Ever since the beginning of the financial crisis and Great Recession, we have consistently raised ethical and corporate governance issues with Citigroup (C). Citigroup, since 2010, has paid over $15 billion in penalties for everything from toxic security abuses to interest rate manipulation. In one Citigroup / SEC settlement, Judge Jed Rakoff rejected as “paltry” a fine of $285 Million, in which the bank agreed to the settlement without admitting wrongdoing, as the SEC’s long-standing policy of “neither-admit-nor-deny” or what really amounts to “simply the cost of doing business”.

After reading Professors Claire Hill and Richard Painter’s book, Better Bankers, Better Banks: Promoting Good Business Through Contractual Commitment, which called for a covenant between financial executives and their banks, HII especially thought it voiced an appropriate philosophy for bank executive responsibility. Banks, both domestic and foreign, have paid over $160 billion in fines and settlements since the financial crisis to resolve cases against them, while senior management has largely escaped individual and collective responsibility/liability.

The covenant included in our resolution calls for financial executives to accept personal liability for a portion of any fines and fraud–based judgments the bank enters into, including legal settlements.
In addition to our resolution creating a covenant for executives to sign taking personal responsibility and accept liability for a portion of any fines and penalties, one of our colleagues, John Chevedden, earlier also submitted a resolution relating to the “claw back of executive compensation” to require corporate executive officers’ annual total compensation to be deferred and forfeited to help satisfy monetary penalties for unlawful corporate activities regardless of individual determined responsibility. I withdrew my resolution upon the condition that Citigroup would not challenge Chevedden’s similar resolution at the SEC. Citigroup agreed, and Chevedden’s resolution will be on the proxy ballot for a shareholder vote this year.




Shareholder Resolution 2017

Whereas, our Company’s board of directors, upon the recommendation of the Nomination, Governance, and Public Affairs Committee, is responsible for the form and amount of director compensation;

Whereas, the Personnel and Compensation Committee of the Board is responsible for determining the compensation and incentives of the Chief Executive Officer and other members of senior management and certain highly compensated employees;

Whereas, our Company has engaged in business conduct that has created systemic risk and that has been harmful to many stakeholders, especially our customer base;

Whereas, our Company has paid out in excess of 15 billion dollars in fines and penalties, penalizing shareholders, while senior management and directors have largely escaped financial hardship and individual and collective responsibility;

Whereas, since the beginning of 2010, major United States and foreign banks have paid over 160 billion dollars in penalties (fines and settlements) to resolve cases brought against them by the Justice Department and federal regulatory agencies, many of these cases involving systemic risk and widespread harm to banking consumers;

Whereas, in the Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States submitted to Congress in January 2011, the majority of the members concluded, among other things, that there were “dramatic failures of corporate governance and risk management at many systemically important financial institutions . . .” including “. . . there was a systematic breakdown in accountability and ethics.”

Whereas, after nearly a decade since the financial crisis, some firms continue to experience systematic breakdowns manifested through significant violations due to poor cultures of compliance;

Whereas, Better Bankers, Better Banks: Promoting Good Business Through Contractual Commitment called for a covenant between financial executives and their bank, requiring personal liability for a portion of any fines and fraud-based judgments the bank enters into, including legal settlements;

Resolved, that shareholders request the board of directors issue a report reviewing senior executive compensation, to assess the feasibility, above and beyond matters of legal compliance, of requiring senior executives to enter a covenant as part of the contract renewal process in which they would be required, regardless of their personal fault, to pay a portion of any fine or penalty imposed during the contract period on the corporation by federal or state regulators or courts for activities which pose systemic risk or which are harmful to consumers.

Supporting Statement
A no-fault contractual agreement between Citigroup and its management may place individual responsibility on executives and their colleagues to curb behavior that creates systemic risk or substantially harms consumers, the result of which often results in losses to shareholders. Such a covenant between our bank and management could not only motivate senior management to be personally responsible for monitoring their own behavior, but also to be on the alert for colleagues’ misbehavior and unethical activities.