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Speakers vent anger at Citi meeting

Wednesday, April 22, 2009

NEW YORK -- Five hours and dozens of angry speakers into Citigroup Inc.'s annual meeting Tuesday, a long line of shareholders still waited at the microphone for their chance to vent.

Everything was fair game -- from executive pay to the company's decision to sponsor the Mets' new baseball stadium, Citi Field. When Chairman Richard Parsons recognized five departing members of the board, a cry rose from the audience: "Thank God, you've gone!"

Citi, the nation's third largest bank by assets, was the first major bank to hold its annual meeting since last year's financial collapse, and its future remains uncertain with the government soon to become its biggest shareholder.

Chief executive officer Vikram Pandit tried to appease the group at the New York Hilton hotel, emphasizing to shareholders that Citigroup is not the same company it was just a year ago, when it was became clear the bank was buckling under the weight of billions of dollars in bad debt.

Despite shareholders' venom, all returning directors and four new ones were elected with at least 70 percent of the vote, according to preliminary results.

And while some shareholder proposals came close to passing -- including one that would have allowed shareholders to call special meetings -- preliminary results showed none did. Final results will not be released until May, the bank said.

The four new board members are former U.S. Bancorp CEO Jerry Grundhofer, former Bank of Hawaii CEO Michael O'Neill, former Philadelphia Federal Reserve President Anthony Santomero and William S. Thompson Jr., former CEO of bond investment manager Pimco.

While many shareholders have been calling for change at the board level for years, some say the new nominations don't go far enough.

Kenneth Steiner, who said he owns about 10,000 shares, supported a proposal that would require the company to nominate two candidates for every board position instead of just one.

"Right now, it's a nonelection, basically," Steiner said. "We know who's going to win."

Shareholders -- many in suits, a few in baseball hats and jean jackets, and one in a bedazzled red satin cap -- brought up other issues, too, questioning Citigroup's underwriting standards for credit cards and the government's involvement in the bank.

Other shareholders called the board "Byzantine," "communist" and "socialist."

Steiner said it is ridiculous that a board composed of CEOs and former CEOs gets a say in Citigroup executives' compensation while shareholders do not.

"It's like having the Yankees determine the salary of the Mets," he said.

Through it all, the 6-foot-4 Parsons remained polite and unflappable as he conducted the meeting from his podium. Pandit was similarly calm as he stood at his own podium on the opposite side of the stage.

Parsons thanked Evelyn Y. Davis, a longtime shareholder who criticized the Citi Field deal as a waste of shareholder money, but said nothing about reconsidering the agreement.

Known as an adroit manager, Parsons broke the tension at times with humor. When a shareholder asked if any U.S. government representatives were in attendance, he said to laughter from the audience: "If they're foolish, they can raise their hand."

Chuck Jones, who said he owned about 25,000 Citi shares, asked Parsons and the board whether they were betting on Citigroup's recovery and buying Citigroup shares.

"How many of these directors," Jones asked, "bought Citi at a dollar a share?"

"I wish I had," Parsons said with a chuckle. Citigroup's shares have tripled since dropping to 97 cents in early March.

Citigroup has gotten $45 billion from the government, and a portion of that will soon be converted into common shares, making the Treasury Department its largest shareholder.

Citigroup last week posted its best quarter since 2007, but still reported a $966 million loss to common shareholders.

Shareholders remain concerned Citigroup could have sharp losses ahead of it. Loan losses and reserves being held to cover future loan losses amounted to $10 billion. Furthermore, accounting rules allowed Citigroup in the first quarter to take a $2.7 billion gain in its derivatives, because it, counterintuitively, benefited from the declining value of its debt.

Angry shareholders are nothing new to Citigroup. It has been several years since shareholders started calling for the ouster of ex-CEO Chuck Prince as Citi's stock lagged its peers. That finally happened in late 2007, but was then followed by a string of quarterly losses and three government bailouts.

So this year's meeting -- which went about two hours longer than usual -- was marked by not only ire, but exhaustion. After about four hours of shareholder commentary, the audience of several hundred in the midtown Hilton ballroom had dwindled by about half.

"How many more years do you have to sit through a shareholder meeting like this before you get it right? You need a new director core," said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees. Ferlauto proposed to vote against the board members on Citigroup's audit and risk committee.

Shareholders also questioned whether the company had enough money to pass the government's stress test and why, if it did have enough capital, Citigroup was diluting it common stock by converting the government's investment into common shares.

Pandit said he believed the company should have the wherewithal to survive the test, but he said shareholders should wait for the government's results on May 4 for the answer.

"This," Pandit said, "is a once-in-a-generation thing we're going through."


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