Conservatives Frantic To Kill Stirrings Of Shareholder Democracy ASAP
The Dodd-Frank Wall Street Reform and Consumer Protection Act that Wall Street is so discomforted by-- and that their conservative allies in both parties are trying to destroy-- is flawed and imperfect in many aspects. Conservative Democrats threatened to vote with the Republicans against it at every step in the process unless their donors were protected. But there are some worthwhile parts of the bill-- witnessed in great part that in the end every single Republican plus two dozen of the most corrupt Democrats in the House did vote against it, including many who forced horrible compromise after horrible compromise as the bill was being put together. Just for the record, some of the worst Democrats on this included Ann Kirkpatrick (AZ)-- who the DCCC is trying to shoehorn back into Congress instead of populist progressive and strongly anti-Wall Street icon Wenona Baldenegro-- and Debbie Halvorson-- who subsequently defeated for reelection and was just re-defeated, this time in a primary against progressive Jesse Jackson, Jr. In the end it passed 223-202, with 27 Democrats voting against it. Almost all the Democrats who voted against it were defeated for reelection or were forced into retirement at the threat of imminent defeat. [Note: Dennis Kucinich voted against it because the bill was too riddled with compromises and he felt-- correctly-- that it wasn't a strong enough deterrent to financial industry predators.] But there was one place where the bill certainly moved the ball down the field: major U.S. companies are required to allow shareholders to have a "say on pay" vote at least every three years. And that just happened at Citigroup-- and Citigroup is not happy with the results.
Citigroup has become the first Wall Street bank to get a thumbs-down from shareholders over outsized executive pay.
At its annual meeting Tuesday, 55 percent of the bank's shareholders voted against the pay packages that have been granted to Citigroup's top executives, including CEO Vikram Pandit's $15 million for last year and $10 million retention pay. The vote is advisory and won't force the bank to change its pay practices, but it did send a powerful message of discontent to Citi's leadership.
"This vote is historic," said Eleanor Bloxham, CEO of The Value Alliance, a board advisory firm. "None of the Wall Street firms have received this kind of a review yet."
Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. Bonuses became a flashpoint of public outrage after the 2008 financial meltdown, which was caused in large part by those same Wall Street firms.
Nonetheless, compensation on Wall Street has remained high, even after a taxpayer-funded bailout of the industry and the Great Recession that followed and left one in 10 Americans unemployed.
Until Tuesday, shareholders haven't voted in large enough numbers against Wall Street pay packages to make a difference. Under the Dodd-Frank financial overhaul law, major U.S. companies are required to allow shareholders to have a "say on pay" vote at least every three years. The votes are not binding.
...For Citigroup's CEO Vikram Pandit, the lost vote at the annual meeting comes at a bad time. Last month the bank's chief regulator the Federal Reserve dealt Citi a huge setback by barring the company from paying a higher dividend, saying the bank wasn't financially strong enough. The Fed's decision came soon after Pandit had been promising to raise dividends.
Pandit's large pay package for 2011 and a large retention pay is not going over well with shareholders. He received $14.8 million in total compensation for 2011, up from his token $1 compensation in 2010.
Pandit was also awarded $10 million in retention pay, which vests after 2013. Paid as an incentive for Pandit to stay on as CEO, Citi's compensation committee will assess him not on financial performance, but on non-quantifiable measures such as talent management, organizational culture and risk management.
"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book Exile on Wall Street.
"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up." ... In a statement late Tuesday, Citigroup said its board and senior management will consult with "representative shareholders" to hear their concerns.
The board's compensation committee "will carefully consider their input as we move forward," the Citi statement said.
Today the AFL-CIO is rechristening its Executive PayWatch site, the all new and improved CEO Pay and the 99% which adds a section on private equity vultures like Romney and most of his financial backers and will give users the ability to look up CEO pay in a database by industry, by state and by the top 100 highest paid CEOs. Last year, a CEO of a company in the S&P 500 Index on average received $12.9 million in total compensation in 2011. That’s a 14% raise over the previous year. And that’s on top of a 23% increase in 2010. In stark contrast, the average wage for workers hovered at $34,000 in 2011. Median household income fell $3,700 over the past decade. And those who are employed received an average 2.8% raise-- barely keeping up with inflation.
Alan Grayson was a voice pushing on behalf of working families on the House Financial Services Committee when that bill was being thrashed out. As a result of his efforts, Wall Street interests spent several million dollars to defeat him the following year. But he's still fighting for us-- against them. He sent me this yesterday:
Yogi Berra once said: "You can see a lot by just looking." This is what you see if you look at corporate income tax revenue, as a percentage of GNP, since World War II:
I came up with this chart myself (hold your applause, please), after downloading the data from the White House's website, here. Corporate income tax revenue has dropped all the way down from 7.2% of GNP at the end of World War II to only 1.2% last year.
Go to a different government website, do a little arithmetic, and you'll find that corporate profits are now 12.7% of GNP. Some division then tells you that corporations are paying less than 10% of their income in taxes.
Wow. That's a tax rate that might make even Mitt Romney blush.
Under the Supreme Court's Citizens United decision, corporations are people. Well, it appears that they are people who pay little or nothing in taxes.
Ben Franklin said: "In this world, nothing can be said to be certain, except death and taxes." For corporations, though, neither is true.
There is something of a consensus among Washington, D.C. policymakers that corporate income taxes ought to be cut. That seems to be why the Obama Administration, unbidden by the Republicans, stuck in $100 billion in corporate tax breaks ("accelerated depreciation") into the so-called "compromise" bill that extended the Bush tax breaks for the rich through this year. (A bill that I voted against, by the way.)
That consensus is wrong. Based on this data, the notion of more corporate tax giveaways is laughable. If you care anything about the federal deficit, then corporate income tax revenues need to be higher, not lower.
If we simply returned corporate income tax revenue, as a percentage of GNP, to where it was six years ago in 2006 (2.7% of GNP), then we would reduce the federal deficit by over $200 billion a year. That is roughly fifty times the amount by which the "Buffett Rule" would reduce the deficit.
Fifty times as much.
Why isn't this all over the newspapers, radio and TV? Why aren't our so-called leaders saying something about this? As Casey Stengel, Yogi Berra's manager during most of his playing days with the Yankees, once asked, "Can't anybody here play this game?"
One more note: the DCCC, which wouldn't lift a finger to help Alan Grayson in 2010, has adamantly refused to help Rob Zerban beat Paul Ryan and adamantly refused to help Wayne Powell beat Eric Cantor. Instead, they're spending millions of dollars on the most conservative Blue Dogs who vote with the Republicans on almost all the important issues, particularly when it comes to the Republican Wars Against... women, gays, working families, education... Take Mike McIntyre (Blue Dog-NC), for example... please. What a piece of work! He voted with Cantor and Boehner against the Dodd-Frank Wall Street Reform and Consumer Protection Act, of course, and in the 2011-12 session he has voted with them-- on crucial roll calls-- 61.78% of the time. Yesterday the DCCC announced a gigantic ad buy-- part of a $32 million expenditure-- to defend him. Almost all the money is being wasted on fake Democrats like McIntyre and almost none is being spent to help progressives. That's the DCCC. Think about it next time they come asking you for a donation. When you donate to the DCCC most of the money you give will go to elect anti-Choice fanatics, anti-gay zealots and political hacks who live for corruption-- just like the DCCC decision makers. By all means, contribute to Democrats, but do it directly through ActBlue-- and for Democrats with whom you agree politically-- like the ones on this page.
UPDATE: From Barney Frank
"The vote by the shareholders of Citigroup to disapprove the pay package for its top executive is one more piece of evidence of the beneficial effect of the Wall Street Reform and Consumer Protection Act which Congress passed in 2010. The say-on-pay provision of that act-- unanimously opposed by House Republicans-– has been falsely characterized as an example of government intrusion. It is, as the Citigroup shareholders’ vote shows, exactly the opposite. It is an empowerment of those who own the corporations of America so that they can control the entities in which they own shares.
"Public unhappiness at the clearly excessive compensation levels for top executives in the financial world is undeniable, and the contrast between large compensation packages and the record of many of these institutions is very troubling. Congress rejected the notion that the federal government should directly intervene by setting pay levels, but we did believe that it was important for shareholders to be able to voice their opinions. In fact, had corporate America been willing on its own truly to honor the principal of shareholder democracy, our legislation would not have been necessary. But we believe that it was necessary, and we think it is now clear that it is also beneficial.
"The vote at Citigroup was important, not only given the significance of Citigroup as a leading financial institution, but also because I believe it will encourage shareholders throughout the financial sector to take their responsibilities seriously. And the result should be a reduction in the excessive levels of compensation to financial company executives that will leave them still extremely well compensated, but not as poster children for unfairness in our country."