion over the use of corporate assets for charitable purposes.
Because of the inequities and uncertainties that would arise from an advisory vote and because Citigroups 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.
Current disclosure is insufficient to allow the Companys 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 MALDEFs 2003-2004 Annual Report.
In light of the comprehensive information already publicly available about Citigroup and the Citigroup Foundations 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 whove 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. Citigroups 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 Foundations award policies and procedures, is readily available to Citigroup stockholders and the public on the Corporate Citizenship page of Citigroups corporate website at www.citigroup.com, on the Citigroup Foundations website at www.citigroupfoundation.org, in the Foundations 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.
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 years 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 Citigroups 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 years proxy statement, the negative developments in 2004 prompted 15% reductions in incentive and retention awards for Messrs. Weill, Prince and Willumstad. Even so, Mr. Princes 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 Citigroups 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, Citigroups 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 Companys performance, but also how that performance compares to its peers and the broader market.
We urge you to vote FOR this proposal.
Citigroups 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 committees 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.
Citigroups compensation philosophy aims to provide pay for performance by providing a mix of cash and long-term equity incentives appropriate
to each business unit and each employees skills, level of expertise and contribution. As a result, the value of each executives cash and equity incentives will increase or decrease based on a consistent approach towards evaluating individual and company performance.
Citigroups equity incentive programs provide incentives to eligible employees in the form of restricted or deferred stock under CAP. In accordance with Citigroups compensation philosophy, at higher compensation levels, CAP awards comprise a higher percentage of an individuals 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 Citigroups 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 Citigroups 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 Citigroups 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 Citigroups 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.
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 corporations 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.
The stated purpose of the proposal is to encourage proxy contests by requiring all of Citigroups 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 Citigroups stockholders and pursue Citigroups 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 Citigroups 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 Citigroups best interests and the board recommends that you vote against this Proposal 10.
This excerpt taken from the C DEF 14A filed Mar 15, 2005.
Our resolution is based on these premises:
Our resolution would introduce an internal foundation for CEO compensationthe companys 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-CIOs 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).
Citigroups 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
over time and compares these results to similar data for comparable companies, to the extent such data is available.
Citigroups pay for performance philosophy aims to provide a mix of cash and equity incentives appropriate to each business unit and each employees 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.
Citigroups 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 Citigroups 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.
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