Citigroup Inc. (C:US), whose shareholders rejected its former leader’s pay package, gave new Chief Executive Officer Michael Corbat an $11.5 million compensation deal for 2012.
The payout includes a $4.18 million cash bonus and $3.14 million of so-called performance share units, or PSUs, according to a regulatory filing yesterday. Citigroup introduced the PSUs as executive compensation after discussions with almost 20 shareholders, the New York-based lender said.
Shareholders rejected former CEO Vikram Pandit’s 2011 pay plan last year amid complaints it was too easy for him to collect his $15 million package plus long-term incentives that could have been worth about $40 million. After promising to reconsider, the board ousted Pandit, 56, in October and promoted Corbat, 52.
“When our shareholders spoke last year about Citi’s compensation structure, we listened,” Chairman Michael O’Neill, who also heads Citigroup’s compensation committee, said in the filing. “As a result of this process, we are introducing a new compensation structure that more strongly connects compensation with performance, emphasizes strong risk management and is both competitive and in line with regulatory standards.”
The bank also disclosed about $30 million of stock awards for other executives, based on yesterday’s closing share price of $42.35. Jamie Forese and Manuel Medina-Mora, promoted by Corbat to co-presidents earlier this year, shared about $7 million in awards, filings show.
Shannon Bell, a spokeswoman for Citigroup, declined to name the shareholders the bank consulted on pay. O’Neill led the discussions with the investors, who together hold more than 30 percent of the bank’s shares, according to the filing. Top shareholders include BlackRock Inc. (BLK:US) and Vanguard Group Inc., according to data compiled by Bloomberg.
JPMorgan Chase & Co.’s Jamie Dimon, Morgan Stanley’s James Gorman and Bank of America Corp. (BAC:US)’s Brian T. Moynihan, received no cash bonuses for 2012. Goldman Sachs Group Inc. (GS:US) awarded Lloyd C. Blankfein a $5.7 million cash bonus, according to a person familiar with the matter.
“The cash part is the heavy minority in these packages, which I think is OK,” said Alan Johnson, founder of compensation-consultant firm Johnson Associates Inc. “People have gotten used to it.”
Corbat’s 2012 total compensation matched the one for Dimon, whose bank posted a $21.3 billion profit in 2012. Citigroup, the third-biggest U.S. bank, reported a $7.54 billion profit for the year. Directors of New York-based JPMorgan cut Dimon’s pay 50 percent after they concluded that he was responsible for an investment unit’s trading losses.
Citigroup shares gained 50 percent in 2012, compared with JPMorgan’s advance of 32 percent.
Goldman Sachs gave Blankfein a $21 million package and Charlotte, North Carolina-based Bank of America awarded Moynihan $12 million. Gorman’s compensation was cut 7.1 percent to $9.75 million from a year earlier.
Citigroup’s compensation committee includes Joan Spero, William Thompson, Diana Taylor and Ernesto Zedillo as well as O’Neill. Taylor is the companion of New York City Mayor Michael Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP.
Corbat received a $1.05 million salary for 2012 and $3.14 million of deferred stock, according to the filing. His pay for 2011 wasn’t disclosed in last year’s proxy statement. The bank gave Corbat $9 million for 2010, according to an earlier filing.
“His package reflects the market in terms of what CEO’s at financial firms command,” said Michael Karp, CEO at New York- based executive-search firm Options Group.
The new CEO plans to fire 11,000 workers and pull back from certain markets as he seeks to cut costs and increase returns for shareholders. He previously was CEO of the bank’s operations in Europe, the Middle East and Africa and head of the Citi Holdings unit.
“Mr. Corbat’s 2012 pay was based on his substantial contributions in his CEO role for the region, his impact as a senior executive on Citi’s overall performance and the immediate contributions he made upon assuming the Citi CEO role in October,” according to yesterday’s filing.
Corbat’s compensation reflects the lender’s new pay structure, which is designed to bring rewards more in line with Citigroup’s performance, the bank said. Awards will be based on “pre-defined” goals -- including financial metrics -- established at the beginning of the year, replacing the previous system of rewarding executives at the discretion of the compensation committee, the firm said.
Executives previously gained from a profit-sharing plan introduced by former Chairman Richard Parsons in 2011, which granted senior bank chiefs a slice of the profit at the Citicorp unit for that year and 2012. The plan excluded losses at Citi Holdings, which contains unwanted assets. Parsons retired in April.
The PSUs will be paid after three years once Citigroup meets performance goals tied to total shareholder return and return on assets, according to the filing.
Executives will collect all of the PSUs if Citigroup produces a return on assets of 0.85 percent and produces a better total shareholder return than half of a group of eight rivals including Goldman Sachs, Bank of America, JPMorgan and HSBC Holdings Plc (HSBA), according to the filing.
The lender’s return on assets, or ROA, was 0.4 percent at the end of 2012, according to Bloomberg data (C:US). The metric measures the profit that a firm makes on its investments.
Medina-Mora, head of consumer banking, received $3.14 million of PSUs on top of $3.13 million in separate stock awards. Chief Financial Officer John Gerspach got $1.95 million of PSUs in addition to $1.88 million in stock, according to filings.
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