Citigroup has decided to raise employees’ base salaries to avoid the backlash that could come with big yearend bonuses, The New York Times reported on Wednesday. Some employees could earn as much as 50% more as a result. Cramer was outraged by the move, he said during Mad Money, especially because Citi’s largest shareholder, the US government, knew nothing of the plan.
Cramer said he doubted that the rank and file, the supposed beneficiaries here, would be the only workers getting a fatter paycheck. He assumed the traders and investment bankers – hardly average employees – would see plenty of extra money themselves. He might feel differently if the bank in question had paid back its TARP loans, but Citigroup has not. In fact, America’s taxpayers are on track to own 34% of the company, making the pay increases bold, to say the least. As long as Citi’s living on the government dime, Cramer wants the firm held accountable.
A better idea, he said, would be to create a two-tiered pay plan, with small incentives for employees who don’t take risks and long-term compensation, such as vesting stock, for those who do. The latter is especially important because it was long-term risk in exchange for short-term gain that sparked the banking crisis in the first place, Cramer said.
Cramer’s bottom line? We as taxpayers have a plurality of votes, and we should use them to keep Citi in check. The fact that Obama, as far as we know, was caught unawares by the new pay plan is concerning. Wall Street, the markets, investors – they can’t afford that right now.
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