Posted on 24 Jun 2009
Citigroup Inc., which received $45 billion of government funds, will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said.
The biggest increases will go to investment bankers and traders, said the person who declined to be identified. Workers in consumer banking, credit cards, legal and risk management will see smaller salary adjustments. The New York-based company also plans to award stock options to try to keep employees after Citigroup’s market value plummeted 84 percent in the past year.
Citigroup joins Morgan Stanley and UBS AG in boosting salaries for executives and employees. Morgan Stanley said last month it will increase base pay for many of the New York-based firm’s top executives and double the pay of Chief Financial Officer Colm Kelleher.
“Citi continues to examine ways to ensure its employee compensation practices are competitive in this very challenging market environment,” Citigroup spokesman Stephen Cohen said yesterday, declining further comment. “Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation.”
The worst financial crisis since the Great Depression has so far led to more than $1.45 trillion in write-downs and credit losses and almost 325,000 job cuts across the worldwide financial industry. Senior management at companies, including Citigroup and Morgan Stanley, lost their bonuses last year.
Citigroup managers began informing employees of the pay changes this week, the New York Times reported yesterday. In the new stock option program, workers will receive one stock option for every share of restricted stock they have, the paper said. Citigroup was unchanged at $3.01 in German trading today.
The Obama administration appointed Washington lawyer Kenneth Feinberg this month as its “special master” to review compensation at companies that received government funds.
Feinberg will have the authority to regulate compensation for 175 executives at seven companies that received “exceptional” government help. He steps into the political maelstrom that erupted after disclosures that firms such as New York-based Merrill Lynch & Co., blamed for fueling the financial crisis, paid workers multimillion-dollar bonuses.
Compensation and benefits were Citigroup’s biggest operating expense last year at $32.4 billion, down 4.3 percent from 2007. The bank had a record net loss of $28 billion in 2008, compared with a $3.62 billion profit in 2007.