Citibank 2011 Annual Report Download - page 183

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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” awards
denominated in U.S. dollars or in local currency that were settled by stock
payments in April 2010. The 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. The recorded
liability was reclassified to equity when newly issued shares were delivered to
participating employees on the settlement date.
Sign-on and Long-Term Awards. From time to time, restricted or
deferred stock awards and/or stock option grants are made outside of the
annual incentive program to induce talented employees to join Citigroup
or as special retention awards to key employees. Vesting periods vary, but
are generally two to four years. Generally, recipients must remain employed
through the vesting dates to vest in the awards, except in cases of death,
disability, or involuntary termination other than for “gross misconduct.”
Unlike CAP, these awards do not usually provide for post-employment vesting
by retirement-eligible participants.
On May 17, 2011, the Committee approved a deferred stock retention
award to CEO Vikram Pandit. The award vests in three equal installments
on December 31, 2013, December 31, 2014 and December 31, 2015 if the
Committee determines that he has satisfied discretionary performance
criteria dealing with regulatory compliance, Citi culture and talent
management and Mr. Pandit remains employed through the vesting date.
Any vested shares from the December 31, 2013, and December 31, 2014
vestings will be sale-restricted until December 31, 2015. This award is subject
to variable accounting.
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.
Directors. Non-employee directors receive part of their compensation in
the form of deferred stock awards that vest in two years, and may elect to
receive part of their retainer in the form of a stock payment, which they may
elect to defer.
A summary of the status of Citigroup’s unvested stock awards that are not
subject to variable accounting at December 31, 2011 and changes during the
12 months ended December 31, 2011 are presented below:
Unvested stock awards Shares
Weighted-average
grant date
fair value
5NVESTEDæATæ*ANUARYææ 32,508,167 $ 72.84
.EWæAWARDS 33,189,925 49.59
#ANCELLEDæAWARDS (1,894,723) 54.39
6ESTEDæAWARDSæ (13,590,245) 99.73
5NVESTEDæATæ$ECEMBERææ 50,213,124 $ 50.90
æ 4HEæWEIGHTEDAVERAGEæFAIRæVALUEæOFæTHEæVESTINGSæDURINGææWASæAPPROXIMATELYææPERæSHARE
A summary of the status of Citigroup’s unvested stock awards that are
subject to variable accounting at December 31, 2011 and changes during the
12 months ended December 31, 2011 are presented below:
Unvested stock awards Shares
Weighted-average
award issuance
fair value
5NVESTEDæATæ*ANUARYææ —$—
.EWæAWARDS 5,337,863 49.31
#ANCELLEDæAWARDS (47,065) 50.20
6ESTEDæAWARDSæ ——
5NVESTEDæATæ$ECEMBERææ 5,290,798 $49.30
At December 31, 2011, there was $985 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 2.3 years. However, the cost of awards subject to variable accounting
will fluctuate with changes in Citigroup’s stock price.
Stock Option Programs
While the Company no longer grants options as part of its annual incentive
award programs, Citi may grant stock options to employees or directors on
a one-time basis, as sign-on awards or as retention 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 2009 Stock Incentive 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).