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Posted by Richard H Dammann on 05/03/2008 at 04:16 PM
Restricted Stock Rains Down On Wall Street
Monday, January 28, 2008 - 2:03 pm
Citigroup is the latest firm to award restricted stock to employees, in lieu of cash:
Citigroup is replacing up to 20% of the bonus package of its highest paid managing directors with a new restricted stock type that will vest over two years to make up for a reduced cash payout.
The US bank has followed its rivals by reducing the cash element of its bonuses and increasing stock payouts to its highest-paid bankers, who get most of the bonus pool. The banks are trying to ensure the limited cash pool is distributed most heavily to lower paid employees, and asking higher paid bankers to take additional restricted stock.
The cash bonus may be cut by 50% in the case of the highest-paid Citigroup executives, according to a source familiar with the situation.
Citigroup’s restricted stock will also have a shorter vesting period than the usual stock distributed through its capital accumulation plan, which vests over four years. The new stock vests over two years, which reflects its purpose as a replacement for cash. Financial News
Citi’s deal is not too different than the other deals floating around the Street:
A banker at JP Morgan earning $1.5m will receive 60% of his pay in cash and 40% in stock, compared with 65% in cash and 35% in stock last year. Merrill Lynch, which used to pay bonuses that were about 75% cash and 25% stock to investment bankers, will this year pay 60% cash and 40% stock, according to chief executive John Thain.
Although there is likely to be some grumbling, the stock is being dished out at depressed valuations, and a recovery in the stocks of banks and brokers by 2010 could put smiles back on the faces of bankers.
Citigroup revamps cash bonus packages
Financial News
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