Leadership Matters: Citi's Pay Dilemma

As some financial institutions are still within the indentured servitude of the federal government, while others are not, we can see the free market consequences of federal intervention in executive pay schemes. Those institutions still under government regulation, such as Citigroup (C - commentary - Trade Now), are finding that some of their top talent is being recruited by competing organizations that no longer have such strictures.

For example, Goldman Sachs (GS - commentary - Trade Now) announced a proposed budget of $20 billion for executive bonuses in 2009 -- an increase to $700,000 a person from $360,000 a person in 2008. Similarly, Morgan Stanley (MS - commentary - Trade Now) has set aside between $11 billion and $14 billion for executive incentives.

At the same time, a great deal of uproar has been heard about Citigroup's decision to raise base salaries by as much as 50% and in some cases offer guaranteed contracts in order to offer competitive compensation packages. The complaint has been that employees of Citigroup will in many cases make as much, if not more, than they did prior to the bailout and that the executives at Citigroup are speaking out of both sides of their mouth. On the one hand, they greatly reduce bonuses; on the other hand, they greatly increase salaries.

I had a member of the press ask me last week if I thought we had any right to feel that the financial institutions were gaming the system. For example, now that Goldman has paid back federal money, she asked, do we have a reason to even comment on their compensation practices? If Citigroup wants to raise salaries to offset bonus compensation, is it even our business? My question in return was, "Did we not learn anything from the past few months?"

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Leadership Development Specialist, L. Todd Thomas ("Dr. Todd") PhD, M.S, M.A, is Founder of IMPACT Consulting and Development . Dr. Todd holds a PhD in Human Communication, Masters in Educational Psychology and a Masters in Interpersonal Communication. He was a professor at North Carolina State University and Indiana University before leaving for the corporate world. He led Organizational Learning at Rockwell Avionics and was the executive responsible for Organizational and Executive Development at Daimler Financial Services for 10 years. Dr. Todd has coached and consulted with over 3000 leaders from 40 different countries spanning 4 continents. He is a speaker, seminar leader and the author of "Leading in a Flat World: How Good Leaders Become Greatly Valued." Other titles include "Life Lessons for Leaders" and "Stop Wasting Your Time: Creating High-IMPACT Meetings" as well as the "Leadership Integrity Quotient(tm)" leadership assessment.