Citigroup came under growing pressure to overhaul its board on Tuesday after it revealed that two long-serving directors survived a shareholder vote largely thanks to a balloting rule that is due to be scrapped.
The results, revealed in a regulatory filing, prompted dissident investors to call for the ousting of the directors, Michael Armstrong, former chief executive of AT&T, and John Deutch, former head of the Central Intelligence Agency.
"We are calling on them to resign immediately. We believe the vote is a repudiation of their tenure on Citi's board," said Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees, one of the unions that had called on Citi to change its board.
Mr Armstrong has been a director of Citi or its predecessors since 1989 and headed its audit and risk management committee in the run-up to the financial crisis. Mr Deutch, who has been on the Citi board since 1996, succeeded Mr Armstrong at the committee's helm.
Citi, which is selling a 34 per cent stake to the government as part of its latest bail-out, has replaced five of its 14 directors including Robert Rubin, former Treasury secretary and has indicated it wants to change one or two more.
The filing showed Mr Armstrong and Mr Deutch received about 2.6m votes in favour of their re-election, about 72 per cent of the total votes.
However, nearly half of the total votes came from brokerages, which usually back management proposals due to a 72-year old rule that allows them to vote on clients' behalf.
The provision, due to be axed by the Securities and Exchange Commission this year, states that brokers who do not receive instructions from clients 10 days before a vote can back management's proposals.
Lynn Turner, a corporate governance expert and former SEC chief accountant, said that without brokers' votes, Mr Armstrong and Mr Deutch would not have been re-elected.
Citi said: "All of our directors received a significant majority of votes cast. It would undermine the principle of majority rule for a director who receives 70 per cent of the vote to resign because 30 per cent voted against him."
The bank declined to comment on the the number of brokers' votes, which rose from 25 per cent of the total last year to 46 per cent this year.
People close to the company said it was impossible to conclude that all brokers' votes had backed the directors.
They added that there was no way of telling that all brokers' votes would have gone against the two directors had clients given detailed instructions to their brokers.
Separately, Citi said it would use up to $5bn of the $45bn in federal aid it received for a new municipal lending programme.
Copyright: The Financial Times Limited 2009
