Business NEWS

Citigroup seeks permission to pay bonuses: a Phibro deal

By Amarendra Bhushan for CEOWORLD Magazine Updated:April 29, 2009

Citigroup Inc., which has received $45 billion in federal bailout funds, is asking the U.S. Treasury for permission to pay special bonuses to many key employees and is looking for ways to free an energy-trading unit from government restrictions, the Wall Street Journal reported.

The report noted that the company is dealing with the people threatening to leave from its energy-trading unit, Phibro, because of pay restrictions.

Citi’s CEO,Vikram Pandit, asked US Treasury secretary Tim Geithner earlier in April if it could pay stock-based “retention” bonuses to employees but the government has yet to decide. It is unclear how much Citi would pay out if the request is approved.

Citigroup is looking into possibilities, including either spinning off Phibro into an independent hedge fund or bringing in outside investors.

Financial Times says the bank has told U.S. regulators it could fill the capital shortfall identified by the government’s so-called stress tests by selling large businesses, asking more investors to convert their preferred shares into common stock and reducing its balance sheet.

Henry Blodget writes, Now that Citi has been forced by the TARP restrictions to pay its executives merely astronomically, Hall and Phibro want out.

And can’t say we blame them. Why on earth would you work for Citi for chicken feed when, say, Deutsche Bank is happy to pay you $100 million a year?

Citi, meanwhile, doesn’t want to see Phibro walk across the street, so it’s beggiei Tim Geithner to let it pay everyone a massive special bonus totalling 50% of their cumulative compensation for the past three years. (That would presumably be $75-$100 million for Hall, paid in stock that vests over three years).

And can’t say we blame Citi. Why on earth shouldn’t they try to keep their best assets instead of letting the firm go to the dogs? (As shareholders, this is also presumably what we should want them to do.)

Like this article! ‹ A fine line between advertising and intrusion Ponzi Schemes: Californian fund manager Danny Pang arrested by FBI for alleged cash structuring crime ›
Share this Post: Get It Delivered To Your Inbox