Citibank 2011 Annual Report Download - page 181

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Stock Award Programs
Citigroup issues (and/or has issued) shares of its common stock in the
form of restricted stock awards, deferred stock awards, and stock payments
pursuant to the 2009 Stock Incentive Plan (and predecessor plans) to its
officers, employees and non-employee directors.
For all stock award programs, during the applicable vesting period, the
shares awarded are not issued to participants (in the case of a deferred stock
award) or cannot be sold or transferred by the participants (in the case
of a restricted stock award), until after the vesting conditions have been
satisfied. Recipients of deferred stock awards do not have any stockholder
rights until shares are delivered to them, but they generally are entitled to
receive dividend-equivalent payments during the vesting period. Recipients
of restricted stock awards are entitled to a limited voting right and to
receive dividend or dividend-equivalent payments during the vesting period.
(Dividend equivalents are paid through payroll and recorded as an offset
to retained earnings on those shares expected to vest.) Once a stock award
vests, the shares may become freely transferable, but in the case of certain
executives, may be subject to transfer restrictions by their terms or a stock
ownership commitment.
The total expense to be recognized for the stock awards described below
represents the fair value of Citigroup common stock at the date of grant.
The expense 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. For awards of deferred
stock expected to be made to retirement-eligible employees, the charge to
income is accelerated based on the dates the retirement rules are or will be
met. If the retirement rules will have been met on or prior to the expected
award date, the entire estimated expense is recognized in the year prior to
grant in the same manner as cash incentive compensation is accrued, rather
than amortized over the applicable vesting period of the award. Salary stock
and other immediately vested awards generally were granted in lieu of cash
compensation and are also recognized in the year prior to the grant in the
same manner as cash compensation is accrued. Certain stock awards with
performance conditions or certain clawback provisions may be subject to
variable accounting, pursuant to which the associated charges fluctuate with
changes in Citigroup’s stock price over the applicable vesting periods. The
total amount that will be recognized as expense cannot be determined in full
until the awards vest.
Annual Award Programs. Citigroup’s primary stock award program
is the Capital Accumulation Program (CAP). Generally, CAP awards of
restricted or deferred stock constitute a percentage of annual incentive
compensation and vest ratably over three- or four-year periods, beginning on
or about the first anniversary of the award date.
Continuous employment within Citigroup is generally required to
vest in CAP and other stock award programs. Typical exceptions include
vesting for participants whose employment is terminated involuntarily
during the vesting period for a reason other than “gross misconduct,” who
meet specified age and service requirements before leaving employment
(retirement-eligible participants), or who die or become disabled during the
vesting period. Post-employment vesting by retirement-eligible participants is
generally conditioned upon their refraining from competition with Citigroup
during the remaining vesting period.
In a change from prior years, incentive awards in January 2012 to
individual employees who have influence over the Company’s material risks
(covered employees) were delivered as a mix of immediate cash bonuses,
deferred stock awards under CAP and deferred cash awards. (Previously,
annual incentives were traditionally awarded as a combination of cash
bonus and CAP.) For covered employees, the minimum percentage of
incentive pay required to be deferred was raised from 25% to 40%, with a
maximum deferral of 60% for the most highly paid employees. For incentive
awards made to covered employees in January 2012 (in respect of 2011
performance), only 50% of the deferred portion was delivered as a CAP award;
the other 50% was delivered in the form of a deferred cash award. The 2012
deferred cash award is subject to a performance-based vesting condition
that results in cancellation of unvested amounts on a formulaic basis if a
participant’s business has losses in any year of the vesting period. The 2012
deferred cash award also earns notional interest at an annual rate of 3.55%,
compounded annually.
CAP awards made in January 2012 and January 2011 to “identified
staff” in the European Union (EU) have several features that differ from
the generally applicable CAP provisions described above. “Identified staff”
are those Citigroup employees whose compensation is subject to various
banking regulations on sound incentive compensation policies in the EU.
CAP awards to these employees are scheduled to vest over three years of
service, but vested shares are subject to a six-month sale restriction, and
awards are subject to cancellation, in the sole discretion of the Committee,
if (a) there is reasonable evidence a participant engaged in misconduct or
committed material error in connection with his or her employment, or (b)
the Company or the employee’s business unit suffers a material downturn
in its financial performance or a material failure of risk management (the
EU clawback). For these CAP awards, the EU clawback is in addition to the
clawback provision described below. CAP awards containing the EU clawback
provision are subject to variable accounting.