Citigroup (NYSE:C) will begin a new bonus plan aimed at getting its senior executives to work for common earnings improvement across the entire company instead of only driving profits within their departments. According to the FT, the new system is "an effort to increase co-operation and minimize in-fighting among the disparate parts of the sprawling financial services conglomerate."
The set-up has all the hallmarks of failure. Senior investment bankers, money managers, and lending executives break their backs to make their operations successful because they can get multi-million dollar bonuses by doing so. Putting them into a pool where their own efforts are watered down by the bank's overall performance is a good way to get top talent to leave for greener pastures.
The most wrong-headed part of the thinking behind the program is that it does not account for the fact that banking executives do their best out of personal greed. The current system of having every operation in the bank strive for its own best results already maximizes overall earnings. The profits from a number of successful divisions within the firm adds up to better financial results for Citi as a whole. Bonuses based on the performance of the the bank as a whole simply makes star executives believed they are being robbed by being lumped in with the company's losers.
Bonus programs like this would not prevent problems like mortgage-backed investments. Each and every financial firm on Wall St. thought they were a good way to make money. Changing the Citi compensation system would not have changed that.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-30-2008 @ 12:38PM
Jill Schottenstein said...
HOW CAN YOU TALK ABOUT A BONUS TO ANYONE AT CITI WHILE SHAREHOLDERS ARE LOSING MILLIONS FROM THIER PERSONAL STOLEN ACCOUNTS?
THE SAME THING HAPPENED WITH DSW AND CYBERTRUST AND OSU...CREDIT CARD THEFT!
Web Shoppers Not Told of Card Thefts
AP
Posted: 2008-06-30 10:41:02
Filed Under: Tech News, Identity Theft, Credit Cards
NEW YORK (June 27) - "An old name in retail was hit by a modern scourge - a hack of its customers' credit card numbers - but didn't inform the consumers, revealing how data breaches might be heavily undercounted even with new notification laws. "
"Company Profile for C:
Industry: Money Center Banks
Total # of Employees: 387,000.00
Prev. Year Sales: +159,229,000,000
Top Competitors: Bank of America, Deutsche Bank, JPMorgan Chase
Key People:
Chief Operations and Technology Officer Kevin M. Kessinger
SVP, Global Corporate Affairs Leah C. Johnson
Chairman Sir Winfried F. W. (Win) Bischoff
Profile: This is the Citi. One of the largest financial services firms on the planet, Citigroup (aka Citi) has more than 3,000 bank branches and consumer finance offices in the US and Canada, plus more than 2,000 additional locations in about 100 other countries. The first US bank with more than $1 trillion in assets, Citigroup and its many subsidiaries offer deposits and loans (mainly through Citibank), credit cards, investment banking, brokerage, wealth management, alternative investments, and a panoply of other retail and corporate financial services. Former CEO Chuck Prince resigned in late 2007 as Citigroup deals with some $45 billion in writedowns of subprime mortgage-related securities and other investments. " More
6-30-2008 @ 4:04PM
alan said...
Top management will just have to "live on their paultry" base pay plus stock options. In fact, switch their pay from base salary to all common shares and then watch them work their butts off.
The one individual in particular that deserves zero comp in any form is Pandy bear, what a HUGE DISASTER. Gee, his note to the troops was soooo insperational that perhaps there will only be a $2-4 Billion loss in 3Q '08.
6-30-2008 @ 5:09PM
Sharma said...
A web application that allows users to express their views on the culture of companies & organizations shows very interesting attributes assigned to Citigroup by the community, including: 'Low Morale, Short-term Focus, Favoritism, Results Driven'. I do not see 'teamwork' or 'infighting' yet.
You can check out the complete results at:
http://apps.facebook.com/office-book
7-07-2008 @ 10:47AM
Davignon said...
If Citi wants to attract investors, they should announce that NO bonuses will be paid this year,
and explain to management that it is their collective fault and their collective need to get the company back on track! I'll bet the current dismal stock price will increase.