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Citigroup energy boss' salary may trigger row with pay czar
Source: Agencies |
July 27, 2009, Monday
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Print Edition
Print Edition
THE hefty 2009 pay package of Andrew J. Hall, leader of Citigroup Inc's lucrative Phibro energy trading unit, may spark a showdown between the New York-based bank and US government pay czar Kenneth Feinberg.
Hall's division generates a substantial chunk of Citigroup's profit, which the bank sorely needs to get back on its feet and eventually repay the US$45 billion it has received in government aid. Under the terms of his contract, Hall's compensation is linked to Phibro's profits, but the size of his 2009 pay package, which The Wall Street Journal estimated last Saturday may total US$100 million, could fuel political and shareholder anger against Citi.
Pay criticism
Employee compensation at financial companies has brought criticism from members of Congress and the public in the wake of the United States paying out hundreds of billions in bailout dollars to banks. The Obama administration has blamed compensation plans for encouraging excessive risk-taking that pushed the financial services sector into chaos last year.
Feinberg, a lawyer, was selected by the administration to be its "special master" to oversee compensation packages awarded by seven companies receiving the most bailout aid, including Citi. He can reject pay plans he deems excessive and review compensation for the firms' top 100 salaried employees.
"Companies will need to convince Mr Feinberg that they have struck the right balance to discourage excessive risk-taking and reward performance for their top executives," a Treasury spokesman said last Saturday. "That process is just beginning now, and Mr Feinberg has begun consulting with those firms about their compensation plans. We are not going to provide a running commentary on that process, but it's clear that Mr Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."
Some of the banks that got government loans, including JPMorgan Chase & Co and Goldman Sachs Group Inc, already have paid back their debt, and are no longer subject to compensation oversight. They are able to offer lucrative deals to entice employees away from other banks.
Quarterly losses
That leaves banks such as Citigroup scrambling to retain the talent they need to turnaround their operations. Among the hardest hit by the credit crisis and recession, Citi has reported six straight quarterly losses totaling nearly US$30 billion. The bank, which will soon be 34 percent owned by the government, has reduced staff and sold assets to streamline operations and return to profitability.
To keep vital personnel from decamping to other firms, Citi in April asked the Treasury to free the highly profitable Phibro unit from federal compensation limits and last month said it would boost the base salaries of many employees - reportedly by as much as 50 percent for some workers - as it restructures their compensation amid government restrictions on bonuses.
"Retaining and attracting the best talent is very important to the success of Citi and all its stakeholders," Citigroup spokeswoman Danielle Romero-Apsilos said in a statement last Saturday.
Hall's division generates a substantial chunk of Citigroup's profit, which the bank sorely needs to get back on its feet and eventually repay the US$45 billion it has received in government aid. Under the terms of his contract, Hall's compensation is linked to Phibro's profits, but the size of his 2009 pay package, which The Wall Street Journal estimated last Saturday may total US$100 million, could fuel political and shareholder anger against Citi.
Pay criticism
Employee compensation at financial companies has brought criticism from members of Congress and the public in the wake of the United States paying out hundreds of billions in bailout dollars to banks. The Obama administration has blamed compensation plans for encouraging excessive risk-taking that pushed the financial services sector into chaos last year.
Feinberg, a lawyer, was selected by the administration to be its "special master" to oversee compensation packages awarded by seven companies receiving the most bailout aid, including Citi. He can reject pay plans he deems excessive and review compensation for the firms' top 100 salaried employees.
"Companies will need to convince Mr Feinberg that they have struck the right balance to discourage excessive risk-taking and reward performance for their top executives," a Treasury spokesman said last Saturday. "That process is just beginning now, and Mr Feinberg has begun consulting with those firms about their compensation plans. We are not going to provide a running commentary on that process, but it's clear that Mr Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance."
Some of the banks that got government loans, including JPMorgan Chase & Co and Goldman Sachs Group Inc, already have paid back their debt, and are no longer subject to compensation oversight. They are able to offer lucrative deals to entice employees away from other banks.
Quarterly losses
That leaves banks such as Citigroup scrambling to retain the talent they need to turnaround their operations. Among the hardest hit by the credit crisis and recession, Citi has reported six straight quarterly losses totaling nearly US$30 billion. The bank, which will soon be 34 percent owned by the government, has reduced staff and sold assets to streamline operations and return to profitability.
To keep vital personnel from decamping to other firms, Citi in April asked the Treasury to free the highly profitable Phibro unit from federal compensation limits and last month said it would boost the base salaries of many employees - reportedly by as much as 50 percent for some workers - as it restructures their compensation amid government restrictions on bonuses.
"Retaining and attracting the best talent is very important to the success of Citi and all its stakeholders," Citigroup spokeswoman Danielle Romero-Apsilos said in a statement last Saturday.
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