Citibank 2010 Annual Report Download - page 188

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In September 2010, salary stock was paid to the 2010 Top 25 (other than
the CEO) in a manner consistent with the salary stock payments made in
2009 pursuant to rulings issued by the Special Master for TARP Executive
Compensation (the Special Master). The salary stock paid for 2010, net of tax
withholdings, is transferable over a 12-month period beginning in January
2011. There are no provisions for early release of these transfer restrictions
in the event of retirement, involuntary termination of employment, change
in control, or any other reason. In 2009 and January 2010, the 2009 Top
100 received salary stock payments that become transferrable in monthly
installments over periods of either one year or three years beginning in
January 2010.
Incentive compensation in respect of 2009 performance for the 2009 Top
100 was administered pursuant to structures approved by the Special Master.
Pursuant to such structures, the affected employees did not participate in CAP
and instead received equity compensation in the form of fully vested stock
payments, LTRS and other restricted and deferred stock awards subject to
vesting requirements and sale restrictions. The other restricted and deferred
stock awards vest ratably over three years pursuant to terms similar to CAP
awards, but vested shares are subject to sale restrictions until the later of the
first anniversary of the regularly scheduled vesting date or January 20, 2013.
Unearned compensation expense associated with CAP and other stock
awards described above 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 and salary stock and other immediately vested awards. The charge
to income for awards made to retirement-eligible employees is accelerated
based on the dates the retirement rules are met. Stock awards to retirement-
eligible employees and salary stock and other immediately vested awards
are recognized in the year prior to the grant in the same manner as cash
incentive compensation is accrued. Certain stock awards with performance
conditions or clawback provisions may be subject to variable accounting.
In connection with its agreement to repay $20 billion of its TARP
obligations to the U.S. Treasury Department in December 2009, Citigroup
announced that $1.7 billion of incentive compensation that would have
otherwise been awarded in cash to employees in respect of 2009 performance
would instead be awarded as “common stock equivalent” (CSE) awards. CSE
awards were denominated in U.S. dollars or in local currency and were settled
by stock payments made in April 2010.
The number of shares delivered to recipients was equal to their individual
CSE award value divided by the fair market value of Citi common stock on the
settlement date ($4.93), less shares withheld for taxes, as applicable. For CSEs
awarded to certain employees whose compensation structure was approved by
the Special Master, 50% of the shares delivered in April 2010 were subject to
restrictions on sale and transfer until January 20, 2011. In lieu of 2010 CAP
awards, certain retirement-eligible employees were instead awarded CSEs
that were settled by stock payments in April 2010, but the shares delivered are
subject to restrictions on sale or transfer that will lapse in four equal annual
installments beginning January 20, 2011. CSE awards were generally accrued
as compensation expense in the year 2009 and were recorded as a liability
from the January 2010 grant date until the settlement date in April 2010. CSE
awards were paid with new issues of common stock as an exception to the
Company’s then-current practice of delivering shares from treasury stock, and
the recorded liability was reclassified to equity at that time.
Generally, in order to reduce the use of shares under Citigroup’s
stockholder-approved stock incentive plan, the percentages of total annual
incentives awarded pursuant to CAP in January 2009 and January 2010
were reduced and were instead awarded as deferred cash awards in the U.S.
and the U.K. The deferred cash awards are subject to two-year and four-
year vesting schedules, but the other terms and conditions are the same as
CAP awards made in those years. The deferred cash awards earn a return
during the vesting period based on LIBOR; in 2010 only, a portion of the
deferred cash award was denominated as a stock unit, the value of which will
fluctuate based on the price of Citi common stock. In both cases, only cash
will be delivered at vesting.