Citi news prompts U.S. to say it is guarding against extreme pay
— -- Citigroup is increasing the base salaries of many employees — reportedly by as much as 50% for some workers — as it restructures their compensation amid government restrictions on bonuses.
The Obama administration reacted by pledging to aggressively implement a new law governing compensation at companies like Citi that received billions of dollars in taxpayer-funded bailout.
Administration officials, however, refused to say whether Citi had informed the government in advance of its decision to restructure salary levels.
The higher salaries at Citi are not the equivalent of annual raises because bonuses are being lowered, according to a person familiar with the matter who requested anonymity because the plans have not been made public. The changes would not affect the amount of an employee's compensation, but could allow Citi to pay most employees as much as they received in 2008 while adhering to bonus caps. The person said the employees included traders, who tend to be compensated more heavily with bonuses, and middle- and lower-level managers, whose compensation is more heavily weighted toward salaries.
Before the financial crisis, top traders and investment bankers typically earned $125,000 to $250,000 in annual base salary and another $1 million to $5 million bonus, according to Alan Johnson, managing director of compensation consulting firm Johnson Associates.
A New York Times report Wednesday said some employees' salaries will rise as much as 50% because of the change in compensation structure.
Employee compensation at financial companies, particularly in the form of bonuses, has been criticized by members of Congress and the public after the government gave the banks hundreds of billions in bailout dollars. Citi and others that still hold bailout funds face limits on bonuses as part of a new government compensation oversight plan.
The administration said in a statement its point person on the issue, Kenneth Feinberg, had begun reviewing compensation at the seven firms receiving the most assistance in the $700 billion bailout. "Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives," it said.
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