FACC 6140 PERFORMANCE

MEASUREMENT
SYSTEMS

REAL EXECUTIVE
COMPENSATION
PRESENTED BY: ANUM KAZI, AMMARA WASEEM,
IMRAN AKHTAR, CAROL AND XIN JHANG

CITI GROUP - REAL EXECUTIVE COMPENSATION

TABLE OF CONTENTS

CITIGROUP BACKGROUND.......................................................................................................2
FINANCIAL PERFORMANCE DATA 2007-2010........................................................................2
CEO TENURE AND ITS COMPENSATION PACKAGE.............................................................2
CITIS EXECUTIVE COMPENSATION PLAN...........................................................................4
OBJECTIVES 4
DRIVERS FOR DETERMINING EXECUTIVE COMPENSATION.......................................4
DRIVERS FOR COMPENSATION 2007-2010.............................................................................6
APPENDIX A PEER PERFORMANCE DURING FINANCIAL CRISIS 2008........................7
APPENDIX B - AWARDS MADE BY THE COMPENSATION COMMITTEE 2007-2010.......8
APPENDIX C - TARP (Troubled Asset Relief Program) AND ITS EFFECT ON CITIGROUP.11
APPENDIX D- DIRECT COMPENSATION APPROVED BY OSM FOR TARP COMPANIES
2009-2011......................................................................................................................................12
APPENDIX E TARP EXPENDITURES TO SEVEN COMPANIES THAT RECEIVED
EXCEPTIONAL ASSISTANCE...................................................................................................13

CITI GROUP - REAL EXECUTIVE COMPENSATION

CITIGROUP BACKGROUND
The company is headquartered in Manhattan, New York city. It was formed from one of the
worlds largest mergers in history on April 7, 1998 (Citicorp & Travelers group. It is one of the
largest financial services companies in the world. It is ranked 24th in term of asset size as of
2011. It has 200 million customer accounts in more than 100 countries. It is employing approx.
358,000 staff with 16,000 offices. The company was bailed out by the U.S. government in
October 2008 with $25 billion and again in December 2008 with $20 billion in other securities,
after the financial crisis. However, TARP money was not used in compensation.
Citgroup paid its new CEO Michael Corbat $11.5 million in 2012, including one of the few cash
bonuses.

CITI GROUP - REAL EXECUTIVE COMPENSATION

FINANCIAL PERFORMANCE DATA 2007-2010

CITI GROUP - REAL EXECUTIVE COMPENSATION

CITI GROUP - REAL EXECUTIVE COMPENSATION

Citigroup Net Revenue

(in billions of dollars)
$91.10

$86.60

$81.60
$61.20

4
3
2
1

1
2007

2008

2009

2010

CEO TENURE AND ITS COMPENSATION PACKAGE

CEO Charles Prince (2001-2007)
Charles
Board of Directors

Total Amount (Millions)

Package
Exit Bonus

$12.5

compensation Mr.

Stocks and Options

$68

during his tenure is

Pension

$1.7

Total

$81.12

Citigroup. The total

Prince received

Prince joined the

Elements of Resignation

$49.9 million.
Prince Resignation

in the year 2006 of the

On Sunday, 4 November 2007, Prince resigned from his post as CEO of Citigroup due to
the failing mortgage industry. He was replaced by Vikram Pandit as the CEO of Citigroup, and
by Robert Rubin as its Chairman.
During his tenure, the market value of Citigroup dropped by $64 billion. He is still a
consultant with Citigroup. In 2008, Fortune named Charles Prince as one of eight economic
leaders "who didn't see the crisis coming", noting his overly optimistic statements in July 2007.
Prince Retirement Package
The package also includes a little more
than 83 percent of his 2006 bonus and

Elements of Retirement

Total Amount (Millions)

Package
vesting of options

$1.28

vesting of deferred stock

$16.05

vesting of restricted

$10.7

shares

CITI GROUP - REAL EXECUTIVE COMPENSATION

stock awards of about $23.8 million, adjusted for the total shareholder return for 2007, which is
so far a decline of about 38 percent.
CEO Vikram Pandit (2007 till 2012)
On 11 December 2007, Pandit was named the new CEO of Citigroup, replacing interimCEO Sir Winfried Bischoff. Pandit was strongly supported by then interim chairman of Citigroup
Robert Rubin, the effective successor to Chuck Prince.
COMPENSATION (2007-2010)
Salary
Bonus
Annual other Income
Restricted Stock Award
Securities Options
LTIP payout
Non Equity Compensation
Other Compensation
Total

2007
250,000
0
0
323,813
0
0
0
0
573,813

2008
958,333
0
0
28,830,000
8,432,911
0
0
16,193
38,237,437

in millions
2009
125,001
0
0
0
0
0
0
3,750
128,751

2010
1
0
0
0
0
0
0
0
1

Vikram Resignation
On October 16, 2012, Pandit unexpectedly resigned as Citigroup CEO. Michael Corbat,
previously Citigroup's CEO of Europe, Middle East, and Africa, was named as his replacement.
Bloomberg News cited anonymous board sources indicating that Pandit was forced out by the
board after eroding investor confidence and damaging company relations with regulators over an
extended period. The New York Times later identified Chairman Michael E. O'Neill as the
driving force behind a months-long secret effort to oust Pandit, which culminated in a surprise
ultimatum to Pandit stating that he must resign immediately, resign at the end of the year, or be
fired. His resignation followed multiple payouts to investors during ongoing fraud allegation.
About 55% of shareholders reject Pandit's $15 million 2011 pay package in a non-binding vote.
Pandit would walk away with $7 million.

CITIS EXECUTIVE COMPENSATION PLAN

OBJECTIVES
Citis Compensation Philosophy includes designing compensation programs and structures that
fulfill four primary objectives:

CITI GROUP - REAL EXECUTIVE COMPENSATION

1) align compensation to shareholder interests; 2) manage risks to the firm by encouraging
prudent decision-making; 3) implement evolving regulatory guidance; and 4) attract and
retain the best talent to lead the Company to success.

COMPENSATION FOR EXECUTIVES IS BASED

ON:
Pay for
Citigroup
Conversely,

performance, so Compensation
Superior
compensates its
that individual
levels are
performance
executives based
compensation
competitive
encompasses
not only on how
awards reflect
with the
achievement of
well its
the performance marketplace in
financial goals
businesses
of Citigroup
order to attract
as well as
perform from a
overall, the
and retain
objective
financial
particular
highexcellence in
standpoint, but
business unit
performing
other key
onhowCitigroup
and individual
executives.
areas.
does business.
performance.

When an
executive
achieves
superior
results, the
executive is
rewarded.

inferior
performance by
an executive
leads to a
reduction in, or
elimination of,
incentive
compensation
for the subject
period.

DRIVERS FOR DETERMINING EXECUTIVE COMPENSATION

Role of the Personnel and Compensation Committee
The committee is responsible for evaluating the

Each of the factors comprising the performance results

Benchmark
ing

structure for the CEO as well as for others in Citigroup.

Performanc
e
Evaluation

performance of and determining the compensation

are considered in determining each executives

compensation. Formulaic approaches are not used to weight these factors, consistent with the
committees and Citigroups belief that the adoption of any given formula could inadvertently
encourage undesirable behavior (e.g., favoring one financial measure to the exclusion of other
important values). Accordingly, each named executive officers incentive and retention
compensation is determined using a balanced scorecard approach that considered, in the
context of a competitive marketplace, factors contributing to the financial performance of
Citigroup and the executives individual leadership.
Basic Citi performance criteria used in evaluations - Citigroup and individual performance
were measured by evaluating the following factors against actual performance :

 Organic revenue growth, in

the mid-to-high single digit
range for Citigroup.
Net income growth faster
than revenue growth.

Continued execution of Citigroups

strategic plan.
Performance of strategic
investment initiatives, measured
by contribution to earnings,

Financial Performance

Strategic Performance

CITI GROUP - REAL EXECUTIVE COMPENSATION

Developing and maintaining positive

regulatory relationships around the
world, and the absence of any new
significant regulatory enforcement

Business Practices
Performance

COMPENSATION OVERVIEW OF 2008-2010

2008
Th e p e rso n n e l an d
c o m p e n s a t io n c o m m it t e e
s t r u c t u r e d t h e c o m p e n s a t io n
a w a rd e d to th e n a m e d
e x e c u t iv e o ffi c e r s in J a n u a r y
2 0 0 8 t o r e fl e c t t h e
e x t r a o r d in a r y m a r k e t
c o n d it io n s in 2 0 0 7 a n d t h e
d e c li n e in fi n a n c ia l
p e r f o r m a n c e o f C it i. A s a
r e s u lt o f t h e s e
d e v e lo p m e n t s , C it i s
c o m p e n s a t io n f r a m e w o r k is
m o r e v a r i e d t h a n it h a s b e e n
h is t o r ic a lly.
T h e g e n e r a l f o r m u l a c o u ld
n o t a p p ly t o C it i s C E O a n d
t h r e e h ig h e s t - p a id e x e c u t iv e
o ffi c e r s . B e c a u s e C it i s
p e r f o r m a n c e d id n o t m e e t
t h e m in im u m h u r d le s in t h e
p la n , n o a n n u a l b o n u s e s
w e r e p a id t o t h e s e
e x e c u t iv e s .
T h e c o m m it t e e a w a r d e d
c o m p e n s a t io n t o a
n e w C E O a n d a n e w C F O t o
r e fl e c t t h e ir n e w r o le s .

2009
C it i a n d t h e e n t ir e fi n a n c ia l
s e r v i c e s in d u s t r y f a c e d
u n p r e c e d e n t e d c h a lle n g e s
a n d p ro fo u n d c h a n g e a n d
2 0 0 8 w a s a p a r t i c u la r ly
c h a lle n g in g y e a r. C it i s
o v e r a r c h in g p r io r it y h a s b e e n
t o r e p o s it io n t h e C o m p a n y t o
c a p it a l iz e o n t h e b e s t
o p p o r t u n it ie s f o r g lo b a l
g r o w t h in a r a p id ly c h a n g i n g
fi n a n c ia l e n v ir o n m e n t . It a l s o
in c lu d e s a r e d e s ig n o f t h e
c o m p e n s a t io n s t r u c t u r e a n d a
s u b s t a n t ia l t u r n o v e r o f t o p
m a n a g e m e n t.
N o b o n u s e s fo r to p
e x e c u t iv e s f o r 2 0 0 8
L im it s o n f u t u r e C E O
c o m p e n s a t io n - C E O V ik r a m
P a n d it h a s a d v i s e d C it is
b o a r d t h a t h e w ill a c c e p t n o
i n c e n t iv e c o m p e n s a t i o n a n d
w ill a c c e p t $ 1 b a s e p a y u n t il
C it i r e t u r n s t o p r o fi t a b ilit y.
S ig n ifi c a n t ly r e d u c e d b o n u s
p o o ls f o r s e n io r e x e c u t iv e s .

2010
T h e S p e c ia l M a s t e r s d e c is io n s
g o v e rn e d th e a m o u n t a n d
s t r u c t u r e o f C it i s e x e c u t i v e
c o m p e n s a t i o n f o r 2 0 0 9 - C it i
a g re e d t o c o m p ly w ith th e
S p e c ia l M a s t e r s c o m p e n s a t io n
d e t e r m in a t io n s f o r 2 0 0 9 e v e n
t h o u g h C i t i w a s n o lo n g e r a
r e c ip ie n t o f e x c e p t io n a l
g o v e r n m e n t a l a s s is t a n c e a t
D e c e m b e r 3 1 , 2 0 0 9 ; in
D e c e m b e r 2 0 0 9 , C it i r e p a id $ 2 0
b illio n o f f u n d s in v e s t e d i n t h e
co m p a n y b y th e U S g o ve rn m e n t
t h r o u g h t h e Tr o u b le d A s s e t
R e l ie f P r o g r a m ( TA R P ) a n d
e x it e d t h e lo s s - s h a r in g
a g r e e m e n t w it h t h e
g o v e rn m e n t.
N o c a s h b o n u s e s w e re p a id t o
C E O V i k r a m P a n d it
C it i s e x e c u t i v e c o m p e n s a t i o n
s t r u c t u r e f o r 2 0 0 9 is a lig n e d
w i t h r is k m i t ig a t io n p r in c ip le s
t h r o u g h c la w b a c k s a n d
d e f e r r a ls .

DRIVERS FOR COMPENSATION 2007-2010

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CITI GROUP - REAL EXECUTIVE COMPENSATION

APPENDIX A PEER PERFORMANCE DURING FINANCIAL

CRISIS 2008

CITI GROUP - REAL EXECUTIVE COMPENSATION

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CITI GROUP - REAL EXECUTIVE COMPENSATION

APPENDIX B - AWARDS MADE BY THE COMPENSATION

COMMITTEE 2007-2010
Awards made by the Committee in 2007
Based on the foregoing, in January 2007 the committee approved the following incentive awards
to the named executive officers for their performance in 2006:

Name

Bonus

Stock Awards

Options

Charles Prince (CEO)

13,200,00
$ 10,633,333

$23,833,333

$ 5,820,000

4,688,333

$10,508,333

$ 8,400,000

6,766,666

$15,166,666

$ 8,100,000

6,525,000

$14,625,000

$ 5,670,000

4,567,500

$10,237,500

Total

Sallie Krawcheck

Robert E. Rubin

Robert Druskin

Stephen Volk

Awards made by the committee in 2008

Based on the foregoing, in January 2008 the committee approved the following incentive and
retention awards to the following named executive officers (excluding the special equity awards
approved for Mr. Pandit in January 2008 in connection with his new CEO role):

Name

Cash

Deferred Cash

Stock Awards

Retention Equity

Bonus

Retention Awards

Under CAP

Awards

Options

Total

Sir Winfried
1,950,00

Bischoff
$

3,092,039

1,950,000

$ 6,992,039

2,500,000

$ 2,500,000

4,591,667

5,350,000

$12,791,667

Vikram Pandit

2,850,00

Gary Crittenden
$

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CITI GROUP - REAL EXECUTIVE COMPENSATION

Sallie
2,910,00

Krawcheck
$

4,688,333

4,410,000

$12,008,333

4,000,000

4,312,500

$ 8,312,500

5,500,000

13,800,000

$19,300,000

1,300,000

8,950,000

$10,250,000

Lewis Kaden

Michael Klein

Stephen Volk

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CITI GROUP - REAL EXECUTIVE COMPENSATION

Awards made by the committee in 2009
Specifically, in January 2009 the committee approved the following awards to the named
executive officers:

Current
Cash
Name

PerformanceDeferred Cash

Vesting

Performance Priced

Award Retention Awards Equity Awards

Options

Total

Vikram Pandit $ 0
Gary

$0

Crittenden

$ 0

0
3,600,00

$0
6,000,00

Ajaypal Banga $ 0

0
5,265,00

1,800,000

600,000

$0
8,775,00

James Fores

$ 0

0
3,600,00

2,632,500

877,500

$0
6,000,00

Stephen Volk

$ 0

1,800,000

600,000

$0

Compensation Structure in 2009

The compensation structure has been redesigned to better meet the objectives summarized above.
In particular, awards are now more closely tied to future performance and risk management is
now a more integrated part of the compensation.
Incentive Compensation Structure

Named Executive Officer

2008 Cash Awards

Deferred Cash Retention Awards
Performance Vesting Equity Awards
Performance Priced Options
Total Awards

0%
60%
30%
10%
100%

Management Executive
Committee

40%
20%
30%
10%
100%

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CITI GROUP - REAL EXECUTIVE COMPENSATION

Awards made by the committee for 2010
The committee approved the following compensation amounts for 2009 to the named executive
officers:

Cash
Name
Vikram Pandit
John Gerspach

Cash

Gary Crittenden

Long Term

Incentive

Restricted

Salary
Bonus Stock
Award
$125,001 $ 0 $0
$0
2,916,66

Stock Award Total

$0
$125,001

$416,667 $ 0

$6
$0
5,062,50

$1,666,667

$5,000,000

$270,833 $ 0
$500,000 $ 0
$521,797 $ 0

$0
$0
$2,666,667
$475,000 $6,150,000 $2,375,000
$450,000 $5,778,203 $2,250,000
4,683,33

$8,000,000
$9,500,000
$9,000,000

$266,667 $ 0
$277,778 $ 0

$3
$0

$7,425,000
$277,778

Edward Kelly
John Havens
Manuel Medina-Mora
Alberto Verme

Salary

Stock

$0
$0

$2,475,000
$0

The objective performance criteria listed above were a basis for determining incentive
compensation, no specific performance targets were used in developing specific compensation
recommendations, approving specific compensation amounts, or in any other aspect of Citis
executive compensation process.
The committee followed a similar process in evaluating the recommendations made by
management regarding compensation for the Top 100. The same scorecard was used for the Top
100, except that executives in the Global Banking business used a more detailed scorecard that
was tailored to the financial metrics used in that business. These metrics included information on
percentage of overall industry fees, industry rankings, and volume metrics, by products.

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CITI GROUP - REAL EXECUTIVE COMPENSATION

APPENDIX C - TARP (Troubled Asset Relief Program) AND

ITS EFFECT ON CITIGROUP
Getting Out from Under the Special Masters Purview Was a Factor for Repayment of TARP
Exceptional Assistance by Bank of America and Citigroup; exited in year 2009.
The seven companies that received assistance that was exceptional because of the amount
and the nature of their bailouts stood out from the more than 700 financial institutions in the
Capital Purchase Program. Those seven companies were American International Group, Inc.
(AIG), Bank of America Corporation (Bank of America), Citigroup Inc.
(Citigroup), Chrysler Financial Services Americas LLC (Chrysler Financial), Chrysler
Holding LLC (Chrysler), General Motors Corporation (GM), and Ally Financial Inc.
(Ally), formerly GMAC, Inc.
The Special Masters authority was narrowly limited to setting pay for the Top 25 most highly
paid employees at these companies, and approving compensation structures, rather than
individual pay, for the next 75 most highly compensated employees.
The Special Master worked under six principles developed by Treasury: (1) avoiding incentives
to take risks; (2) keeping the company competitive and retaining and recruiting employees who
would contribute to the companys success and its ability to repay TARP; (3) allocating
compensation between salary and incentives; (4) basing pay on performance metrics; (5) setting
compensation consistent with similar peers at similarly situated companies; and (6) setting
compensation that reflects an employees contribution to the companys value.
In proposing high pay packages based on historical pay prior to their bailout, the TARP
companies failed to take into account the exceptional situation they had gotten themselves into

15

CITI GROUP - REAL EXECUTIVE COMPENSATION

that necessitated taxpayer bailout as Citigroup executives were highly paid than others in the
industry.

APPENDIX D- DIRECT COMPENSATION APPROVED BY OSM

FOR TARP COMPANIES 2009-2011

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CITI GROUP - REAL EXECUTIVE COMPENSATION

APPENDIX E TARP EXPENDITURES TO SEVEN COMPANIES

THAT RECEIVED EXCEPTIONAL ASSISTANCE

17