Citigroup Is Not Increasing Employee Compensation

Breaking news: Citigroup (C) is not increasing the compensation of its employees.

What’s that? I’ll say it again a little louder to make it crystal clear.

CITIGROUP IS NOT INCREASING THE COMPENSATION OF ITS EMPLOYEES!

But wait, haven't we all read that Citigroup is increasing salaries by up to 50%?

Sure we have, but remember that monthly salaries are but one component of total compensation. The other major components are bonuses and, for some employees, equity awards (typically options or restricted stock).

What Citigroup IS doing is reducing bonuses paid to staff all around the world.

Remember the furor a few months ago about bonuses being too large and being the root cause of so many evil bankers taking undue risks?

Well, Citi is explicitly responding to those concerns by changing the composition of its compensation structure to put more weight on base salaries and less weight on bonuses.

So while rank-and-file staff may receive more in their monthly paychecks, they will also be receiving smaller annual bonuses. But on average, the total compensation for staff globally will remain flat. And now all those evil bankers who ruined our world with their bonus-induced greed won’t be motivated to do so again.

What’s wrong with that?

Disclosure: Long C, XLF

Comments

[Pfloyd234:]

I didn't read the original story other than seeing the headline. What I assumed it meant was TOTALLY WRONG. I thought they were taking large bonuses away from executives and spreading that money around to everyone in higher salaries. It seemed to be a good idea to me. Too bad I assumed wrong. Bells should of went off in my head because for something like that to happen pigs would probably have to start growing wings on top of their other wings that are non-existent.

Jun 25 09:20 AM

[Angry Banker:]

In effect though, what you assumed is happening also. Because of the new regulations on maximum compensation for the 25 highest paid staff (which basically limits it to $500K/year + 1/3rd their compensation in restricted stock), there will be lots of extra money to spread around to the more rank-and-file staff. For example, Ajay Banga made over $10 million last year and if he had decided to stay, he would have been limited by the formula above (see my earlier article on this). So there's another $9.5 million which can be reallocated to other lower paid staff.

Jun 25 09:29 AM

[Moon Kil Woong:]

Citibank is not paying out as ridiculous of bonuses even when they loose boatloads of money mainly because of public scrutiny, not because it has decided to make compensation based more on work they should do whether or not they get a bonus or deny it to people who get paid a bonus whether or not they make a profit (take a look at all the execs that paid themselves bonuses while they begged the government for money).

So yes, total compensation dropped. That doesn't, however mean that it is right or proper to boost the salaries of those very same people who would be criticized for getting exceedingly fat compensation packages. Likewise, if you think the bonuses are going to average workers and bank tellers you really don't know Citibank. It certainly didn't get to be the biggest and most bankrupt kid on the block by rewarding hard or profitable work. Au contraire...

Jun 26 04:52 AM

[hksche2000:]

Stockholders, in this case "All US tax payers!", not Citi management should decide what salaries, bonuses, fringes etc Citi deserves. We own this bank even if we don't like it. Citi never had or will have us, their customers and (involuntary) stockholders in mind, just their own profits and mainly for their upper echelon employees. If Citi can make profits by laundering money for the underworld in Japan (see 6/26 news, or anywhere else for that matter), it'll do it. Nice guys! You gotto love'em.

Jun 26 12:33 PM

[American in...:]

I am quite glad that you are an angry banker. You're vastly over-rated and I probably make more money than you do now. So I am very happy. Poor banker.

Jun 26 12:37 PM

[User 305589:]

you really ask , what's wrong with that???
Oh my, i can tell you what's wrong! Total compensation is base salaries plus bonuses. Bonuses, though, by and large only apply when a company earns good money. Put differently, when times are bad, there will be no or little bonus payments in addition to the base salaries.

now, citi is changing the game (as did MS and JPM and BofA before). what was formerly a bonus and dependent on the success of the company, now becomes a base salary and is no longer dependent on whether the company makes money or loses it. it gets paid out anyway now.
that's what is wrong! fat salaries stay, even while the company is on life suppirt by the taxpayer.
and guess what? when times get better, the crooks at MS, JPM, BofA, Citi etc. will change it again. then bonuses will be raised again. it's the classic heads i win, tails i win even bigger. And the taxpayer loses as he subsidises all these banks with his money either directly or indirectly (TARP, TALF, artificially low interest rates etc)

Jun 26 01:02 PM

[Tony Daltorio:]

Citi employees should meet the same fate as employees in any bankrupt company - out of a job and on the street.

Jun 26 01:11 PM

[notsosmart:]

now everybody head for citi stadium in ny where you can go in free & see the mets play? all summer.you own the place use it.what?you cant.how is that possible?

Jun 26 03:14 PM

[stckpkr7000:]

Bankers, brokers, and most financial related jobs have been WAY over paid! Many offer worthless services and their pay needs to drop to more typical levels....... Give me a break! I'm waiting for the coming revolution.........

Jun 27 12:21 PM

[Mark54:]

The fact is that the prior comp structure of low base salary and big performance based bonus was conducive to risk. But it was also flexible and earnings friendly. The higher base salary and lower bonus structure is going to hurt Citi in the long run. The last thing these institutions need now is a more rigid cost structure.

Jul 02 11:59 PM