Citi Cuts Bonuses, Severance for Top Execs

Updated from 10:54 a.m. EST

Citigroup (C Quote) shares finished down 1.3% Wednesday on news that the troubled financial giant was slashing bonuses and severance packages for many top executives.

Citi was required to make changes to its executive compensation plan after receiving more than $45 billion in capital from the U.S. Treasury this fall. The government has approved Citi's new compensation plans, the bank said in an internal memo sent to employees on Wednesday.

Under the new plan, Citi CEO Vikram Pandit, who just passed his first anniversary as head of the financial services giant, Citi chairman Sir Win Bischoff and senior advisor Robert Rubin will not receive bonuses for 2008.

"Unfortunately, the harsh realities of 2008, primarily our earnings results, mean that our bonus pool is dramatically lower than last year," Pandit said in the memo. "Our focus, however, is on the future, and I believe we will continue to make progress in 2009 -- much more of it and much faster than we did in 2008."

Bonuses for other executives will be cut "substantially," Citi said. A larger portion of the bonuses will be paid in deferred compensation, Citi said.

The bank is also instituting a so-called clawback policy, in which it will be able to recoup executive compensation "that over time proves to be based on inaccurate financial or other information," the memo said.

Additionally, the bank is restricting severance payments, particularly for its five most senior executives.

Citi along with other large banks including JPMorgan Chase (JPM Quote), Wells Fargo (WFC Quote) and Goldman Sachs (GS Quote) were among the first firms to receive capital infusions through the Troubled Assets Relief Program, or TARP, in September.