06-24-2009, 07:58 PM
I'm kind of a big deal
Join Date: Jan 2009
Location: San Antonio, TX
Citi Boosts Salaries to Offset Bonuses
It was only a matter of time before they did this. Because the government is not allowing Citi or any other company receiving government bailouts/our money to bonus their employees, they are simply increasing the base pay.
Citi boosting salaries to offset lower bonuses
By STEPHEN BERNARD, AP Business Writer Stephen Bernard, Ap Business Writer – 29 mins ago
NEW YORK – Citigroup Inc. is increasing the base salaries of many of its employees — reportedly by as much as 50 percent for some workers — as it restructures its compensation program amid new restrictions on bonus payments.
The higher salaries are not the equivalent of annual raises because bonuses are being lowered, according to a person familiar with the matter who requested anonymity because the plans have not been made public.
Employee compensation at financial companies, particularly in the form of bonuses, has brought criticism from members of Congress and the public after the government gave the banks hundreds of billions in bailout dollars. Citi and the other companies who still hold bailout funds face restrictions on bonuses as part of a new government compensation oversight plan. The Treasury Department had no immediate comment about Citi's change in compensation plans.
The person said the changes would not affect the amount of an employee's compensation. By shifting the mix in compensation packages, the change could allow Citi to pay most employees as much as they received in 2008 while adhering to bonus caps. The person said the employees included traders, who tend to be compensated more heavily with bonuses, and middle- and lower-level managers whose compensation is more heavily weighted toward salaries.
Not all employees will be affected equally by the change in compensation, according to the person. Only those who receive a base salary and bonus could see an adjustment. Even then, the adjustments will vary based on an employee's position and current breakdown of pay between base salary and bonus.
A New York Times report published Wednesday said some employees salaries will rise by as much as 50 percent because of the change in compensation structure.
Sen. Christopher Dodd, D-Conn., a critic of financial companies' compensation, said of Citi in a statement, "they just don't get it." The statement called Citi's compensation changes "pay hikes."
Citi and other banks are likely reconfiguring their compensation to avoid losing talented workers to competitors. Some of the banks that received government loans during the mushrooming credit crisis last fall have already paid back their debt, and are no longer subject to compensation oversight, among them big banks like JPMorgan Chase & Co. and Goldman Sachs Group Inc. Those no longer under the government's compensation oversight are able to offer lucrative deals to entice employees away from other banks.
Citi has seen some defections from its ranks in recent months. The latest was the departure of Ajay Banga, CEO of its Asia Pacific division, who left to take a position at MasterCard Inc.
The Obama administration recently named lawyer Kenneth Feinberg a "special master" to oversee compensation packages awarded to seven companies that have received the most government support, including Citigroup. Feinberg can reject pay plans he deems excessive and review compensation for the top 100 salaried employees at those companies.
The 100 highest paid employees at Citi will not be part of the bank's revised compensation program because of the government's additional review over that group's pay.
"Citi continues to examine ways to ensure its employee compensation practices are competitive in this very challenging market environment," Citi said in a statement Wednesday. "Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation."
The New York-based bank has been among the hardest hit by the credit crisis and recession. Citi has reported six straight quarterly losses totaling nearly $30 billion. But, it would have posted a profit in the first quarter had it not been for dividend payments on preferred stock. In recent months, the bank has been reducing staff and selling assets in an attempt to streamline operations and return to profitability.
The bank has received $45 billion in loans from the government. A portion of those funds will soon be converted to common stock, giving the government a 34 percent stake in the bank.
Earlier this year, American International Group Inc. was sharply criticized for bonuses it paid to employees at one of its most troubled divisions. AIG was rescued from the brink of collapse by the government last fall. The Obama administration has blamed compensation plans for encouraging excessive risk-taking that pushed the financial services sector into chaos last year.
Charlotte, N.C.-based Bank of America Corp., which received $45 billion in government support, is among those facing additional scrutiny about bonuses and executive compensation.
"Bank of America looks forward to working cooperatively with Mr. Feinberg to ensure we comply with all applicable compensation regulation outlines by the Treasury," said Bank of America spokesman Scott Silvestri.
Last month, during a speech in London, Bank of America's CEO, Ken Lewis, said the financial industry must make reforms in compensation, including changes to performance-based pay that rewards long-term company growth and punishes inappropriate risk taking.
Shares of Citigroup rose 4 cents to $3.05 in midday trading. Bank of America shares rose 36 cents, or 2.9 percent, to $12.59.
AP Business Writer Ieva M. Augstums in Charlotte, N.C. contributed to this report.