Citigroup, still partly owned by the US government after a rescue during the financial meltdown, is giving raises to top executives that could amount to millions of dollars.
CEO Vikram Pandit, who is drawing a salary of US$1 for the second year in a row, did not get a raise.
The announcement on Friday raised questions among experts on corporate governance. By paying the raises in company stock, not cash, Citi has decided to follow previously issued guidelines that limited salaries to US$500,000 for the top 25 executives at financial institutions still receiving large amounts of federal help.
“The question is do they deserve higher salaries, and are they evading rules to avoid losing talent?” asked Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware.
Citi is fighting to keep talented bankers from jumping ship to any of its rivals on Wall Street, all of whom have repaid their federal bailout money and are not under the same kind of restrictions.
Bank spokesman Edward Skyler said the compensation levels “correspond with similarly situated executives in the industry.”
Citi was the hardest-hit US bank during the credit crisis of 2008, and received US$45 billion in government bailout money, part of which was converted to stock last year. The government is gradually selling its stake and owns about 17 percent of the bank.
Even today, Citi continues to be weighed down by large amounts of bad loans and investments it made in the run-up to the crisis. The bank posted a loss in the third quarter after two straight quarters of profits.
Pandit, who pledged last year to take a US$1 salary until the bank returned to profitability, elected to keep that figure for this year, but he seems set for a big payday next year. Citi’s chairman, Richard Parsons, said in a statement that beginning next year the bank’s board “intends to compensate Vikram commensurate with the job of CEO of Citi.”
The biggest raise disclosed in Citi’s regulatory filing will go to John Havens, head of the bank’s institutional clients group. He will get a cash salary of US$500,000 this year, the maximum under the cap, and US$9 million of salary paid in stock.
That compares with US$975,000 last year, also in cash and stock. Including other stock and options, Havens’ total compensation last year was US$11.2 million.
Citibank did not disclose how much Havens might receive in other stock grants, but he could be eligible for a bonus of up to 50 percent of his salary.
Manuel Medina-Mora, head of consumer banking for the Americas, will also get a cash salary of US$500,000 and US$7.45 million of salary in stock, making him eligible for a bonus of up to US$4 million. Last year, Medina-Mora’s base salary was US$972,000, and his total compensation including other awards of stock and options was US$9.8 million.
Chief financial officer John Gerspach’s salary will be US$500,000 in cash and US$4.17 million in stock, making him eligible for a bonus of up to US$2.3 million. Last year, his cash and stock salary was US$3.3 million, and his total compensation including other stock awards was US$5 million.
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