Citigroup said on Thursday it has overhauled an executive pay plan that shareholders rejected last year as overly generous, revising it to tie bonus payments more closely to stock performance and profitability.
The company also said it will pay new Chief Executive Mike Corbat $11.5 million for his work in 2012, in line with remuneration for his peers at other major banks.
The new plan was crafted after board Chairman Michael O'Neill and other directors met with "nearly 20" shareholders representing more than 30 percent of Citigroup stock, Citi said in a filing.
"At first blush, the package appears to be responsive to a number of the issues we raised," said Michael Garland, an assistant comptroller overseeing corporate governance matters for the City of New York.
New York City's pension funds, which own about 7.4 million shares of the bank, met O'Neill in August to discuss senior executive pay, Garland said.
Citigroup's previous pay plan was rejected by shareholders in a non-binding vote at the company's annual meeting in April last year, in what was seen as a stinging rebuke to the bank's management and directors, and helped hasten departure of then-chief executive Vikram Pandit.
Compensation analysts had criticized the plan for giving directors too much discretion to set pay, and for setting the bar too low for bank executives to receive high payouts.
Under the previous profit-sharing plan, Citigroup would pay millions to executives if Citigroup earned more than $12 billion before taxes over two years, a figure the company easily topped in 2010 and 2011.
Under the new plan, 30 percent of the bonus for top executives will be paid in cash based on how much the company earns on assets and on total shareholder return compared with peers over three years through 2015. Another 40 percent will be a simple cash bonus and the final 30 percent will be deferred stock.
Still, elements of the bank's proposed pay package could be better, said Paul Hodgson, a corporate governance analyst in Camden, Maine.
For example, the pay plan would ideally reward executives more for their performance. But too much of the stock bonuses are awarded mainly for the employee staying with the company, Hodgson said.
There were positives, including the fact that the bank needs to show stronger performance over the longer term than before, Hodgson said.
"They have done enough to check the boxes, basically," Hodgson said.
Charles Elson, director of a corporate governance center at the University of Delaware, said the new pay plan could be followed by other banks because it reduces the discretion of the board, a sore point for bank investors.
"At a lot of these financial institutions, people distrust the board, so moving away from discretion makes some sense," Elson said.
The 2012 pay for Corbat, who was named CEO in October, was based partly on the new pay plan.
Corbat's $11.5 million payment was based on his work as CEO and on his prior performance as head of the Europe, Middle East and Africa region, the company said. The board's compensation committee noted that Corbat had quickly moved as CEO to finalize the 2013 budget, including a restructuring plan to save $1.2 billion a year.
Of the payment, $1 million is base salary, $4.18 million is cash bonus, $3.14 million is deferred stock and $3.14 million is in new "performance share units" which deliver cash payments depending on profits and stock performance compared with peers.
Pandit, who was pushed out as CEO in October, received a symbolic $1 in 2010 and $128,741 in 2009, far less than rivals, after the company received more than $45 billion of government bailout money over three rescues during the financial crisis.
Pandit was paid $15 million in 2011.
Citigroup did not disclose pay for other top executives. It did, however, say that "performance share units" valued at $3.14 million had been awarded to Manuel Medina-Mora, the co-president, and that $1.95 million of the units had been awarded to CFO John Gerspach.