In a stinging rebuke, Citigroup shareholders rebuffed on Tuesday the bank’s $15 million pay package for its chief executive, Vikram S. Pandit, marking the first time that stock owners have united in opposition to outsized compensation at a financial giant.  The shareholder vote, which comes amid a rising national debate over income inequality, suggests that anger over pay for chief executives has spread from Occupy Wall Street to wealthy institutional investors like pension fund and mutual fund managers. About 55 percent of the shareholders voting were against the plan, which laid out compensation for the bank’s five top executives, including Mr. Pandit.  “C.E.O.’s deserve good pay but there’s good pay and there’s obscene pay,” said Brian Wenzinger, a principal at Aronson Johnson Ortiz, a Philadelphia money management company that voted against the pay package. Mr. Wenzinger’s firm owns more than 5 million shares of Citigroup.  While the vote at Tuesday’s annual meeting in Dallas is not binding, it serves as a warning shot to other banks that have increased the pay of their top executives this year despite middling performance.  After the vote, Richard D. Parsons, who is retiring as Citigroup chairman, said that he takes the vote seriously and Citi’s board will carefully consider it.  Mike Mayo, an analyst with Credit Agricole Securities, said: “This is a milestone for corporate America. When shareholders speak up about issues on which they’ve been complacent, it’s definitely a wake-up call. The only question is what took so long?”  Shareholders rarely vote against compensation plans. The votes are part of the Dodd-Frank financial overhaul that mandates that public companies include “say on pay” votes for shareholders to express opinions about compensation. Last year, only 2 percent of compensation plans were voted against, according to ISS Proxy Advisory Services. In some instances, boards responded by reducing executives’ pay.  In Citigroup’s case, ISS itself recommended that shareholders vote against the pay proposal, citing concerns that the compensation package lacked “rigorous goals to incentivize improvement in shareholder value.” At Tuesday’s meeting, 75 percent of the shareholders voted.  Excessive pay has been a long-running problem at Citigroup, dating to well before Mr. Pandit became chief executive in 2007, analysts said. Citigroup has had the worst stock price performance among large banks over the last decade but ranked among the highest in terms of compensation for top executives, Mr. Mayo said.  Citi shares closed at $35.08 Tuesday, up 3.18 percent amid a market rally. Citigroup shares remain down more than 80 percent since the financial crisis.  Last year, Mr. Pandit’s compensation included a $1.67 million salary and a $5.3 million cash bonus. In addition, he received a retention package valued at $40 million, to be awarded through 2015. In 2009 and 2010, as Mr. Pandit struggled to pull the bank back from the brink, he accepted only a $1 annual salary.  Still, investors say that it is too soon for the bank to start giving out generous pay packages again. “The company has been flatlining,” said Mike McCauley, a senior officer at the Florida State Board of Administration, which voted its 6.4 million shares against the plan. “The plan put forth reveals a disconnect between pay and performance.”  Calpers, the California state pension fund, also voted against the plan. The issue was whether pay was linked to performance and whether those targets were spelled out and sustainable over the long term, said Anne Simpson, director of corporate governance for Calpers, which owns 9.7 million Citigroup shares.  “Citi was found wanting on both,” she said. “If you reward them for focusing on high-risk, short-term profits, that’s what you get, and that’s how the financial crisis caught fire.”  Not all institutional investors are unhappy. Bill Ackman, the head of Pershing Square Capital Management, which owns more than 26 million shares, said he thinks that “Vikram Pandit is doing an excellent job and the bank has made tremendous progress during his tenure.”  Noting that Mr. Pandit received just $1 a year in 2009 and 2010, Mr. Ackman called the current package “an appropriate level of compensation.”  In justifying the pay package, the company noted in its proxy filing that Citigroup net income was $11.1 billion in 2011, up 4 percent from 2010 and that it paid back the federal government billions in bailout loans and deferred cash awards to “limit incentives to take imprudent or excessive risks.”  Even as Citigroup’s earnings and capital cushion have improved, the bank has struggled to make up for lackluster revenue. Citi was dealt a further blow in March when the Federal Reserve rejected the bank’s proposal to buy back shares and increase its dividend. While Citi intends to submit a revised plan to the central bank this year, shareholders say that with a quarterly dividend of one cent, Citi’s top executives shouldn’t be rewarded.  “Citigroup was terribly managed and whatever could be done wrong, they did wrong,” said David Dreman, whose money management firm owns about $400,000 worth of Citigroup shares. While many of those mistakes predated Mr. Pandit, he said, it was way too early to start handing out generous pay packages. “Shareholders have finally done something constructive on the whole C.E.O. pay problem,” he said.  Mr. Pandit’s compensation is higher than some more successful rivals, according to proxy filings. Lloyd C. Blankfein, the chief executive of Goldman Sachs, received $3 million less than Mr. Pandit’s $15 million, while James P. Gorman, the chief of Morgan Stanley, had a pay package of $10.5 million.  Still, disapprovals are rare. Last year, shareholders at 42 companies — out of more than 3,000 firms — voted against pay plans. In one of the most visible renunciations, shareholders at Hewlett-Packard, which has struggled with lackluster returns, voted against the pay for the technology company’s top executives, including the chief executive, Meg Whitman.  Companies should brace for more shareholder denunciations, said James D. C. Barrall, an executive compensation lawyer at Latham & Watkins. The nation’s other major banks have their annual meetings in the coming weeks.  Bank of America, whose shares have also struggled, could be the next bank to feel shareholders’ wrath when it holds its annual meeting May 9, executive compensation consultants said. Its chief executive, Brian T. Moynihan, received $7 million for 2011, down from $10 million the previous year.  “There could be a real disconnect between pay and performance at Bank of America,” said Frank Glassner, a partner with Meridian Compensation Partners, an executive consulting firm.
Citigroup's shareholders voted down an endorsement of the bank's plan to award its chief executive, Vikram Pandit, $15 million in compensation, in a show of frustration about Wall Street pay.