NEW YORK (Reuters) - Citigroup Inc (C.N) Chief Executive Vikram Pandit, Chairman Win Bischoff and senior adviser Robert Rubin will forego 2008 bonuses, after a year of heavy losses and a plunge in the share price of the second-largest U.S. bank.
In a memo to employees, Pandit also said the bank's overall bonus pool will be "dramatically lower" than in 2007, in light of the "harsh realities of 2008, primarily our earnings results."
Citigroup lost $10.42 billion from January to September, and is expected to post its fifth straight quarterly loss for the fourth quarter. Its stock fell 77 percent in 2008, and the bank set plans in November to cut 52,000 jobs by early 2009.
A spokesman declined to elaborate. New York-based Citigroup does not break out overall bonus pay, but has said that overall compensation and benefits totaled $33.89 billion in 2007.
Citigroup was required to limit executive pay as part of November's government rescue, in which the United States agreed to inject $20 billion of capital and shoulder most losses on $306 billion of risky assets.
"It sounds like Citigroup is going in the right direction," said Eleanor Bloxham, president of the Corporate Governance Alliance in Westerville, Ohio. "It puts pressure on other banks to follow suit."
Pandit joins several other bank chiefs to give up bonuses for 2008, including Goldman Sachs Group Inc's (GS.N) Lloyd Blankfein, JPMorgan Chase & Co's (JPM.N) Jamie Dimon, Merrill Lynch & Co's MER.N John Thain and Morgan Stanley's (MS.N) John Mack.
The foregone bonuses come in a year when the government tried to stabilize a financial sector battered by asset writedowns, loan losses and tight credit conditions. It has already committed close to half of the U.S. Treasury Department's $700 billion Troubled Asset Relief Program money.
Citigroup's compensation changes will limit bonuses in both 2008 and 2009 for top executives to 60 percent of 2007 levels. Pandit said the bank will limit executive severance, and that several top officials will be ineligible to receive any.
He also said Citigroup instituted a new policy allowing it to take back executive pay that "over time" proves to be based on inaccurate information. Many governance specialists have called for companies to take back previously awarded compensation based on gains that proved illusory.
Pandit also said that "meritocracy requires differentiation in pay," and compensation will be based on the individual's performance as well as that of the company.
Barney Frank, a Massachusetts Democrat and the chairman of the House Financial Services Committee, has pledged to pass legislation in 2009 to give shareholders a bigger say on executive compensation.
The issue is also important to President-elect Barack Obama, who as an Illinois senator sponsored a bill to give investors a nonbinding vote on corporate executive pay.
Citigroup shares closed Wednesday down 9 cents at $6.71 on the New York Stock Exchange. The bank's shares fell 77 percent in 2008 compared with a 50 percent decline in the KBW Bank Index
(Additional reporting by Karey Wutkowski in Washington; editing by Jeffrey Benkoe and Matthew Lewis)
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