NEW YORK (Reuters) - Citigroup Inc’s top executives could forego some of their compensation as a condition of the bank’s bailout, but that may not satisfy critics who want firm limits on the earnings of leaders at companies getting government help.
Citigroup, the latest financial institution lining up for federal help to shore up its finances, must submit an executive pay plan for government approval as part of its rescue. The plan should focus on rewarding long-term performance and contain “appropriate limitations,” the bailout agreement says.
A Citigroup spokesman, Stephen Cohen, said on Monday that details of the pay plan were being worked out, and that no deadline for its submission has yet been announced.
He declined to comment on which executives from the bank, which is getting $20 billion in new capital and an agreement from the government to shoulder the bulk of potential losses from $306 billion of toxic assets, would be subject to the pay rules.
Government officials have said more details on the compensation arrangement would be available next week.
Citigroup’s chief financial officer, Gary Crittenden, said on CNBC television on Monday that the pay plan would affect 2008 compensation for some executives but offered few other details besides saying, “I know it will be done the right way.”
Earlier rules announced by the U.S. Treasury Department aiming to curb payouts at various banks participating in a federal cash infusion apply to a company’s chief executive, chief financial officer and the next three most highly compensated executive officers.
The prospect of big payouts to executives at banks getting federal aid amid the economic crisis has infuriated some politicians and shareholders who say these managers — among the highest paid in corporate America — helped create the financial crisis through risky business practices.
Under pressure to curb lavish executive pay, some financial firms, such as Goldman Sachs Group Inc have voluntarily announced their top executives will not get bonuses for this year.
While the Treasury Department already has crafted restraints on executive payouts at banks getting equity infusions, critics say the rules are vague and do not go far enough. It is unclear whether the plan to be submitted by Citigroup will be much different than what the Treasury’s pay rules already require.
The public wants “strict limits on executive pay,” said Sarah Anderson, a pay expert at the Institute for Policy Studies, which has pressed for executive pay curbs.
“We’ve been told for so long that these guys are such geniuses that we have to pay them this kind of money or these companies will collapse,” she said. “Now these companies are collapsing and they are still telling us these guys are geniuses who need to make this amount of money.”
Others, though, say the government should not get in the business of dictating exact limits on executive pay at Citigroup or any other firm taking part in a federal rescue.
If the government goes that route, says former U.S. Securities and Exchange Commission Chairman Arthur Levitt, it may find itself micromanaging companies, something he says it should not be doing.
“I don’t think it’s appropriate for the government to legislate pay and I doubt that they will,” he said. “As a result of their ownership of a portion of Citigroup they will certainly indicate their desire for reasonable levels of compensation. I don’t think it will be beyond that.”
Reporting by Martha Graybow; editing by Carol Bishopric