Robert Reich notes a development in the corporate world worth keeping an eye on:
The Significance of Citigroup’s Shareholder Revolt, by Robert Reich: The shareholders of Wall Street giant Citigroup ... said no to the exorbitant $15 million pay package of Citi’s CEO Vikram Pandit, as well as to the giant pay packages of Citi’s four other top executives.
The vote, at Citigroup’s annual meeting in Dallas Tuesday, isn’t binding on Citigroup. But it’s a warning shot across the bow of every corporate boardroom in America.
Shareholders aren’t happy about executive pay.
And why should they be? CEO pay at large publicly-held corporations is now typically 300 times the pay of the average American worker. It was 40 times average worker pay in the 1960s and has steadily crept upward since then as corporations have morphed into “winner-take-all” contraptions that reward their top executives with boundless beneficence and perks while slicing the jobs, wages, and benefits of almost everyone else.
Meanwhile, too many of these same corporations have failed to deliver for their shareholders. Citigroup, for example, has had the worst stock performance among all large banks for the last decade but ranked among the highest in executive pay.
The real news here is new-found activism among institutional investors – especially the managers of pension funds and mutual funds. They’re the ones who fired the warning shot Tuesday.
Institutional investors are catching on to a truth they should have understood years ago: When executive pay goes through the roof, there’s less money left for everyone else who owns shares of the company. ...
Two key questions for the future: Will institutional investors keep the pressure on? And will CEOs and boards of directors get the message?
It's a start, I suppose, but we'll see if anything actually changes. I'm pessimistic.