Citibank 2008 Annual Report Download - page 147

employees. As explained below, pursuant to SFAS 123(R), the charge to
income for awards made to retirement-eligible employees is accelerated
based on the dates the retirement rules are met.
CAP and certain other awards provide that participants who meet certain
age and years of service conditions may continue to vest in all or a portion of
the award without remaining employed by the Company during the entire
vesting period, so long as they do not compete with Citigroup during that
time. Beginning in 2006, awards to these retirement-eligible employees are
recognized in the year prior to the grant in the same manner as cash
incentive compensation is accrued. However, awards granted in January
2006 were required to be expensed in their entirety at the date of grant. Prior
to 2006, all awards were recognized ratably over the stated vesting period. See
Note 1 to the Consolidated Financial Statements on page 122 for the impact
of adopting SFAS 123(R).
From 2003 to 2007, Citigroup granted restricted or deferred shares
annually under the Citigroup Ownership Program (COP) to eligible
employees. This program replaced the WealthBuilder, CitiBuilder and
Citigroup Ownership stock option programs. Under COP, eligible employees
received either restricted or deferred shares of Citigroup common stock that
vest after three years. The last award under this program was in 2007.
Unearned compensation expense associated with the stock grants represents
the market value of Citigroup common stock at the date of grant and is
recognized as a charge to income ratably over the vesting period, except for
those awards granted to retirement-eligible employees. The charge to income
for awards made to retirement-eligible employees is accelerated based on the
dates the retirement rules are met.
On July 17, 2007, the Personnel and Compensation Committee of
Citigroup’s Board of Directors approved the Management Committee Long-
Term Incentive Plan (MC LTIP), under the terms of the shareholder-
approved 1999 Stock Incentive Plan. The MC LTIP provides members of the
Citigroup Management Committee, including the CEO, CFO and the named
executive officers in the Citigroup Proxy Statement, an opportunity to earn
stock awards based on Citigroup’s performance. Each participant received an
equity award that will be earned based on Citigroup’s performance for the
period from July 1, 2007 to December 31, 2009. Three periods will be
measured for performance (July 1, 2007 to December 31, 2007, full year
2008 and full year 2009). The ultimate value of the award will be based on
Citigroup’s performance in each of these periods with respect to (1) total
shareholder return versus Citigroup’s current key competitors and
(2) publicly stated return on equity (ROE) targets measured at the end of
each calendar year. If, in any of the three performance periods, Citigroup’s
total shareholder return does not exceed the median performance of the peer
group, the participants will not receive award shares for that period. The
awards will generally vest after 30 months. In order to receive the shares, a
participant generally must be a Citigroup employee on January 5, 2010. The
final expense for each of the three calendar years will be adjusted based on
the results of the ROE tests. No awards were earned for 2008 or 2007 because
performance targets were not met. No new awards were made under the MC
LTIP since the initial award in July 2007.
On January 22, 2008, special retention stock awards were made to key
senior executive officers and certain other members of senior management.
The awards vest ratably over two- or four-year periods. Executives must
remain employed through the vesting dates to receive the shares awarded,
except in cases of death, disability, or involuntary termination other than for
gross misconduct. Unlike CAP, post-employment vesting is not provided for
participants who meet specified age and years of service conditions. Shares
subject to some of the awards are exempted from the stock ownership
commitment.
A summary of the status of Citigroup’s unvested stock awards as of
December 31, 2008, and changes during the 12 months ended December 31,
2008, is presented below:
Unvested stock awards Shares
Weighted average
grant date
fair value
Unvested at January 1, 2008 153,207,132 $50.70
Awards 149,140,314 $26.04
Cancellations (20,945,018) $42.92
Deletions (1,968,824) $25.94
Vestings (1) (53,222,745) $47.06
Unvested at December 31, 2008 226,210,859 $36.23
(1) The weighted average market value of the vestings during 2008 was approximately $22.31 per share.
As of December 31, 2008, there was $3.3 billion of total unrecognized
compensation cost related to unvested stock awards net of the forfeiture
provision. That cost is expected to be recognized over a weighted-average
period of 2.6 years.
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