Corporate Governance

The Director Compensation Project: Citigroup

By Mark Dunn

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009's Fortune 100 and using information found in their 2009 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence. While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting.

Under NYSE Rule 303A.01, all listed companies must have a majority of independent directors sitting on their boards. Directors are not independent if they received over $120,000 in direct compensation, other than director's fees, in any one year period over the last three years pursuant to Rule 303A.02(b)(ii). This is a looser restriction than the equivalent NASDAQ Rule, 5605(a)(2), which includes all compensation. Rule 303A.06 requires that, in addition to the general independence standards, audit committee members must comport with the requirements of Exchange Act Rule 10A-3 (C.F.R. §240.10A-3), also known as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Citibank's (C-NYSE) 2009 proxy statement. According to the proxy statement, the company paid the directors the following amounts:

* Mr. Hernández Ramirez compensation included payment for security services for himself and members of his immediate family as well as payment for office, secretarial and related services, and aircraft usage for Citi business-related purposes.

Director Compensation. Citibank's board met twenty-five times in 2008. All directors attended at least 75% of the combined Board of Director and committee meetings held during the periods served by such nominee. Only one director received more than $100,000 in direct cash compensation. Non-management directors averaged approximately $130,000 in stock awards, the value of which has declined significantly since a dramatic drop in Citi's stock price.

Director Tenure. Four of Citibank's thirteen directors have served on the board since at least 1997. C. Michael Armstrong has the longest tenure, serving on the board since 1989. Several directors serve on other boards. Mr. Ryan serves on the board of Black & Decker, General Mills and Hewlett-Packard.

CEO Compensation. Mr. Vikram Pandit serves as CEO of Citibank. In 2008, his total compensation was $10,815,263. His compensation included a $958,333 salary, stock awards worth $8,230,244, and $16,193 in 'other compensation.' The 'other compensation' included $2,393 in ground transportation and $13,800 as a match to Mr. Pandit's 401(k) contributions. Citibank's second highest paid employee in 2008 was James Forese, Co-Head of Global Markets. His total compensation amounted to $12,855,072.

Full post as published by The Race to the Bottom on May 07, 2009 (boomark / email).