- The Washington Times - Monday, March 16, 2009

NEW YORK (AP) - Citigroup has nominated four new independent directors to its board in the latest move to toughen up the bank’s oversight.

Citigroup’s board has been widely criticized for allowing bank executives to make risky investments in the housing market and not having enough financial services experience. The new directors include two former bank CEOS and two other financial experts.

The new candidates are Jerry A. Grundhofer, 64, chairman emeritus and former chairman and CEO of U.S. Bancorp; Michael O’Neill, 62, former chairman and CEO of Bank of Hawaii; Anthony M. Santomero, 62, a senior adviser at McKinsey & Co. and former president of the Federal Reserve Bank of Philadelphia; and William S. Thompson Jr., 63, the former CEO of bond investment manager Pimco.

Chairman Richard Parsons said these candidates have “extensive banking and financial services experience, a deep understanding of international credit and equity markets, and first-hand knowledge of the governing regulatory system.”

James Post, a management professor at Boston University, said Citi’s directors had been too generous with compensation and that investors had grown weary of the board’s “coziness with the CEOs, and a tolerance for bad behavior.”

Post said the new members “seem to have the kind of savvy that at least will hold management’s feet to the fire,” Post said. “It looks like it’s going to be a better board, and certainly less cozy.”

Citigroup shares jumped 55 cents, or 31 percent, to $2.33.

Citi also disclosed Monday that its CEO took no bonus last year, but did receive stock and options awards in early 2008 upon taking the job.

The four nominated directors will be up for election at the annual shareholders meeting in April.

With the four new directors, Citigroup would have 14 board members, and the bank says it is considering future additions. The board currently has 15 directors, three of whom previously announced they will not stand for re-election and two of whom will be of retirement age by the shareholder meeting.

The three directors departing are Roberto Hernandez Ramirez, the chairman of Citi’s Mexican banking operations; Robert Rubin, a former Treasury Secretary who was a longtime Citigroup board member; and Win Bischoff, most recently chairman at Citigroup.

Citigroup had already been scaling back executive compensation. The bank disclosed Monday lower compensation figures for officers in 2008 and fewer perks compared to previous years, and described a 2009 incentive plan that would make fewer global executives eligible for stock awards.

Some say the embattled bank should be scaling back more, though.

“I don’t really see the drastic moves,” said James Reda, an independent executive compensation consultant who has testified on Capitol Hill. He said reducing the number of countries with executives eligible for bonuses in 2009 is a step in the right direction, but eliminating stock awards overseas altogether would save the company millions of dollars in fees.

The bank did set aside big cash retention bonuses for three of the top five executives last year. These deferred cash retention awards vest over a four-year period, and the executive must be employed on the vesting dates to get the payment, the filing said.

Citigroup’s co-head of global markets James Forese is eligible for a $5.3 million bonus; CEO of the Asia Pacific region, Ajaypal Banga, can get $3.6 million; and Vice Chairman Stephen Volk can get $3.6 million.

Citigroup’s board “is not biting the bullet,” Reda said. “It’s ludicrous to think you need to pay retention awards of any type this year.”

Citigroup’s CEO Vikram Pandit, however, did not get any cash bonus, like many other CEOs of banks receiving federal money. Neither did Citigroup’s chief financial officer, Gary Crittenden.

Pandit’s compensation was valued at $38.2 million last year, according to a regulatory filing. That’s less than former CEO Charles Prince received from the board in 2007, when he got ousted with a $40 million payout.

The bulk of Pandit’s compensation was $37.3 million in stock and option awards granted in January 2008, when Citigroup’s shares were worth about $25. They are now worth around $2. Nearly $35 million of Pandit’s stock and options awards were sign-on bonuses, and the other $2.5 million were retention awards.

“The real payday for him won’t come unless there’s genuine performance improvement at Citi,” Post said.

Pandit became CEO of the troubled bank in December 2007, as the bank was recording the first of five straight quarterly losses. Citigroup has since gotten $45 billion in federal funding, and government backstops on a pool of assets worth more than $300 billion. The government is a major stakeholder in Citi and could wind up owning up to 36 percent of the bank.

Pandit’s 2008 salary was $958,333, and his other compensation amounted to $16,193. That figure includes $2,393 for ground transportation and $13,800 in 401(k) contributions. Pandit said earlier this year he will accept a $1 salary until the bank is profitable again.

Pandit and the four other most highly paid executives were not compensated for personal use of company aircraft.

The Associated Press’s total pay calculations include executives’ salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don’t include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the SEC.


AP Business Writer Sara Lepro contributed to this report.

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