The company said the salary increases are necessary to prevent valued employees from fleeing to other organizations and stressed that the change was not intended to increase employees' overall compensation but rather shift compensation packages that are based heavily on annual performance bonuses and tie them more directly to salaries.
Some rank-and-file workers reportedly could see base salaries rise as much as 50 percent to make up for shrinking bonuses. The mega-bank would also award millions of new stock options.
"Retaining and attracting the best talent is very important to the success of Citi and all its stakeholders," the company said in a statement this morning. "Citi continues to examine ways to ensure its employee compensation practices are competitive in this very challenging market environment. Any salary adjustments are not intended to increase to total annual compensation, rather, to adjust the balance between fixed and variable compensation."
Citi has received some $50 billion in funds from the government's Troubled Asset Relief Program. When asked about the Citi pay plan, an official with the Obama administration said that the White House was working aggressively to implement a law governing compensation at firms receiving taxpayer money.
But, the official added, "the president has been crystal clear that we are reluctant shareholders and are not going to be dragged into the day-to-day operations of private companies where the government has invested taxpayer money."
Kenneth Feinberg, the administration's recently appointed compensation "czar" has begun to review the compensation of top executives at the seven firms that have received the most government assistance, including Citi.
"We are not going to provide a running commentary on that process, but it's clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance," the official said.
While the more than 6 million Americans who have lost their jobs since the start of the recession might find it hard to believe that already high-paid bankers might leave jobs that pay six or seven or even eight figures, bonus reductions enacted after the government's investment in Citi and other banks can have an impact.
Heidi Coppola, 51, who recently resigned from a position as a director for fixed income at Citi, said that while compensation concerns weren't her primary reason for leaving the bank, they played a role.
"I didn't leave because of the money, but in the back of my mind I knew this was a good time," she said. "I knew, with compensation affected … I wasn't really missing anything by staying at Citi, financially."
Coppola said that while at Citi she and her co-workers relied on their bonuses to help pay their living expenses. Reduced compensation could make up the minds of Citi employees who are already considering leaving the company, she said.
"People may not be leaving to go to other corporations," she said, but "they may be looking to try their hand at entrepreneurial endeavors."