Worth the Price of Admission
I told you about my plan to attend the Citi annual shareholders
meeting, last Tuesday here in New York. It was all the spectacle I
hoped it would
be and more. I have to say, until two days ago I never, ever
imagined myself attending one of these meetings. It just had never
crossed my mind, and until I moved to Manhattan, most meetings
would never have been within striking distance anyway.
The place was packed. The meeting was in the Grand Ballroom of
the Hilton. When I got off the escalator I realized I was standing
in the same room where the final scene of Michael Clayton was
filmed. Kind of eerie.
My world is changed, let me tell you. This was amazing. The
shareholders were angry, the executives were holding their own, but
I do think I saw beads of sweat on the forehead of Sir Winfried
Bischoff, the chairman. Vikram Pandit, the new CEO seemed to be
trying to strike a balance between a positive outlook for the
future, an apologetic stance for catastrophes that occurred before
he took the wheel, and some sort of stretch for humility over
the…wait, let me check the numbers…1,094,098 shares of common
stock excluding options, $2,500,000 retention equity award, and the
gajillion bazillion dollar rest of the package that has been
reported
The total package is in excess of $200 million.
I hate to say it, but at times he came off as rather flippant,
for example when he was confronted by personal stories of long time
Citi employees facing layoffs, and was asked to return some of his
salary to save their jobs. “These are hard decisions,” didn’t quite
play. He could take some lessons from Win Bischoff on appearing
sympathetic while dodging the issue. That’s only partly tongue in
cheek, because in truth there were no answers to some of the
questions in the blame game, and Bischoff did bring an air of grace
to the otherwise ugly, and sometimes comical proceedings.
He also impressed me by appearing genuinely sympathetic to the
corporate responsibility concerns that were put before him. I would
very much like to think that having human rights and environmental
issues presented by shareholders at an annual meeting can sway
corporate behavior in the long term. I have no illusions about
immediate action, but bringing it to the table seems like a great
first step.
And bring it, they did. In a room full of angry shareholders
asking for the heads of the directors on silver platters, the
voices that stood out with calm, eloquence, and forceful courtesy
were those of people like Amy O’Meara, speaking for Amnesty
International, and Maria G., talking about the destruction of her
hometown by mountain top removal coal mining.
Being totally new to this, I had no idea that by owning a single
share, you buy the right to stand face to face with the chairman
and the CEO of a company like Citi and speak your mind. Indeed,
that is exactly how it works.
Any shareholder can put forth a resolution, which the company
responds to in print in the proxy statement. The deadline to submit
a proposal for the next annual meeting is November 18, 2008. Any
shareholder holding stock on the date of record, which this year
was February 25th, receives a ticket to attend the meeting in
person, or vote their shares by mail, telephone, or over the
Internet. As I understand it, resolutions are not binding, but they
can send a strong message. There are plenty of examples of
shareholder resolutions that have been proposed year after year and
eventually adopted.
In the meeting, someone takes the floor and presents the
resolution in a prepared statement. Anyone can comment on that
resolution. Everyone votes, and then there is a question and answer
session. Microphones are set up in the hall, and if you have
something to say, all you have to do is get in line and say it. You
have the floor.
I listened to a lot of calls for change in executive
compensation, stories of long time employees who are being laid
off, an elderly man in retirement who has seen the income from his
stock cut in half. There were stories of devastated pension
plans–and of course a lot of blame being passed around over the
subprime losses. The general feeling was that those loans never
should have been made in the first place, and everyone should have
seen it coming.
About halfway through the Q&A, I realized I had something that
needed to be said. I’m not exactly a wall flower, but my knees were
shaking nonetheless. Here’s what I told them:
I offered a different perspective on the subprime situation. I
told them that there was a
that should have been recognized across the industry, but it was
missed. Most of the people who signed on for these
loans were people who had been completely disenfranchised from the
wealth building system, people who had been renting and never had a
hope of owning their own homes. When they qualified for a loan, they
were buying a lottery ticket, in hopes of being able to build a
better future. In a foreclosure, the burden is in stress and in
transaction costs, but in the end, they go back to renting.
I told them that it is human to help someone live in a house that
they own, but what is not humane is the predatory lending practices
that went along with these loans. Subprime may be dead, they may
not be issuing any more of these loans, but there are still loans
that are held, and now we are hearing about predatory foreclosure
practices. I suggested that they need to act now to stop the
bleeding.
But more than that, there are lessons to be learned from this.
These loans are high margin instruments, that is why everyone is
holding them. There was a lot of money to be made. I said that it
was being made on the backs of the most disenfrachised part of
society. What I didn’t say, but what is true, is that many of these
loans were made to women and single parents trying to raise a
family.
I told them that I support the people who spoke on issues related
to human rights and the environment, and I commended them on the
commitment they expressed toward those issues. I suggested
that social justice and social equity can be profitable–and that
when social justice is ignored, it can lead to the kind of
catastrophe that we are now experiencing.
I asked them to keep these lessons in mind in the future, and to
dedicate themselves to making Citi a leader as a company that holds
itself to the principles that profitability is not only financial,
but also reflect the principles of environmental protection and
social justice.
Win Bischoff responded very graciously, and acknowledged that indeed
lessons do need be learned for the future. Not all comments were
responded to, and I respected him taking a moment to do so.
The angry mob in the room clamoring for profits gave me a very
warm round of applause.
