Citi Cuts Bonuses, Severance for Top Execs

The bank's shares drop on news it is slashing bonuses and severance packages for many top executives.
Publish date:

Updated from 10:54 a.m. EST


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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

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Wells Fargo

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Goldman Sachs

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were among the first firms to receive capital infusions through the Troubled Assets Relief Program, or TARP, in September.

But the

Treasury Department

was forced in late November to take an additional $20 billion stake after Citi's stock fell to record lows amid investors' concerns about the company's viability.

Other top banks that have received government investments, including Goldman Sachs and

Morgan Stanley

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, also have cut bonuses for top executives this year.

The executive compensation news comes as Citi continues to pare down its extraneous businesses.

Separately on Wednesday, Citi said it had completed the sale of its Indian outsourcing business, Citigroup Global Services Ltd., to Tata Consultancy Services for $512 million in cash. It first agreed to sell the unit in October.

In addition to the sale, Citi has agreed to have Tata process outsourcing services to the bank and its affiliates over a period of 9.5 years. The agreement builds upon an existing relationship between Citi and Tata, it said.

Citi announced in November that it planned to cut an additional 53,000 jobs from its bloated global workforce as the bank struggles with massive writedowns and credit issues from its businesses.

Citi said the sale of the outsourcing business will reduce its global headcount by more than 12,000 employees, all of whom are located in India.