Shareholders

April 19, 2012 per the Associated Press: Citigroup has become the first Wall Street bank to get a thumbs-down from shareholders. At its annual meeting April 17, 55% of the bank's shareholders voted against the pay packages granted to Citigroup's top executives, including CEO Vikram Pandit's $14.9 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."

The vote may be nonbinding but it's certainly an embarrassment for Pandit and a warning to other bank CEOs that they need to increase profits or else. And while I'm sure a lot of Americans would be happy to see bank executives get taken down a peg, it's important to note that the interests of bank shareholders and the interests of bank customers aren't always aligned. It's possible a push to bring in more money could result in national banks trying to staunch the flow of customers leaving over new fees and customer service issues. A customer service expert interviewed last month says the only way large national banks can turn their businesses around is by offering better customer service. But Citi actually added 3 million new deposit accounts between the first quarter of 2011 and the first quarter of 2012. Despite defections from thousands of disgruntled customers, the large national banks appear to have little trouble signing up new accounts, thanks to huge advertising budgets and a nationwide network of branches. What seems to be the problem for banks is generating more revenue from customers and as far as checking accounts go, right now that means some combination of cutting costs and increasing fees. So while it may be fun to see bank CEOs sweat a little bit under scrutiny from shareholders the ultimate result could be more expensive checking accounts and fewer branches at the larger national banks.

On December 7, 2011 we heard that CitiGroup was to lay off 4,500 workers. On December 15 we heard that non-Wall Street bonuses were down 15% in the last 4 years.

On February 9 it was reported that the government reached a nearly $26 billion settlement with Bank of America, JP Morgan Chase, Wells Fargo, Ally and CitiGroup for fraudulent foreclosure practices during the housing crisis; 750,000 people who lost their houses will get $2,000 and over 1 million will either get refinancing or have their loans lowered by an average of $50,000 as the value of their house is less than the market price; banks are being forced to relook at mortgages if you’re just $1 behind on your payments and the government is going after Frannie Mae and Freddie Mac next as they have 50% of the mortgage market. (April 22 blog said - The Huffington Post in an article first posted on February 11 and updated on May 25, 2011 said Obama called for the end of Fannie Mae, Freddie Mac and outlines the issues with dismantling the agencies.) On February 16 we heard CitiGroup paid $158 million to settle accusations that it took advantage of the federal mortgage insurance program. On April 7, the federal government ordered 70 executives at the bailed out GM, Ally Financial and AIG to take a 10% pay cut because they still owed the government money.

On April 13 Goldman-Sachs was fined $22 million for so-called trading huddles and the former Best Buy CEO is being investigated for an improper relationship with an employee. Also, on April 13 we heard the Exxon CEO was awarded a $34.9 million package in 2011; a 20% increase over 2010. On April 14 we heard Wall Street closed at its lowest point of the year (because of a decrease in China’s economy and an increase in European borrowing); despite this gas prices are going down and some believe it’s because of a slowing global demand, increased Saudi Arabia production and the Iran talks; others say they’re not sure prices will continue to decrease because of unknown European and Iran issues as well as the change in fuel for the summer. On April 17 a study found 21% of New York City residents lived in poverty in 2010. On April 18 - The gap in pay for the highest and lowest paid is widening; between 2009 and 2011 the top got 7% more while the bottom got 2.5%. On April 20 we heard that because of job layoffs, a low housing market and a slowdown in manufacturing the economy’s recovery is slowing. On April 21 we heard that the top 10% of American earners made 9% more in 2011 than the average American and WalMart hushed up a bribe network in Mexico where 20% of its stores are located.

If you were a bank shareholder, would you want them to increase profits by making fundamental changes and dealing with some of the problems they've been having with customers lately or would you want them to simply increase fees on existing customers? I think I now know why 99% of the 99% doesn’t support the Occupy Wall Street Movement; some are greedy shareholders like their company CEOs.

If I were a shareholder I would want my company to reduce CEO pay, quit making illicit transactions that waste millions in settlements and leave the little guy alone.