After being ousted by a proactive board of directors on Tuesday, Citigroup’s former chief executive Vikram Pandit is unlikely to suffer a decline in his standard of living.
As CEO of Citigroup, a $1.9 trillion asset global banking giant, Mr. Pandit was paid a relatively modest base salary of $1.67 million during 2011. During 2009 and 2010, as Citigroup was struggling to recover from huge losses associated with the financial crisis, Mr. Pandit received compensation of only $1 per year after a shareholder revolt over excessive executive pay.
Mr. Pandit’s base salary, however, represented only a fraction of his total compensation from Citigroup. According to the Washington Post, during his five year reign at Citigroup, Mr. Pandit received the almost incomprehensible sum of over a quarter of a billion dollars.
If Citigroup doesn’t alter Pandit’s pay, its shareholders will have paid him about $261 million in the five years since he became CEO, including personal compensation and about $165 million for the 2007 purchase of his Old Lane Partners LP hedge fund in a deal that positioned him to take charge of the company. Pandit shut Old Lane and booked a $202 million writedown soon after he took the post.
Most shareholders won’t begrudge high pay for a CEO as long as there is a correlation between pay and stockholder returns. In the case of Citigroup, the world was turned upside down as Mr. Pandit walks off with a fortune while shareholders have been decimated by an 89% decline in the value of their shares during the five years that Pandit ran Citigroup.
Is it any wonder that almost half of all Americans have a lack of confidence in the integrity of the banking system?