Citigroup's chief, in a memo to employees, says complaints about excessive pay are going too far and risk penalizing those working to save the system
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At the end of a week in which popular anger over executive pay and bonuses translated into legislation that could impose heavy taxes on payouts at numerous firms receiving federal bailout dollars, Citigroup (C) CEO Vikram Pandit has distributed a memo to the company's employees that criticizes the prevailing mood and urges them to "continue to work hard helping clients and customers."
Pandit's Mar. 20 memo takes aim at legislation passed Mar. 19 in the House of Representatives that slaps a tax of up to 90% on bonuses given to highly paid employees of companies that receive federal funds. The legislation was rushed through the House following an uproar over $165 million in retention bonuses given to executives in American International Group's (AIG) financial-services division.
"Our industry has recently seen a tide of negative sentiment rising in Washington, D.C., regarding compensation. Of course, some of it is warranted. But I take exception when there is a discussion about spreading the blame to each and every employee in the financial-services industry," Pandit wrote in the memo. "At our company, we removed the people responsible for Citi's financial distress and acted fast to strengthen and streamline the business, and install new risk processes and new risk personnel. You have been invaluable in our collective efforts to put the company on solid footing."
Bernanke Targets "Compensation," Too
Pandit added: "The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial-services employees. It would affect countless number of people who will find it difficult, if not impossible, to pay back the bonuses that they earned."
Pandit said Citi executives were working with policymakers and industry officials "to come to agreement on a constructive industry compensation system that is good for the company, the financial system, and the country. We will continue to do everything we can to ensure that we can pay our employees fairly, reflecting their market value and hard work, especially during these challenging times."
Also on Mar. 20, Federal Reserve Chairman Ben Bernanke called for banking supervisors to pay "close attention" to compensation practices as they examine the soundness of financial institutions.
Banking regulators have observed that "poorly designed compensation policies can create perverse incentives that can ultimately jeopardize the health of the banking organization," Bernanke told a meeting of smaller "community" banks in Phoenix.