SALARY INCREMENT BONUSES CITIGROUP
US - Citigroup intends to raise the base salaries of rank-and-file employees by as much as 50% this year to offset smaller annual bonuses.
This means that most Citigroup employees will make as much money as they did in 2008, says The New York Times. The banking giant also plans to award millions of new stock options to employees in an attempt to retain workers and reduce the gradual decrease in the value of their stock holdings.
Similarly, financial companies like Bank of America and Morgan Stanley are also raising the base salaries of their employees to divert attention away from bonuses and curb excessive risk-taking.
The Citigroup proposals present a test for the Obama administration, where the bank has already gotten two rescues from Washington. The government will soon assume a 34% stake in the company, in which share prices had fallen by nearly 84% in the last year. However, administration officials have limited power to prevent the company from raising the salaries of junior employees.
Citigroup is also offering guaranteed pay contracts to retain employees, as some have already left for smaller boutique banks or large rivals less dependent on the government. For some Citigroup investment bankers and traders, this can mean salary increases up to 50%, while legal and risk management employees and those in the credit card and consumer banking unit are expected to receive smaller increases as their salaries rely less on bonuses.
While Citigroup officials declined to reveal more, they said the changes will align the bank's compensation plan with the view on Wall Street that bonuses are not one-time payouts but rather a form of deferred salary. This new system will allow them adjust bonuses to reflect an employee's performance.
Citigroup spokesman Stephen Cohen said that any changes will be intended to adjust the balance between salaries and bonuses, which are fixed and vary from year to year respectively.
The bank also plans to introduce a new stock option programme this year, where employees will be awarded one stock option for every share of restricted stock accumulated. This could release the millions of stock options which could be cashed out over the next three years, and hopefully give employees another reason to stay.
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