FirstMerit Bank Shareholders Reject Executive Pay, Following Citi's Path

Next on the say-on-pay hot seat? Maybe Brian Moynihan, President and CEO of Bank of America.

Citigroup shareholders seem to have started a trend.

After the resounding rejection of Citigroup's compensation plan earlier this week, shareholders at other banks are following suit, according to a Wall Street Journal story by Robin Sidel, Suzanne Kapner and Joann S. Lublin Thursday.

The movement reflects a widespread disgust with pay in the banking sector that seems to have finally found its voice with the Citi smackdown. It could affect shareholder meetings coming up this spring at other gargantuan banks such as Bank of America, JPMorgan Chase and Wells Fargo.

It is also having an effect on smaller regional banks. Shareholders on Wednesday rejected the executive pay plan of regional bank FirstMerit Corp., of Akron, Ohio, the WSJ reported. The bank gave its CEO a pay raise to $6.4 million last year from $5.5 million, while its stock fell 20 percent, the WSJ notes.

Coming up later this month and next there will be more shareholders' meetings for regional banks, including Huntington Bancshares Inc. of Columbus, Ohio; Associated Banc-Corp of Green Bay, Wis.; and Hudson City Bancorp Inc. of Paramus, N.J. Proxy advisory firm Glass Lewis & Co., which recommended shareholders vote against pay plans at Citi and FirstMerit, is also against pay plans at these banks, and several more.

It might be difficult to tell just how much trouble shareholders are really making. A recent study by consulting firm Towers Watson found that shareholders so far in 2012 have approved 90 percent of corporate pay plans for 2011. That roughly matches the approval rate for 2011, the first year such say-on-pay votes were required by the Dodd-Frank financial-reform act.

But shareholders may be giving companies a pass because companies are throwing cash around a little less. Average CEO pay rose just 2.6 percent in 2011, according to Towers Watson, while bonuses were flat. The year before, pay was flat, but bonuses jumped 21 percent.

And a new survey of investors by FTI Consulting found that 81 percent think that having a say on pay is "very or critically important" this year. More than 80 percent of investors said they would withhold votes from directors that didn't respond adequately to shareholder concerns about pay.

“Historically, shareholder involvement into boardroom affairs has been reserved for activist investors," Elizabeth Saunders, Americas Chairman of the Strategic Communications practice at FTI Consulting, said in a press release. "But increasingly, we are seeing that the investment community at large wants to have the levers to hold executive leadership accountable for performance and corporate practices."

Heightening the sense of embattlement, the Occupy movement plans to protest at 36 shareholder meetings this spring, Reuters reports. Their first gathering will be at the Wells Fargo meeting, next Tuesday in San Francisco. Bank of America and Morgan Stanley are also on the list, according to Reuters.

The Occupy protesters probably won't spend all their energy yelling about executive pay. But maybe some inspired shareholders will.

"After 15 years, shareholders are beginning to protest," Richard Trumka, president of the AFL-CIO, said on Thursday announcing the results of the labor union's own executive-pay study. It found a significantly bigger gain in CEO pay in 2011, up 14 percent, than the Towers Watson survey. But that was down from a 23 percent gain the year before.

Trumka called the Citigroup rejection a "bell-ringer." And Robert Fields, of New York law firm Fox Rothschild, told the WSJ the Citi event would "raise everybody's consciousness," possibly leading to more shareholder lawsuits for companies that don't listen to shareholders' concerns about pay.

 

Comments

[PatrickforO]

04:13 PM on 04/21/2012

I'm surprised (and gratified) HP ran this article. To my mind, this is a direct result of OWS elevating our national dialog around wealth and income inequities.

I have said before that I feel the central issue of our time is the inordinate amount of control big business exerts on our government.

Now, I don't think that. This is our fault. That's right, the blame lies on our shoulders. We have abrogated our responsibilities as citizens of a republic. To keep this republic we must be informed and engaged.

This means MORE than listening to Rush every day. It means understanding priorities. Is our priority to keep giving big business hundreds of billions in defense contracts and subsidies OR is our priority to fund social security, medicare, financial aid for college and other social programs that actually help the American people?

The defining issue of our time can be summed up in one question:

Is our priority profit over people, or is it people over profit?

I'm all for the latter, and THANKS OWS! for elevating the dialog so people can see this.

[moby49]

11:54 AM on 04/20/2012

Waking up perhaps??

[bullthull]

10:38 AM on 04/20/2012

Good to see , hope it is a trend with legs

[DocJoseph]

10:33 AM on 04/20/2012

Accountability is the ingredient that has been missing from business for the past few decades. Companies, and their directors, should be accountable to the board, the shareholders and the customers. A good, profitable company is a good investment, and the higher echelons have forgotten that.

[AskandThink]

10:35 PM on 04/20/2012

Reminds me of that old saying: You don't have to make a killing to make a living...

[Martha Fair]

08:35 AM on 04/20/2012

I knew this was coming...after completely raiding the assets of the middle class the rich are starting to eat their own. They just never have enough so where do you think they are going to "downsize" next? Laugh my butt off right now. New trend will be to "downsize" the executives and distribute thier salary and bonus among the always hungry shareholders. Now the monkey see monkey do corporate fascists will begin to emulate each other since most are completely devoid of anything creative themselves and easily adopt to the next status quo buzz word or trend. I predicted this months ago here on Huff Post and it's here already. My, my....hmmmmmmmmmm. We need a new suit buzzword for this trend. How about UpsideDown sizing? Feel free to contribute all valid and creative ideas to name this new trend. This could be fun.

[dbackl]

08:26 AM on 04/20/2012

It is about time!!!!

[They Call Me Mr Snark]

08:39 AM on 04/20/2012

Was going to say the same.

[ItsGettingWeird]

08:12 AM on 04/21/2012

It is about them.

[Aneesia]

07:59 AM on 04/20/2012

Take the CEO's bonuses and give them to the employees. We wouldn't be in the mess we are in without the complicity of the banks, and the employees have suffered the wrath of the upper executives who have contempt for their workers !!

[swjacobs]

08:30 AM on 04/20/2012

A 10M USD executive bonus divided amongst all employees at my firm would enrich me by about 30 bucks. Woo hoo.

[Clifford McKinstry]

08:44 AM on 04/20/2012

If you don't want it, I will take it!!

[Peter Everts]

08:45 AM on 04/20/2012

Not the point bucko.

[jistinnkees]

07:49 AM on 04/20/2012

its about time share holders check there morality along with there bank statements

[phatdaddy51]

07:47 AM on 04/20/2012

ceo bonuses turned into dividends would sure make a co.'s investors happy, but making customers happy isn't what the banking industry is all about.

the ceo that can cheat the customers out of he most without getting caught wins and gets the biggest bonus

screw banks any way yuh can. get your money out of 'em and put it somewhere else

[sun07]

07:29 AM on 04/20/2012

Only people can bring revolution and not those 1%. I am so ashamed that in this democratic country we have to fight for our own right. This so called 1% and their cohort politicians are selling their souls for greed leaving 99% of us in despair.
Mr. President tried to do the right thing but these right wing congress always opposed him. It is now time for all of use to show our strength and show them what we can do and fight against social injustice in this great nation.

[bullthull]

10:37 AM on 04/20/2012

Guess he is returning the money from Goldman Sachs then

[Phed Up]

07:06 AM on 04/20/2012

Recently refinanced the small mortgage we had with Citi at our Credit Union. Now all our financial activity is there. Checking, savings, credit card and mortgage. Why anyone is still using a big bank that caused such damage to our economy is beyond me! About time the shareholders revolt.

[rothomaha]

06:52 AM on 04/20/2012

Great! If we don't send 'em to jail, then let's starve 'em to death! Maybe if they have to do some genuine labor(not just the proverbial "work" of doing lunch) they'll get the idea that being a bank prez means doing more than schmoozing. It means getting LEGITIMATE profit on investment and sharing that with others besides the investors - that is, savers are investors, too, folks, since they are using our deposits to generate those profits! Looked at your interest statement lately?

[fscuttle]

08:07 AM on 04/20/2012

Nothing will come of this.He will get his raise.

[HamletsMill]

06:44 AM on 04/20/2012

Judgment Day is coming for them step by step. Enough is enough.

THE SECRET OF OZ - Bill Still
http://www.youtube.com/watch?v=swkq2E8mswI

[Lindeen]

06:01 AM on 04/20/2012

It's about time!!!!

Last year at least one medical device/pharmaceuticl company informed their employees they might not receive a pay raise or their annual bonus, while paying their new CEO an insane salary and cushy benefits.

[jayes]

05:26 AM on 04/20/2012

Nice job FirstMerit shareholders!