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April 22, 2011
Proxy Season Opens for Big Banks
    by Robert Kropp

At Citigroup, resolutions calling for an independent audit of foreclosure practices and the restoration of confidence in the financial system receive shareowner support.


Citigroup became the first of the nation's too-big-too-fail banks to hold its annual general meeting this year, and the mainstream media seems content to describe the sparsely attended gathering as an exercise in unanimity. After all, as was reported in the New York Times, "All of Citiís directors were re-elected with at least 88 percent of the shareholder vote."

Furthermore, as the Times reported, Citigroup returned to profitability in 2010 for the first time since the financial crisis, and earlier this year it paid back the $45 billion dollars it received in Troubled Asset Relief Program (TARP) funds from the US Treasury Department.

But all is far from well in an economy still struggling with a recession and high unemployment, and sustainable investors did file shareowner resolutions with Citigroup that address some of the serious problems still lingering from the crisis.

The New York City Employees Retirement System (NYC Pension Funds) filed a resolution requesting that the board of Citigroup "conduct an independent review of the Company's internal controls related to loan modifications, foreclosures and securitizations."

According to New York City Comptroller John Liu, federal banking regulators recently found "critical internal control weaknesses" in the foreclosure practices of Citigroup and other large mortgage lenders. Furthermore, in rejecting the bank's request that the resolution be excluded from the proxy ballot, the Securities and Exchange Commission (SEC) found that Citigroup's internal audit function is not independent, as the company argued.

The proposal by NYC Pension Funds received 25% of shareowner votes at the annual meeting. Similar proposals are on the proxy ballot at Wells Fargo and Bank of America, whose shareowner meetings will be held in May.

The Interfaith Center on Corporate Responsibility (ICCR) also submitted a resolution at Citigroup, requesting that the company's Board of Directors report to shareowners on "the risk management structure, staffing and reporting lines of the institution and how it is integrated into their business model and across all the operations of the company's business lines."

According to ICCR, the Operations Management Group of the Federal Reserve was directed by last year's passage by Congress of the Dodd-Frank bill to "monitor the global trading of derivatives in an effort to limit the excessive risk-taking that nearly toppled the financial system in 2008, left millions jobless and homeless, and shook global confidence in the markets to its core." The resolution states that "greater transparency and accountability across the sector" is necessary for "restoring public trust and confidence in the financial system."

The first-time resolution received seven percent of shareowner support, which, according to SEC rules, allows it to be submitted again on next year's proxy ballot. ICCR members have also submitted the resolution at Goldman Sachs, J.P. Morgan Chase, and Morgan Stanley.

 

 
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