Following the recommendation of consulting firms, the General meeting of Citigroup issued an unfavourable opinion concerning the remuneration of the Chief executive officer (CEO)

© thejournalofregulation

This episode shows that the Dodd-Frank Act is beginning to have certain amount of effectivity concerning the compensation of officers, even it remains doubt on this matter a short time ago. Indeed, information on the ratios is sufficient to trigger a shareholder revolt, under the leadership of the Consulting firms, practice illustrates here the theory of "Law and Finance". Shareholder activism serves his purpose. It does not matter if here the opinion was just an advice: once that it is public, because the capital market plays the role of «Echo Chamber», so it have the same value as the law.

Indeed, if it is legally true that the Board of Directors are not bound by this opinion, shareholders (which reflect the market) expressed an opinion more restrictive than many legal acts with legally biding.

It’s clear that Regulation and the Corporate governance meet, especially the one applied to banks, in which the distinction between the supervision of financial markets (Regulation) and the monitoring of the internal organisation of the operators (Governance) has little meaning because they are systemic operators.

Information have to be be given to shareholders, that is to say the real amount of benefit provide to the manager, and the ratio with the average earnings of the employee of the company, which was the case here, but it’s not obvious that, ("criminal education" helping) the boards continue to give this information, even they know to what cut-of-time this exposes the officers which composed the board.