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
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
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.
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.
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.