The Director Compensation Project: Citigroup

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010’s Fortune 500 and using information found in their 2010 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 know as SOX 301.

One can see some of the effects of these rules when looking at the director compensation table from Citigroup (NYSE:C) 2010 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
C. Michael Armstrong	75,000	150,000	0	3,162	228,162
Alain J.P. Belda	0	240,000	0	0	240,000
Timothy C. Collins	62,500	75,000	0	0	137,500
Kenneth T. Derr*	18,750	37,500	0	0	56,250
John M. Deutch	138,750	150,000	0	0	288,750
Jerry A. Grundhofer	123,750	112,500	0	0	236,250
Roberto Hernandez Ramirez*	0	0	0	494,000	494,000
Robert L. Loss	0	112,500	0	100,000	212,500
Andrew N. Liveris	135,000	150,000	0	0	285,000
Anne M. Mulcahy	92,500	150,000	0	0	242,500
Michael E. O’Neill	25,000	193,750	0	0	218,750
Richard D. Parsons	0	240,000	0	0	240,000
Lawrence R. Ricciardi	125,000	150,000	0	0	275,000
Judith Rodin	90,000	150,000	0	0	240,000
Robert L. Ryan	125,000	150,000	0	0	275,000
Anthony M. Santomero	32,500	172,500	0	0	205,000
Diana L. Taylor	37,500	75,000	0	0	112,500
Franklin A. Thomas *	22,500	37,500	0	0	60,000
William S. Thompson, Jr.	0	168,750	0	0	168,750

*Compensation amount reflects fees earned through retirement date.

Director Compensation.  The Citigroup Board of Directors met 30 times during the fiscal year 2009 with each director attending at least 75% of the meetings. The risk management committee and the governance committee each met 11 times and the personnel and compensation committee met 17 times.   The director compensation package has not changed since 2005, with non-employee directors receiving a $75,000 cash retainer and deferred stock awards valued at $150,000. An additional $15,000 is paid to directors who participate on board committees. Citigroup also reimburses its board members for food, lodging and transportation expenses incurred in attending meetings.

Director Tenure.  During 2009 all of the current directors were nominated for re-election with the exception of the following directors who are retiring from the board: Mr. Armstrong, Mr. Deutch, and Ms. Mulcahay. Mr. Parsons holds the longest tenure on the Board as a member since 1996.   Mr. Belda brings extensive experience in International Business to the Board. In addition to being a member of Citigroup’s board since 1997, Mr. Belda also serves as a director for IBM Corporation and Renault. Ms. Rodlin brings experience in the not-for-profit sector in addition to her knowledge in corporate governance. Dr. Rodlin is the President of the Rockefeller foundation and also sits on the Board of Directors at Comcast Corporation and AMR Corporation.

CEO Compensation.  Due to the Special Master Requirements the top executives’ compensation were significantly lower in 2009 than in past years. Additionally, no cash bonuses were paid in 2009.  Vikram Pandit was promoted to CEO in 2009 for a 10 year term. Mr. Pandit agreed to a nominal salary in 2009 along with equity awards  in the amount of 1 million shares in 2008 that were intended to award him for future performances. Mr. Pandit earned $128,751 in 2009, as compared to the $38,237,437 he earned in 2008.  John Gerspach, Chief Financial Officer, earned $5,063,817 in compensation during 2009; while John Havens, the Chief Executive Officer of the Clients Group earned $11,276,454 in 2009.