Citigroup slashes executive bonuses tied to bank’s turnaround

[NEW YORK] Citigroup cut payouts to hundreds of top executives in the final round of a three-year special bonus programme that tied their compensation to the bank’s progress on risk and regulatory matters.

In the third annual installment, the “Transformation Bonus Programme” paid out 68 per cent of the target for 2024 to about 250 senior employees, according to a proxy filing on Tuesday (Mar 18). That compares with 94 per cent for 2022 and 80 per cent the following year.

The payouts were designed to tie top managers’ compensation to Citi’s progress on improving risk and controls. The programme was intended to link pay with meeting regulator’s demands, milestones reviewed by internal auditors and “culture change” as determined by an employee survey.

The final tranche, unlike the first two, included a boost from the performance of Citi shares. Without that, the so-called “performance achievement percentage” determined by the board’s compensation committee was just 53 per cent.

Citi’s back office has long been considered a weakness for the Wall Street bank, which has invested heavily to fix its problems as part of a larger revamp initiated by chief executive officer Jane Fraser.

In July, regulators fined the bank US$136 million because of its slow improvement on data quality management. Recent reports of botched account transfers renewed scrutiny of Citi’s back-office controls. The bank remains subject to consent orders from the Federal Reserve and Office of the Comptroller of the Currency.

“Citi has acknowledged that, despite making important progress in advancing the transformation, including remediating the consent orders, there were areas where we have not made progress quickly enough, such as in our data quality management related to governance and regulatory reporting,” the bank said in the filing.

Chief financial officer Mark Mason declined to accept his 2024 transformation bonus, according to a source familiar with the matter, who asked not to be identified discussing confidential details. Last year, his award was US$1 million.

Tough decisions

An anonymous group of former employees criticised the bonus programme last year in a letter to Citi’s board. The bank disputed the accuracy and framing of the letter at the time, and said it was “making the tough decisions” for further progress.

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The bonuses follow a 33 per cent increase in total annual compensation for Fraser – the biggest bump among the CEOs of the six largest US banks. Fraser, who was paid US$34.5 million for 2024, was not eligible for the transformation award.

The stock-performance component for the final tranche of bonuses was tied to the average share price over a five-day period ended Feb 19 of US$83.31, according to the filing.

The payouts would have been smaller if they were tied to more recent stock prices. Citi slumped 16 per cent since the end of that five-day span amid a bout of volatility across global equities.

It closed on Tuesday at US$70.22 a share – 15 US cents lower than when the bonus programme was initiated in 2021. BLOOMBERG