Pandit: Reaping gains
New York, Nov. 10 (Agencies): The board of Citigroup has awarded $6.65 million to Vikram S. Pandit after unexpectedly ousting the chief executive last month.
Pandit will receive the money as part of an “incentive” package for his work during 2012. He will also continue to collect his deferred cash and stock awards from the previous year, compensation that the bank currently valued at more than $8.8 million.
In a surprise move, Pandit resigned in October, a departure that was orchestrated for months by the bank’s board. Its powerful chairman, Michael E. O'Neill, manoeuvred behind the scenes to curry support with other directors and replace Pandit. Michael L. Corbat was named the new chief executive.
As part of the shake-up, the board also forced out John Havens, the chief operating officer. Havens will receive $6.8 million in incentive pay for 2012, with previous deferred stock and cash awards valued at $8.725 million.
Since Pandit and Havens abruptly left the company, they will both forfeit the remainder of their retention packages, which were outlined last year.
For Pandit, the lost compensation amounts to roughly $24 million, according to a person with knowledge of the matter who could not speak publicly.
Pandit led the bank during a turbulent chapter in its history. After taking over in 2007, he navigated the bank through the financial crisis, securing a $45-billion lifeline from the federal government. The bank’s health was so dire that Pandit opted to take a token $1 annual salary.
Pandit and Havens had previously sold their hedge fund to Citigroup in a deal that ultimately paid each man $79.7 million.
The company later adopted a new compensation plan and Pandit was paid $14.8 million in 2011. The pay plan raised the ire of investors and was denounced by a majority vote of shareholders in a referendum at Citigroup’s annual meeting in April.
The pay plan did not closely link executive compensation to performance, critics said. US median household income was $50,054 in 2011.
The plan was also criticised for granting large retention awards to keep executives from leaving.
While the bank has returned to profitability, Citigroup has struggled with a stagnant stock price and lacklustre earnings. It suffered an especially tough blow in March when the Federal Reserve rejected the bank’s plans to raise its dividend.
Since Pandit resigned, the mood among some senior executives has been grim, according to several people close to the bank.
The executives felt that the board’s actions last month were particularly brutal and humiliating to Pandit, considering his role in reviving the bank.
The payments are the final chapter in the reign of Pandit. Payments to departing officers are a thorny matter for corporate boards because investors question the benefit the company gets from handing money over to executives that no longer work there.
Citigroup said it was paying the men what it had to. “While Citi will also honour all past awards that they are legally entitled to, there are no severance payments. Awards to which they are not legally entitled have been forfeited,” ’Neill said.