Citi Salary Plan Rankles Activist Investor

Citigroup's (C Quote) reported plan to raise employee salaries this year by as much as 50% has rankled at least one activist investor group.

The American Federation of State, County and Municipal Employees, or AFSCME, plans to send Citi a letter criticizing the company's reported plan to change its compensation structure to a plan that does not foster successful performance in the long term.

"Our concern is that it seems the bulk of this money will be focused on the traders, so that will create a win-win situation for them ... guaranteeing a very high salary, and then on top of that they will have an additional huge upside because restricted stock is going to be converted into options so that there should be a huge pay day for them in the future," says Rich Ferlauto, AFSCME's director of corporate governance and pension investment.

"What we would like to see is appropriate incentives in place for the creation of value," he says.

Citi, in a statement, made a well-worn argument among financial companies justifying big salaries and bonuses in the financial crisis: it needs to offer competitive compensation to retain and attract top talent.

"Citi continues to examine ways to ensure its employee compensation practices are competitive in this very challenging market environment," the company said in its statement. "Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation."