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Citigroup bosses forgo bonuses

New York: The U.S. government has seized control of Citigroup’s staff Christmas party budget and set tight restrictions on the use of its corporate jet in exchange for its $45bn bail-out.

The measures are among a raft of restrictions on expenses detailed in the small print of filing made by Citi on New Year’s Eve with the financial regulator, the Securities and Exchange Commission.

The filing was made to formalise restrictions on executive pay and bonuses that Citi’s chief executive, Vikram Pandit, was forced to adopt in exchange for the government bail-out, which includes guarantees on $306 billion of troubled assets on top of $45 billion of loans.

In a memo to staff, Mr. Pandit said he and the chairman, Sir Win Bischoff, would forgo year-end bonuses for 2008 after the huge banking group lost three-quarters of its market value and was forced to go cap in hand to the treasury. The government was granted a stake in Citigroup in exchange for the unprecedented bail-out.

“The harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower than last year,” wrote Mr. Pandit. “The most senior leaders should be affected the most. That is why Win Bischoff and I will receive no bonus for 2008.”

Robert Rubin, Treasury Secretary under the former President, Bill Clinton, and now an adviser to the Citigroup board, also declined his bonus for 2008. The deal with the treasury also imposed restrictions on so-called “golden parachutes”.

Many departing Wall Street executives have been rebuked for receiving payoffs worth tens of millions of dollars when investors lost larger sums as the banks’ performances dwindled.

Mr. Pandit also claimed pay would be determined by individual and company performance, and that the bank could “claw back” any payment made to individuals that, according to the memo, “over time proves to be based on inaccurate financial or other information”.

But much of the SEC filing is left out of Mr. Pandit’s memo, such as a lengthy section on Citigroup’s new agreement on staff expenses, which must remain in place as long as the U.S. government holds its tranche of preferred stock in the banking group. Citigroup has written a new expenses policy governing the use of the company’s private jet and budgets for “entertainment and holiday parties”. The bank has also set new policies to govern expenses for travel and accommodation, office renovations, and the purchase or lease of real estate. — © Guardian Newspapers Limited, 2009

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