Citigroup is reinventing the way it pays finance executives. (midweekpost, CC3.0)
Citigroup, the nation’s third-largest bank, is exploring new compensation models to try the impossible: retain staff, stay profitable and reward good behavior, sources told Thompson-Reuters.
Citigroup may pay employees on a commission basis, increasing base salaries to limit the exposure to year-end bonuses, stock-based bonuses or some combination of all three, Reuters reported today. “A number of possibilities are under discussion, and generally are geared toward ensuring that employees are motivated to perform well,” wrote Reuters.
Citigroup and banks on Wall Street and across the nation are struggling to find ways to retain top talent and live within the letter of the law of the 2009 stimulus package and Trouble Asset Relief Program that limits executive pay and bonus. Banks, especially those who have accepted TARP money (Citigroup accepted $45 billion) are worried about losing employees to financial institutions like hedge funds that are not limited by compensation regulations. “If we can’t pay people competitively, we can’t expect them to stay here,” a bank executive told Reuters.
One would hope they also desire a compensation model that rewards behavior that benefits the company as opposed to the bonuses paid on short-term profits that later resulted in financial disaster for the companies.
The new models being considered face hurdles beyond the expected institutional inertia. According to Reuters:
Commissions, for example, only work well for professionals in sales positions, and even then can lead to conflicts over which sales person was responsible for a deal. Giving percentages of revenue could result in outsized paydays if a business outperforms, which could lead to public outcry.
Several banks, such as Goldman Sachs Group ($10 billion in TARP funds), have chosen instead to repay the TARP funds and shake off government regulation. The approach would allow Goldman and others who choose that course to pursue business as usual as fast as possible. But business as usual was seen as partly responsible for the events that caused several banks to fail last year and put others in the unfortunate position of seeking TAP funds in the first place. To pursue business as usual can be called a failure of imagination.
If you work on Wall Street or in finance anywhere, the compensation debate ongoing at Citigroup, and other banks, is of great interest to your job search, depending on where and when you seek a new job or raise, it could change the way you approach the offer or negotiate your salary. Stay tuned and stay informed to make the best decisions with the best intelligence.
(Citigroup by midweekpost, CC3.0)
For more information on salary negotiations:
- 8 Common Commission/Salary Packages
- How to Negotiate Your Salary in This Recession
- When Should I Talk to a Lawyer about Compensation?
- How to Ask For More Money
Geithner Says SEC, Bank Regulators Key to Executive-Pay Limits http://bit.ly/l0efz
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