citibank case study
Ethics, values, and sustainability
Prof. Lovas
March 27, 2014
Citibank Case Study
1. I believe that the provisions made to the Dodd Frank Act that mandates advisory shareholder votes on executive compensation was a good change. I agree with this provision because I believe that the shareholders should ultimately have a say I'm what sort of compensation the executives of the company are taking. They are the real company owners and it's their money that's on the line if Citibank doesn't succeed. In the recent recession their track record hasn't been great. Citi recently failed a stress test done by the federal reserve to see if they had enough capital in their reserves to combat a severe downturn. They are currently ranked in the bottom 3 of the 17 banks according to forbes. At the same time the CEO is proposing that he gets paid a 1.7 million dollar salary with a cash bonus of 5.3 million dollars. If that isn't enough that was only a portion of the 15 million dollar package to paid to him over four years. With citi in the current state they are in the executives should not be taking this much money as compensation. They are draining valuable capital that could be used to fix the problems that they already have. The shareholders should have the last say on if this can be allowed because that's money coming out of their pockets. Not the executives.
2. The arguments for the compensation package are that the company over the past year had grew due to the CEO that the pay is proposed to. According to them if it wasn't for him being in charge the company would have never grew that year. He had" led cities return to profitability and...positioned the company for future growth." The bank had seen a 4 percent increase over the past year. The argument by the executives is that much of the compensation was deferred and subject to meeting performance targets. What the shareholders don't know is that pandit had taken a salary of just 1$ a year for 2 years
Prof. Lovas
March 27, 2014
Citibank Case Study
1. I believe that the provisions made to the Dodd Frank Act that mandates advisory shareholder votes on executive compensation was a good change. I agree with this provision because I believe that the shareholders should ultimately have a say I'm what sort of compensation the executives of the company are taking. They are the real company owners and it's their money that's on the line if Citibank doesn't succeed. In the recent recession their track record hasn't been great. Citi recently failed a stress test done by the federal reserve to see if they had enough capital in their reserves to combat a severe downturn. They are currently ranked in the bottom 3 of the 17 banks according to forbes. At the same time the CEO is proposing that he gets paid a 1.7 million dollar salary with a cash bonus of 5.3 million dollars. If that isn't enough that was only a portion of the 15 million dollar package to paid to him over four years. With citi in the current state they are in the executives should not be taking this much money as compensation. They are draining valuable capital that could be used to fix the problems that they already have. The shareholders should have the last say on if this can be allowed because that's money coming out of their pockets. Not the executives.
2. The arguments for the compensation package are that the company over the past year had grew due to the CEO that the pay is proposed to. According to them if it wasn't for him being in charge the company would have never grew that year. He had" led cities return to profitability and...positioned the company for future growth." The bank had seen a 4 percent increase over the past year. The argument by the executives is that much of the compensation was deferred and subject to meeting performance targets. What the shareholders don't know is that pandit had taken a salary of just 1$ a year for 2 years