Vikram Pandit, the Chief Execuive for Citigroup Inc, along with the bank’s directors, have been sued for awarding outsized compensation for its highest executives. The complaint was filed on Thursday in federal court in Manhattan. It alleges that the directors at the bank breached their fiduciary duties by issuing over $54 million in compensation to its executives in 2011. This payment included $15 million to Pandit despite the performance of the bank not justifying the payments.
The compensation package for Pandit was rejected by the shareholders of the bank at Citigroup’s annual meeting, which was held on Tuesday. Pandit’s package was declined by a vote of 55 percent. The rejection vote was the first to reject a compensation package for directors at a major U.S. bank. The complaint said that the vote “has cast doubt on the board’s decision-making process, as well as the accuracy and truthfulness of its public statements. Absent this (lawsuit), the majority will of the company’s stockholders shall be rendered meaningless.”
When the 2010 Dodd-Frank Act was passed, it gave shareholders the right to vote on executive pay at almost all public companies. Richard Parsons, who is retiring as the Citigroup chairman, said that the vote to reject the package would be addressed by the board. In 2009, Pandit received a payment of $128,741 and then a payment of $1 in 2010. Pandit joined Citigroup in 2007 when the bank purchased his hedge fund Old Lane Partners for a total of $800 million. A shareholder for Citigroup filed the lawsuit on Thursday. It was filed by Stanley Moskal with the hopes that it forces Pandit, Parsons and other directors at Citigroup to pay damages to the bank while also hoping Citigroup bolsters its internal controls. Citigroup has yet to issue a statement regarding the lawsuit.
The case is Moskal v. Pandit et al, U.S. District Court, Southern District of New York, No. 12-03114.