Citi's pay increase plan raises eyebrows
Citigroup, which accepted two infusions of TARP money, wants to raise some of its employees' base salaries by as much as 50 percent. The pay increase is meant to compensate for reduced bonuses. Ashley Milne-Tyte reports.
A pedestrian walks by a Citibank branch office in San Francisco, Calif. (Justin Sullivan/Getty Images)
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TEXT OF STORY
Kai Ryssdal: There is some Citigroup news today that you, as taxpayers and thus shareholders, might be interested in. Citi's already into the U.S. government for $45 billion from the TARP bailout. Washington is about to come into a 34 percent stake in the bank thanks to a fairly convoluted stock transaction.
So it may come as a surprise to hear that Citi plans to raise employees' salaries. In some cases by as much as 50 percent. Citi says it's not going to actually end up paying employees more because bonuses will be smaller from now on. But irate observers are pointing out that Citi wouldn't be able to pay anybody anything at all if it wasn't for us keeping them in business. From New York, Ashley Milne-Tyte reports.
ASHLEY MILNE-TYTE: Citi says it wants to pay the government back but to do that it needs to hold onto the workers who'll make that money. Alan Johnson is a compensation consultant. He says paying more in base salary and less in bonuses is the right thing to do.
ALAN JOHNSON: In Citibank's case in particular they obviously have morale problems, they have issues of whether they can actually be paid at the end of the year.
He says removing uncertainty about compensation is more likely to keep Citi workers at their desks. Peter Cohan writes widely about banks. He says raising base pay and trimming bonuses will please some bankers but anger others.
PETER COHAN: If they're paying a bigger salary to somebody who's working in a part of the business that's losing money, it doesn't seem to me they should be getting a reward for that. It seems to me they should be suffering along with the performance of the business.
Instead bankers are guaranteed more base pay even if Citi does badly. That's the way the way Rich Ferlauto sees it. He's with the American Federation of State, County and Municipal Employees, which holds three percent of Citi's stock. He says the traders and others who created Citi's problems are the winners here.
RICH FERLAUTO: Before they were overly rewarded for taking big risks. Now we're just going to reward them very generously. There needs to be a tie to performance. And not a guarantee of the delivery of very large salaries.
Ferlauto says bankers deserve to be paid well. But he says if Citi concentrated on being a regular retail bank, it wouldn't need to offer so much of its pay in bonuses.
In New York, I'm Ashley Milne-Tyte for Marketplace.
Comments
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From Buffalo, NY, 06/29/2009
You won't find any congressman who has some of these employees in his/her district doing anything about this situation, because they all realize that big salaries or bonuses means big campaign contributions. Isn't that, what Wall Street is all about?
From Charleston, SC, 06/25/2009
This is insulting and infuriating. People, including professionals, in productive jobs that contribute to GNP and real value are taking pay cuts, losing those jobs, yet these boobs expect they're deservant of a pay hike? Unbelieveable, its absolutely unconscionable.
From Oakland, CA, 06/25/2009
After listening to this story followed by the one on Miss Bird, the California teacher's aid in dire straits, I think I felt physically sick. Where is the outrage? Even the White House, through Geitner and Summers, appears completely out of touch with the EFFECTS that the banking crisis have wrought.
From AZ, 06/25/2009
In the midst of this economoy crisis, some banks are still doing well. Hecne the board of directors and the government should seriously look at assessing if the senior guys in Citi should be replaced. If it claims its stuff is doing well, and performing, why do they still need to be bailed out? Hope they are not taking all ordinary people like us as fools.
From Somerset, NJ, 06/24/2009
What have these people done to deserve raises other than take taxpayer money? Most people have to actually perform to get a raise.
From Cadiz, KY, 06/24/2009
It should do more than raise eyebrows. It should prompt the federal government to ask for the money back and let them fail. This behavior is inexcusable.
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