We should reward him for doing such a good job.
Ummm, wait a second… didn’t…
Vikram S. Pandit, Citigroup’s chief executive, has led the bank from a federal bailout to five consecutive quarterly profits.
After spending years as one of Wall Street’s lowest paid chief executives, Vikram S. Pandit received a $23.2 million retention package that could catapult him to the top of the list.
Mr. Pandit earned a token annual salary of $1 as he steered Citigroup back into the black over the last two years. But on Wednesday, Citi’s board awarded him as much as $16.5 million in stock and options as well as a cash payment valued at more than $6.65 million as part of a special profit-sharing program for top executives.
The payouts will be spread over the next four years and are subject to Mr. Pandit’s meeting certain performance goals. They will be in addition to his regular salary and annual bonuses.
The announcement comes as Citigroup recently posted its fifth consecutive quarterly profit and completed a reverse stock split that, with the stroke of a pen, ratcheted its share price to more than $40 from $4.
Just three short years ago, Citigroup was in such dire straits that it twice needed to be rescued by the government. With the bank receiving more than $45 billion of federal aid, questions swirled about whether Mr. Pandit would remain at the helm. The large retention award seems to put those questions to rest.
“Vikram has done an outstanding job since coming on board as the financial crisis began,” Richard S. Parsons, Citigroup’s chairman, said in a statement. “This award is designed to retain Vikram as our C.E.O. and reward him for future performance benefiting the company and our shareholders.”
The retention package also could signify the unofficial end of the post-bailout pay era.
Most banks made minor adjustments to compensation practices amid the uproar over bonuses, shifting more pay into stock from cash but still awarding hefty sums. Others like Citigroup and Bank of America, which accepted multiple government rescues, needed a federal pay overseer to formally approve the awards for their 25 highest earners.
Mr. Pandit helped avert even more animosity toward his bankers when he pledged at a 2009 Congressional hearing to accept a mere $1 a year in salary until Citigroup turned a profit.
Even so, he continued to benefit from the Citi board’s largess. Throughout the crisis, Mr. Pandit was allowed to hold about $79.7 million in cash from the sale of Old Lane Partners, an investment firm he founded that was acquired by Citi in April 2007. Mr. Pandit would have to forfeit that money if he left the company before July 2011, giving the board a strong incentive to extend the retention package now.
Careful not to call it a bonus — Mr. Parsons referred to it as a “long-term, multiyear performance-based” award. Citigroup’s board broke the retention package into three parts. It also has the power to claw back any ill-gotten pay.
The largest part of the award is deferred stock valued at $10 million, which will vest in three equal installments from the end of 2013 to 2015. Mr. Pandit must meet largely subjective performance goals, including developing senior managers, satisfying certain regulatory goals like improved risk management and steering the bank toward a culture focused on so-called responsible finance.
The second part of the retention package is a special profit-sharing plan for top employees based on the company’s financials. If Citigroup’s core operations over the period earn at least $12 billion in pretax income during each of the next two years, Mr. Pandit could take home more than $6.65 million.
About two dozen or so other top executives participate in the program — including John P. Havens, Citi’s chief operating officer, who could receive almost $5.2 million. The bank earned $19 billion in pretax income last year.
Citigroup also awarded Mr. Pandit more than 500,000 options, which the company valued at as much as $6.5 million. The options carry strike prices ranging from $41.54 to $60. Citigroup shares currently trade at $41.24.
Citigroup’s board had signaled a pay increase for Mr. Pandit last fall when it granted stock awards to several of his top lieutenants and announced plans to restore his compensation so that it would be in line with other Wall Street chiefs.
In January, Citi’s board raised Mr. Pandit’s $1 salary to $1.75 million a year. The additional $5.5 million a year in retention payouts will set the stage for him to be paid as much, if not more, than his peers.
Bank of America’s chief executive, Brian T. Moynihan, received about $10.2 million in total compensation for 2010, according to Equilar, a compensation research and consulting firm. Jamie Dimon, JPMorgan’s chairman and chief executive, was awarded a $23.6 million pay package last year, making him the highest paid of any Wall Street chief. The heads of Goldman Sachs, Morgan Stanley and Wells Fargo were paid somewhere in between.