Let the fury begin. Today, it was reported that Citigroup (NYSE: C) is planning to give several top executives salary raises in the form of stock, which will lead to multi-million dollar increases in total compensation.
Aligning the goals management and shareholders has been a point of contention for many years, one that many assumed would be satisfied through compensation in stock. CEO Vikram Pandit will still only be paid $1 this year, but is in line for a raise next year. If that raise does not come to fruition of course, it is easy to assume Pandit could jump ship and start a hedge fund (again). In a sign indicative of recognizing a potential concern, 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.”
Since Citigroup is still partly owned by taxpayers, as the Treasury Department continues to shed shares, the firm disclosed the pay changes in a press release and regulatory filing Friday. Consistent with last year, the bank divulged that stock will be used to pay significant portions of the salary for the firm’s top 25 executives.
John Havens, the head of the bank’s institutional clients group stands to receive the highest raise. Havens will get a cash salary of $500,000 this year, the maximum allowed under a federal pay cap, and $9 million of salary paid in stock. This compares to a salary of $975,000 last year for Havens, also in a blend of cash and stock. Including other awards of stock and options last year, Havens’ total compensation last year came to $11.2 million. The bank did not disclose how much Havens might be awarded in other stock grants this year, but he could be eligible for a bonus this year of up to 50 percent of his salary, or $4.75 million.
The salary of Chief Financial Officer John Gerspach will be $500,000 in cash and $4.17 million in stock, making him eligible for a bonus of up to $2.3 million. Last year, his cash and stock salary was $3.3 million, and his total compensation including other stock awards was $5 million.
While Citi’s profitability continues to lag, it seems the tea leaves are changing. In order to prevent mass exodus amid the turmoil, compensation bumps may become a new norm.
