Citigroup Inc said on Thursday it has overhauled an executive pay plan that shareholders rejected last year as overly generous, revising it to tie bonus payments more closely to stock performance and profitability.
The company also said it will pay new chief executive Mike Corbat $11.5 million for his work in 2012, in line with remuneration for his peers at other major banks.
The new plan was crafted after board chairman Michael O’Neill and other directors met with “nearly 20” shareholders representing more than 30% of Citigroup stock, Citi said in a filing.
“At first blush, the package appears to be responsive to a number of the issues we raised,” said Michael Garland, an assistant comptroller overseeing corporate governance matters for the City of New York. New York City’s pension funds, which own about 7.4 million shares of the bank, met O’Neill in August to discuss senior executive pay, Garland said.
Citigroup’s previous pay plan was rejected by shareholders in a non-binding vote at the company’s annual meeting in April last year, in what was seen as a stinging rebuke to the bank’s management and directors, and helped hasten departure of then-chief executive Vikram Pandit.
Compensation analysts had criticised the plan for giving directors too much discretion to set pay, and for setting the bar too low for bank executives to receive high payouts.
Under the previous profit-sharing plan, Citigroup would pay millions to executives if Citigroup earned more than $12 billion before taxes over two years, a figure the company easily topped in 2010 and 2011. Under the new plan, 30% of the bonus for top executives will be paid in cash based on how much the company earns on assets and on total shareholder return compared with peers over three years through 2015. Another 40% will be a simple cash bonus and the final 30% will be deferred stock.
Still, elements of the bank’s proposed pay package could be better, said Paul Hodgson, a corporate governance analyst in Camden, Maine. For example, the pay plan would ideally reward executives more for their performance. But too much of the stock bonuses are awarded mainly for the employee staying with the company, Hodgson said. There were positives, including the fact that the bank needs to show stronger performance over the longer term than before, he said. “They have done enough to check the boxes, basically,” Hodgson said.