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Will Citigroup Shareholders Sue over Executive Compensation?

Justin Sullivan/Getty Images(NEW YORK) -- Citigroup may get one step closer to a potential legal onslaught from shareholders if it proceeds with its compensation package, which was contested by investors in a rare failed "say-on-pay" vote this week.

Citigroup shareholders voted to reject the company's executive compensation plan during an annual stockholders meeting in Dallas on Tuesday after critics complained that top officials, including CEO Vikram Pandit, enjoy high pay that's not well-connected to increasing shareholder value.

The pay proposal received just 45 percent of votes cast and followed Citigroup's announcement on Monday that profits fell two percent to $2.9 billion from a year earlier, missing analysts' expectations.

Many "say-on-pay" lawsuits against companies do not survive the motion for summary judgment in court, said Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y.  Still, Foley said it is "highly likely" there will be one or more lawsuits against Citigroup if the company proceeds with its pay package.

"If Citigroup acts quickly and significantly maybe that reduces that likelihood or makes an impact.  It depends on what they do," Foley said.

Foley said one driving factor on whether the financial giant moves forward with its executive package is how Citigroup CEO Pandit responds.

"He was paid a very significant amount in 2011 in which they made award commitments to him.  Those don't come off the table unless he or they act," Foley said.  "If they act and he doesn't acquiesce, [the awards] are still his.  As a practical matter, it would have to be a joint action."

Pandit, 55, had $15 million in compensation for 2011, which included a base salary of $1.7 million, a cash bonus of $5.3 million, almost $4 million in deferred stock and another near $4 million in deferred cash.

Included in the compensation package detailed in Citigroup's 2012 annual proxy were multi-year retention award packages for the senior management team.  Pandit's "executive long-term performance retention award" could be worth $40 million, Bloomberg reported. 

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