Citibank 2010 Annual Report Download - page 189

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In January 2009, members of the Management Executive Committee
(except the CEO and CFO) received 30% of their incentive awards for 2008
as performance vesting-equity awards. These awards vest 50% if the price
of Citigroup common stock meets a price target of $10.61, and 50% for a
price target of $17.85, in each case on or prior to January 14, 2013. The
price target will be met only if the NYSE closing price equals or exceeds the
applicable price target for at least 20 NYSE trading days within any period
of 30 consecutive NYSE trading days ending on or before January 14, 2013.
Any shares that have not vested by such date will vest according to a fraction,
the numerator of which is the share price on the delivery date and the
denominator of which is the price target of the unvested shares. No dividend
equivalents are paid on unvested awards. The fair value of the awards is
recognized as compensation expense ratably over the vesting period. This fair
value was determined using the following assumptions:
Weighted-average per-share fair value $2.30
Weighted-average expected life 3.85 years
Valuation assumptions
Expected volatility 36.07%
Risk-free interest rate 1.21%
Expected dividend yield 0.88%
CAP participants in 2008, 2007, 2006 and 2005, and Financial Advisor
CAP (FA CAP) participants in those years and in 2009, could elect to receive
all or part of their award in stock options. The figures presented in the stock
option program tables (see “Stock Option Programs” below) include options
granted in lieu of CAP and FA CAP stock awards in those years.
On July 17, 2007, the Committee approved the Management Committee
Long-Term Incentive Plan (MC LTIP) (pursuant to the terms of the
shareholder-approved 1999 Stock Incentive Plan) under which participants
received an equity award that could be earned based on Citigroup’s
performance against various metrics relative to peer companies and publicly
stated return on equity (ROE) targets measured at the end of each calendar
year beginning with 2007. The final expense for each of the three consecutive
calendar years was adjusted based on the results of the ROE tests. No awards
were earned for 2009, 2008 or 2007 and no shares were issued because
performance targets were not met. No new awards were made under the MC
LTIP since the initial award in July 2007.
A summary of the status of Citigroup’s unvested stock awards at
December 31, 2010 and changes during the 12 months ended December 31,
2010 are presented below:
Unvested stock awards Shares
Weighted-average
grant date
fair value
Unvested at January 1, 2010 187,950,748 $19.53
New awards 628,158,906 4.34
Cancelled awards (27,569,242) 14.10
Vested awards (1) (463,458,743) 7.86
Unvested at December 31, 2010 325,081,669 $ 7.28
(1) The weighted-average market value of the vestings during 2010 was approximately $4.64 per share.
At December 31, 2010, there was $965 million 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 1.7 years.
Stock Option Programs
The Company has a number of stock option programs for its non-employee
directors, officers and employees. Generally, in January 2008, 2007 and
2006, stock options were granted only to CAP and FA CAP participants who
elected to receive stock options in lieu of restricted or deferred stock awards,
and to non-employee directors who elected to receive their compensation
in the form of a stock option grant. Beginning in 2009, CAP participants,
and directors may no longer elect to receive stock options (however, FA
CAP participants were permitted to make a stock option election for awards
made in 2009). Occasionally, stock options also may be granted as sign-on
awards. All stock options are granted on Citigroup common stock with
exercise prices that are no less than the fair market value at the time of
grant (which is defined under the plan to be the NYSE closing price on the
trading day immediately preceding the grant date or on the grant date for
grants to executive officers). Generally, options granted from 2003 through
2009 have six-year terms and vest ratably over three- or four-year periods;
however, directors’ options cliff vest after two years, and vesting schedules for
sign-on grants may vary. The sale of shares acquired through the exercise
of employee stock options granted from 2003 through 2008 (and FA CAP
options granted in 2009) is restricted for a two-year period (and may be
subject to the stock ownership commitment of senior executives thereafter).