In February 2009, after his bank received more taxpayer assistance than any other U.S. lender, Citigroup Chief Executive Officer Vikram Pandit told Congress he would take $1 a year in salary until the bank turned a profit. Now that Citigroup has posted a profit in five consecutive quarters, the board has rewarded Pandit with a substantial raise.
In January, the board increased his salary to $1.75 million. In May, Pandit, 54, got $10 million in deferred stock and options the company valued at $6 million to $6.5 million. He also entered a profit-sharing program that could net him millions more. In addition, on July 2, Pandit received $80 million, the last of the $165 million he was due from Citigroup’s purchase of his Old Lane Partners hedge fund in 2007, according to regulatory filings.
All this comes as Citigroup stock fell 9.3 percent in the first half of the year, while the Standard & Poor’s 500-stock index rose 6.5 percent. “This raises the interesting question as to why the comp committee decided the war was over and it was time to stage a victory celebration.” says Graef Crystal, a compensation specialist and Bloomberg News consultant.
In a May statement, Citigroup Chairman Richard Parsons said the pay package was “designed to retain Vikram as our CEO and reward him for future performance.” Pandit has boosted lending in emerging markets in Asia and Latin America and cut the amount of toxic assets on the bank’s balance sheet. The strategy enabled Citigroup to pay back the Treasury’s $45 billion in bailout funds and deliver a profit to taxpayers of about $12 billion. The bank is on course to make a $12.6 billion profit for the year, according to a Bloomberg survey of 12 analysts. “Providing incentives to keep him on board makes sense,” says Pri de Silva, an analyst with CreditSights.
Investors remain skeptical. Citigroup’s stock market performance this year places it 13th on the 24-company KBW Bank Index. The shares have fallen about 92 percent since the Old Lane deal closed and 87 percent since Dec. 11, 2007, the day Pandit was appointed CEO. “Taxpayers saved this bank,” says Crystal, “and he’s getting a bundle while shareholders are getting shortchanged on the stock price.”