Citi's Pandit will not Receive Bonuses for 2008

New York
Citi's Pandit will not Receive Bonuses for 2008

Citigroup Inc's Chairman Win Bischoff and Chief Executive Vikram Pandit won't receive bonuses for 2008, as part of a series of moves the company announced on Wednesday as it formalised its bailout agreement with the US government, a media report said today.

Quoting a memo to employees by Pandit, the leading financial daily Wall Street Journal said Senior Counselor Robert Rubin is also foregoing the annual bonus, and bonuses for other top executives would be "reduced substantially".

Citigroup, which has now received USD 45 billion in federal capital infusions and a government-financed arrangement to insulate it from hundreds of billions of dollars in potential losses, was widely expected to substantially curtail its compensation costs, the Journal said.

Other financial institutions that are receiving taxpayer funds previously have announced that their top executives will forego bonuses for 2008, a year in which Citigroup and other banking companies were battered by losses, it noted.

The terms of the latest rescue package, disclosed in a securities filing Wednesday, are the latest sign that the Treasury Department is seeking to exert sway over the internal Citigroup operations, the paper said.

Terms of the latest capital infusion require Citigroup to award at least 60 per cent of any 2008 bonuses to top executives in the form of deferred stock or cash. Like other institutions, Citigroup is instituting a "clawback" provision to bonuses that will allow the company to recoup payments under certain circumstances, the Journal said.

The pact with Treasury requires Citigroup to maintain its current policies on federal lobbying activities and to keep a tight leash on expenses. Citigroup also is required to submit a report detailing compensation of risk-management officials and potential problems with that pay system.

While federal officials have urged aid recipients to exercise restraint in executive pay, Citigroup's limits appear to be tighter than those of rivals, the Journal said. For example, it said, the government investment requires limitations on so-called golden parachutes to the top five senior executives. Citigroup is extending those limitations to its senior leadership committee, which has more than 50 members.

In his memo to employees, the paper quoted Pandit as saying the relatively small 2008 bonus pool reflects the challenging times facing Citigroup, but he struck an optimistic note about 2009.

"Unfortunately, the harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower than last year," Pandit wrote. "Our focus, however, is on the future, and I believe we will continue to make progress in 2009, much more of it and much faster than we did in 2008." It is unclear, the paper said, how exactly the lobbying restrictions will work, but any move to curtail the company's government ties could come at a bad time for Citigroup.

Congress and the incoming Obama administration are expected to move quickly to overhaul the way financial companies are supervised, and large banks are expected to lobby aggressively to try and shape any changes, the paper said.

Big-bank competitors, especially Bank of America Corp and J P Morgan Chase & Co, have sophisticated lobbying shops but usually lack the manpower of Citigroup, the Journal said. PTI

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