Citigroup revamps cash bonus packages

Citigroup is replacing up to 20% of the bonus package of its highest paid managing directors with a new restricted stock type that will vest over two years to make up for a reduced cash payout.


The US bank has followed its rivals by reducing the cash element of its bonuses and increasing stock payouts to its highest-paid bankers, who get most of the bonus pool. The banks are trying to ensure the limited cash pool is distributed most heavily to lower paid employees, and asking higher paid bankers to take additional restricted stock.

The cash bonus may be cut by 50% in the case of the highest-paid Citigroup executives, according to a source familiar with the situation.

Citigroup’s restricted stock will also have a shorter vesting period than the usual stock distributed through its capital accumulation plan, which vests over four years. The new stock vests over two years, which reflects its purpose as a replacement for cash.

Rivals such as UBS have issued restricted stock with a one-year vesting period. JP Morgan’s stock packages for its top bankers call for half to vest after two years and the remainder after three years.

JP Morgan has also changed its compensation package for its highest-paid bankers, according to sources familiar with the bank. It has increased by 5% the amount of stock in the pay packages of managing directors making more than $1m. Bankers earning more than $2m in total compensation will receive 10% more of their pay in stock this year.

A banker at JP Morgan earning $1.5m will receive 60% of his pay in cash and 40% in stock, compared with 65% in cash and 35% in stock last year. Merrill Lynch, which used to pay bonuses that were about 75% cash and 25% stock to investment bankers, will this year pay 60% cash and 40% stock, according to chief executive John Thain.

Citigroup and JP Morgan declined to comment. UBS said: “For staff with annual incentive awards above a certain threshold, UBS has always awarded a mandatory component of bonus in restricted shares .”