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Citi's board urges rejection of 6 shareholder proposals

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Citi's board urges rejection of 6 shareholder proposals

Six shareholder proposals are on the agenda at Citigroup Inc.'s April 24 annual meeting, and three of them are about stockholders' power.

One proposal pushes to ease the requirements for shareholder groups nominating members to the board. Citi's bylaws currently allow nominations from those who have held a 3% stake in the company for at least three consecutive years. That 3% stake may be beneficially held by up to 20 shareholders, and they may nominate 20% of the board.

But John Chevedden, citing the Council of Institutional Investors, said that "[e]ven if the 20 largest public pension funds were able to aggregate their shares, they would not meet the current 3% criteria for a continuous 3 years at most companies." Citi's rebuttal is that the limits reduce the risk of abuse by investors with special, possibly short-term interests, and allows "enough stockholder-selected nominees to have a meaningful effect" without hurting board continuity and diversity. The company also noted that Chevedden had been the proponent of a proxy access proposal supported by the board in 2015, and that he is now trying to change terms just recently agreed upon.

A second proposal asks that the stake threshold for calling special shareholder meetings be lowered. Citi's bylaws allow those with a minimum aggregate stake of 25% to call meetings. Kenneth Steiner, however, thinks that should be reduced to 15%. Citi argued that the current requirement means large and small stockholders may work together to raise important issues to the general stockholder population, while those who cannot garner support have other means to raise concerns.

A third proposal, by James McRitchie and Myra Young, is for the adoption of cumulative voting in director elections. Cumulative voting allows each shareholder to cast as many votes as the shares they hold, multiplied by the number of director nominees. Further, the votes can all be cast in favor of even just one preferred candidate.

Citi said the cumulative standard could lead to the election of directors who do not have majority support and whose different interests "impair [board] members' ability to work together."

Three other shareholder proposals involve corporate social responsibility, lobbying disclosures and golden parachutes, respectively.

Harrington Investments Inc. asked that Citi establish a human and indigenous peoples' rights policy. The policy would require the company, when financing projects, to consider the finance recipients' own policies and practices for potential impacts on indigenous communities. Citi's board said it already has a similar policy and pointed out that the proposal had originally been co-filed by Harrington and Mercy Investment Services Inc. Mercy withdrew the proposal after meeting with Citi's representatives, while Harrington has refused to meet with the company, Citi said.

CtW Investment Group, meanwhile, wants an annual report on Citi's lobbying expenditures, both direct and indirect, at local, state and federal levels. The proposal — which Citi tried and failed to exclude from the 2018 agenda — notes that the company is a member of the Chamber of Commerce, the Business Roundtable and the Securities Industry and Financial Markets Association. Those groups spend on lobbying, but Citi does not disclose how much it pays those trade associations.

The company said it already provides the information requested and that its payments to trade associations are "not material" to the company, making the percentage of the payments used for lobbying "even less significant."

The AFL-CIO Reserve Fund is pushing to prohibit the so-called "golden parachute" for senior executives who leave the company for government service. The proposal says: "We oppose compensation plans that provide windfalls to executives that are unrelated to their performance[, and we] question how our Company benefits from providing Government Service Golden Parachutes." Citi said the compensation policy applies to all employees and to jobs in charitable and educational institutions, as well as government. Nor is it so much a "windfall" as an award for services already rendered, the company said. In addition, "no executive officer has resigned and continued to vest in his or her awards by reason of the provision in the last 10 years."

Citi's board asks shareholders to reject the aforementioned proposals.

The company, in its proxy statement, additionally disclosed a 2017 CEO pay ratio of 369 to 1. It paid CEO Michael Corbat $17.8 million in total compensation that year. The median annual total compensation of all other employees was $48,249.