Citigroup, still partly owned by the government after a rescue during the financial meltdown, is giving raises to top executives that could amount to millions of dollars, awarding them in stock to get around a cap on cash pay at bailed-out banks.
CEO Vikram Pandit, who is drawing a salary of $1 for the second year in a row, did not get a raise, but the chairman of the bank hinted it plans a big payout for him next year.
The announcement Friday by Citi, which remains one of the weakest large American banks two years after the meltdown, raised questions among experts on corporate governance.
By paying the raises in company stock, not cash, Citi circumvents a rule limiting salaries to $500,000 for the top 25 executives at financial institutions still receiving large amounts of federal help.
"The question is do they deserve higher salaries, and are they evading rules to avoid losing talent?" asked Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware.
Citi is fighting to keep talented bankers from jumping ship to any of its rivals on Wall Street, all of whom have repaid their federal bailout money and are not under the same kind of compensation restrictions.
Edward Skyler, a spokesman for the bank, said the compensation levels "correspond with similarly situated executives in the industry."
Citi was the hardest-hit U.S. bank during the credit crisis of 2008, and received $45 billion in government bailout money under the Troubled Asset Relief Program, part of which was converted to stock last year. The government is gradually selling its stake and still owns about 17 percent of the bank.
Even today, Citi continues to be weighed down by large amounts of bad loans and investments it made in the run-up to the crisis. The bank posted a loss in the third quarter after two straight quarters of profits.
Pandit, who pledged last year to take a $1 salary until the bank returned to profitability, elected to keep that figure for this year, but he seems set for a big payday in 2011. Citi's chairman, Richard Parsons, said in a statement that beginning next year the bank's board "intends to compensate Vikram commensurate with the job of CEO of Citi."
Rolfe Kopelan, a managing partner at search firm Capstone Partnership and an expert on corporate compensation, said $1 still seems appropriate for Pandit.
"It's not ridiculous when you're living on public funds, and when you're one of the major causes of the recession," Kopelan said.
The biggest raise disclosed in Citi's regulatory filing will go to John Havens, head of the bank's institutional clients group. He will get a cash salary of $500,000 this year, the maximum under the cap, and $9 million of salary paid in stock.
That compares with a salary of $975,000 last year for Havens, also in a blend of cash and stock. Including other awards of stock and options last year, Havens' total compensation last year came to $11.2 million.
Citibank did not disclose how much Havens might be awarded in other stock grants, but he could be eligible for a bonus this year of up to 50 percent of his salary, or $4.75 million.
Manuel Medina-Mora, head of consumer banking for the Americas, will also get a cash salary of $500,000 and $7.45 million of salary in stock, making him eligible for a bonus of up to $4 million. Last year, Medina-Mora's base salary was $972,000, and his total compensation including other awards of stock and options was $9.8 million.
Chief Financial Officer John Gerspach's salary will be $500,000 in cash and $4.17 million in stock, making him eligible for a bonus of up to $2.3 million. Last year, his cash and stock salary was $3.3 million, and his total compensation including other stock awards was $5 million.
Under an amendment to the bank bailout law of 2008, Citi is still subject to the compensation restrictions as long as the government remains a shareholder. That means the top 25 executives cannot receive bonuses exceeding 50 percent of their salaries and cannot receive more than $500,000 of their salary in cash.
The Associated Press' calculation for executive pay aims to isolate the value the company's board placed on the CEO's total compensation package. The figure includes salary, bonus, incentives, perks and the estimated value of stock options and awards.
The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list with federal regulators.