Bid to Limit Citigroup Severance Deals Fails

Citigroup Inc. Chairman Sanford Weill, who earned $30.3 million last year, overcame a dissident shareholder move to limit executive severance payments after the bank said the plan would hurt recruitment.

The proposal to require a shareholder vote for any pay for an ousted executive that exceeds three times annual compensation garnered 46.5% of shareholders’ support, or 1.65 billion Citigroup shares, at the annual meeting of the largest U.S. bank.

Shareholders including SEIU Master Trust, with $1.5 billion in assets, proposed the measure after Enron Corp.’s collapse fueled concern that executives are putting their personal interests above shareholders. The depth of support by shareholders such as the California Public Employees’ Retirement System underlines the importance of the issue, experts said.

“There’s never been a high-profile company where this sort of proposal received this level of support,” said Patrick McGurn, director of corporate programs at Institutional Shareholders Services Inc., which backed the proposal.

Shareholders favoring the plan secured the highest percentage of support for severance pay limits of any company with a market value of $10 billion or more, according to the Investor Responsibility Research Center in Washington. Citigroup’s market value is $248 billion. CalPERS, which manages more than $150 billion in assets, voted 27 million shares in favor of the proposal.

At the meeting in New York, Weill said the provision requiring a shareholder vote would be difficult. Citigroup will meet shareholders’ concerns by starting limits on severance packages that follow a takeover, he said.

“We have never had golden parachutes,” Weill said at the meeting. “We don’t believe in them.”

Weill’s former co-Chairman, John Reed, took away a $30 million package plus $5 million a year for life after he was forced out of the bank in 2000, according to the Journal of Accountancy.