- The Washington Times - Wednesday, April 22, 2009

NEW YORK |The anger was evident Tuesday at Citigroup Inc.’s annual meeting, where shareholders took turns at the microphone to object to how the bank has been operating.

When Chairman Richard Parsons recognized the five departing members of the board, who include ex-Chairman Win Bischoff and former U.S. Treasury Secretary Robert Rubin, one man from the audience yelled out: “Thank God you’ve gone!”

Despite the rancor on the floor, all returning directors and four new ones were elected with at least 70 percent of the vote, according to preliminary results. And while some shareholder proposals came close to passing, preliminary results showed that none did.

The meeting is usually a well-attended affair lasting many hours as shareholders air their grievances, and Tuesday’s gathering was as somber and full of ire as ever.

But Citigroup Chief Executive Officer Vikram Pandit tried to bring a more upbeat atmosphere to the ballroom at the New York Hilton, emphasizing to shareholders that Citigroup is not the same company it was just a year ago, when it became clear the bank was buckling under the weight of billions of dollars in bad debt.

In his opening remarks, Mr. Pandit said the four new board members will bring “new eyes” to the bank. He also discussed the “new structure” that has split the bank into two parts, and the “new strategy” and “new beginning” on which the company is embarking.

“Citi is one of the great business opportunities of our age,” Mr. Pandit said. “I believe to my core that Citigroup has what it takes to rebound, what it takes to rebuild.”

The four nominees included former U.S. Bancorp CEO Jerry Grundhofer; former Bank of Hawaii CEO Michael O’Neill, former Philadelphia Federal Reserve President Anthony Santomero; and William S. Thompson Jr., former CEO of bond investment manager Pimco.

While many shareholders have been calling for change at the board level for years, some say the new nominations don’t go far enough.

Kenneth Steiner, who said he owns about 10,000 shares, supported a proposal that would require the company to nominate two candidates for every board position instead of just one.

“Right now, it’s a non-election, basically,” Mr. Steiner said. “We know who’s going to win.”

Shareholders - many in suits, a few in baseball hats and jean jackets, and one in a bedazzling red satin cap - brought up other issues, too. They questioned Citigroup’s underwriting standards for credit cards, the government’s involvement in the bank, executive compensation and the decision to sponsor the New York Mets ballpark, Citi Field.

Evelyn Y. Davis, a longtime shareholder who every year takes several trips to the microphone, called the Citi Field deal the “most stupid thing” and a waste of shareholder money.

Other shareholders called the board “Byzantine,” “communist” and “socialist.”

Mr. Steiner said it is ridiculous that a board composed of CEOs and former CEOs gets a say in Citigroup executive’s compensation while shareholders do not.

“It’s like having the Yankees determine the salary of the Mets,” he said.

Through it all, the 6-foot-4 Mr. Parsons remained polite and unflappable as he conducted the meeting from his lectern; one shareholder called him a “gentleman.” Mr. Pandit was similarly calm on the surface, keeping quiet for most of the meeting as he stood at his own lectern on the opposite side of the stage.

Mr. Parsons, known as an adroit manager, broke the tension at times with humor. When a shareholder asked whether any U.S. government representatives were in attendance, he said to laughter from the audience: “If they’re foolish, they can raise their hand.”

Citigroup has received $45 billion in government funding, and a portion of that will soon be converted into common shares.

Citigroup last week posted its best quarter since 2007, but still reported a $966 million loss to common shareholders. Before dividends paid to preferred shareholders, Citigroup posted net income of $1.6 billion. The figure relieved investors to some extent - the bank benefited from strong bond trading, low borrowing rates and severe cost cutting.

But shareholders remain concerned Citigroup could have sharp losses ahead of it. Loan losses and reserve builds for future loan losses amounted to $10 billion. Furthermore, accounting rules allowed Citigroup in the first quarter to take a $2.7 billion gain in its derivatives, because it, counterintuitively, benefited from the declining value of its debt.

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