The SEC has ruled that four banking giants – Citigroup, JPMorgan, Bank of America and Morgan Stanley – do not have to hold proxy votes on whether they should be broken up.
Publishing near-identical letters to the four banks, the SEC says that ‘there appears to be some basis for your view’ that the break-up proposals are ‘vague and indefinite’. The firms will not now have to include a vote on this at their upcoming annual meetings.
Break-up calls had come from a variety of sources, including the AFL-CIO Reserve Fund, the American Federation of State, County and Municipal Employees union and even the Benedictine Sisters of Virginia.
AFL-CIO had called for a committee to explore extraordinary transactions ‘resulting in the separation of one or more of JPMorgan’s businesses’. Trillium Asset Management, which proposed the vote at Citigroup, had also called for the creation of a committee to look at ‘extraordinary transactions, such as selling portions of the company’s business, in an effort to increase benefits to shareholders’.
Responding to the Citigroup proposal, Adam Turk, an adviser to the SEC, writes: ‘In applying this particular proposal to Citigroup, neither shareholders nor the company would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires. Accordingly, we will not recommend enforcement action to the commission if Citigroup omits the proposal from its proxy materials.’
In its proposal, Trillium argued that Citigroup’s informal reputation as an institution that was ‘too big to fail’ could subject the company to increasing regulation and scrutiny, while downsizing could avoid that.
‘Citigroup’s progress toward simplifying and de-risking its business has been slow and incomplete,’ Trillium wrote in its letter to the SEC. ‘Citigroup boasts many attractive attributes, but remains burdened by excessive complexity, as well as the stigma and risks associated with being named a ‘too big to fail’ institution.’
In its reply to Trillium’s proposal, Citigroup stated that, due to recent asset sales, ‘the proposal has been substantially implemented because the company has pursued a well-publicized value-maximization strategy to simplify the company, focus on risk management and divest non-core assets.’
