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New York Times, November 12, 2007 article


The New York Times




November 12, 2007

For Ousted Citigroup Chief, a Bonus of $12.5 Million

This year, thousands of Citigroup employees can expect bonuses based on their work in 2007, when the bank’s results have been less than stellar. One, however, will get a bonus based largely on his performance in 2006, which was a better year: Charles O. Prince III, who resigned under pressure as chairman and chief executive last week.

Mr. Prince, arguably the person most responsible for Citigroup’s enormous problems, can expect at least a $12.5 million cash bonus, compared with last year’s cash payout of $13.8 million.

And as he awaits his official retirement next month, Mr. Prince can rest assured that he will leave with $68 million, including his salary and accumulated stockholdings; a $1.7 million pension; an office, car and driver for up to five years — all in addition to the bonus. That is on top of $53.1 million he has taken home in the last four years, a period when $64 billion in the company’s market value has evaporated.

His $12.5 million bonus is based on a formula that adjusts the 2006 bonus for current stock performance, instead of simply awarding it on his performance during 2007, as with most everyone else. Pay experts say the unusual time-traveling maneuver effectively guarantees him a windfall.

Mr. Prince’s payout raises questions about Citigroup’s compensation philosophy at a time when Wall Street bankers are anxious about smaller bonuses and the current credit crisis. It also raises new questions for Citigroup’s board, which for years handed Mr. Prince lavish paychecks that encouraged risk-taking — and is now handing him extra money despite the billions in losses on his watch.

Compensation specialists say the huge bonus simply looks unfair. “If you were a investment banker on Wall Street working for Citigroup,” said Brian Foley, an independent compensation consultant, “and you resigned before the end of the year, you would most likely get nothing.”

A Citigroup spokeswoman, Christina Pretto, said the company and Mr. Prince declined to comment. Asked if Citigroup bankers who originate mortgages, package loans or have corporate staff jobs would also have their bonuses largely determined by their 2006 performance, she pointed to a memo from Robert E. Rubin, Citigroup’s new chairman, and Winfried F. W. Bischoff, its acting chief executive, which said in part: “We have tremendously talented and dedicated employees, and we intend to continue to pay you competitively and reward performance.”

Mr. Prince’s departure package is smaller than some others on Wall Street. His predecessor at Citigroup, Sanford I. Weill, left with $874 million in stock and options, a $350,000-a-year pension and lifetime use of the bank’s corporate jets (a perk that the board ratcheted back to 10 years).

Philip J. Purcell collected more than $113 million when he was forced out of Morgan Stanley in 2005. And E. Stanley O’Neal received a $161.5 million package when he was ousted from Merrill Lynch last month.

Wall Street bankers this year can expect more of their bonuses to be paid in stock as firms conserve cash. Citigroup’s bankers may be particularly anxious about their bonuses as billions of dollars in losses continue to mount from bad investments in subprime mortgages.

There is also the matter of transparency. Mr. Prince’s big payout can be found buried deep in paragraph 4(d) of his 10-page separation agreement with the company filed late Thursday night. It states that he is entitled to a “prorated incentive award” that adjusts his 2006 bonus based on the 2007 shareholder returns. It does not, however, provide an estimated amount.

Doing the math: his $23.8 million in cash and stock incentives, combined with the company’s negative 37 percent return and the 10 out of 12 months of the year he worked is projected at just over $12.5 million in cash. That is more than the $13.8 million cash portion of his 2006 package.

“This looks like it was done on the back of a napkin,” Mr. Foley said. “It strikes me as very odd-looking. It will look even worse if it turns out the losses are worse.”


Copyright 2007 The New York Times Company




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