by Reese Darragh on March 12, 2012
In yet another executive compensation critics and investors nightmare, Citigroup’s chief executive officer Vikram Pandit is set to receive a windfall, his $15 million compensation package for 2011 and a multi-year retention package announced in May last year could total up to $53 million while the company is struggling with a revenue slump. Based on the KBW Bank Index last year, Citigroup is named the second worst performer.
The chief executive also received $80 million last year from the firm’s purchase of his Old Lane Partners LP hedge fund in 2007. Pandit’s compensation is said to be structured after he willingly accept a $1 pay check for most of 2009 and 2010 as he helped the bank to recover from the brink of collapse and boosted net income by 4 percent to $11.1 billion last year. However, stock price slid 44 percent and revenue fell almost 10 percent as Europe’s sovereign debt crisis roiled the markets.
Pandit’s pay for the year, disclosed in a March 8 regulatory filing, included stock awards, $1.67 million in salary and a $5.33 million cash bonus, his first in four years, according to a Bloomberg report. The CEO joined the bank in 2007. Citigroup returned to profitability in 2011 with net income of $1.45 billion as revenue slid by 16 percent while share prices fell by 58 percent.
The argument, executive compensation experts say, is that the pay does not seem to be in line with total shareholder return (TSR). TSR is the acid test employ by many executive compensation and proxy advisory firms to determine whether executive pay is properly aligned with their performance- values bring in to shareholder. The straight line evaluation measures among others increase in stock pricing, revenue, long-term and short-term business profitability against the compensation package awarded to the business chief.
Other banks, including the KBW index worst performer, Bank of America cut CEO Brian Moynihan’s pay for 2011, freezing his salary ay $950,000 with no cash bonus. It gave him $5.9 million in restricted stocks mostly linked to future performance.
Meanwhile, JPMorgan Chase’s Jamie Dimon is likely to get a $23 million package for 2011 after the firm posted a record $19 billion profit. Revenue at the bank slipped 5.3 percent and stock fell 22 percent.