Citigroup senior management decline bonuses
21 Jan 2009
Citigroup today disclosed that certain executives, including CEO Vikram Pandit, declined to be considered for recently approved incentive or retention awards.
In addition to the CEO, chairman Sir Winfried Bischoff and CFO Gary Crittenden also declined to be considered for the awards, according to a document filed with the US Securities and Exchange Commission (SEC).
The broader markets welcomed this news as the stock is trading at $3.07 up $0.27 from Tuesday's close. With the advance, the stock stands to open having reversed some recent losses. Citigroup, which last week reported an $8.29 billion loss for the fourth quarter, is down 58 per cent this year on the New York Stock Exchange. The stock fell 70 cents yesterday, or 20 per cent, to $2.80.
Year-end bonuses, which typically account for two-thirds of Wall Street compensation, are being cut after financial-services companies racked up more than $1 trillion of write-downs and losses and the US government passed a $700 billion rescue plan.
Lloyd Blankfein of Goldman Sachs Group Inc. and John Mack of Morgan Stanley are among CEOs not getting bonuses for 2008. Banking executives in Germany, Britain and France have also turned down payments. (See: Goldman Sachs senior executives to forgo bonuses for 2008 / Barclays' senior executives too to forego annual bonuses / UBS executives to repay over $58 million of bonuses; bank admits some fraud)
Citigroup's other executive committee received stock awards that vest if the price of the company's common stock meets specified price targets during the next four years. Half of each individual's award has a price target of $17.85 and half has a price target of $10.61.
These price levels were based on the conversion prices of the warrants to purchase common stock issued by Citigroup to the US Department of the Treasury on 28 October 2008 and on 31 December. These executives also received premium priced stock options, which have a 10-year term and will vest ratably over four years, the filing said.
''The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower,'' Pandit said last month when he told employees of the decision to forgo a year-end payout. He had received 1 million Citigroup shares as part of a ''sign-on'' bonus last January, in addition to a $2.5 million ''retention equity award,'' the company said in March.
Pandit also got $165 million from Citigroup in 2007 when he sold Old Lane Partners LP, the hedge fund he co-founded and ran. Citigroup closed New York-based Old Lane in June and took a $202 million write-down on its $800 million investment. (See: Citigroup to shut down Vikram Pandit's hedge fund Old Lane Partners)
