Citibank 2012 Annual Report Download - page 188

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to settle the annual vesting of deferred stock awards is expected to continue
in the absence of a share repurchase program by which treasury shares can
be replenished. The use of treasury stock or newly issued shares to settle stock
awards does not affect the amortization recorded in the Consolidated Income
Statement for equity awards.
The following table shows components of compensation expense relating
to the Company’s stock-based compensation programs and deferred cash
award programs as recorded during 2012, 2011 and 2010:
In millions of dollars 2012 2011 2010
Charges for estimated awards to
retirement-eligible employees $ 444 $ 338 $ 366
Option expense 99 161 197
Amortization of deferred cash awards and
deferred cash stock units 198 208 280
Salary stock award expense —— 173
Immediately vested stock award expense (1) 60 52 174
Amortization of restricted and deferred
stock awards (2) 864 871 747
Total $ 1,665 $ 1,630 $ 1,937
(1) This represents expense for immediately vested stock awards that generally were stock payments in
lieu of cash compensation. The expense is generally accrued as cash incentive compensation in the
year prior to grant.
(2) All periods include amortization expense for all unvested awards to non-retirement-eligible employees.
Amortization is recognized net of estimated forfeitures of awards.
Annual Incentive Awards
Most of the shares of common stock issued by Citigroup as part of its equity
compensation programs are to settle the vesting of restricted and deferred
stock awards granted as part of annual incentive awards. These annual
incentive awards generally also include immediate cash bonus payments and
deferred cash awards, and in the European Union (EU), immediately vested
stock payments.
Annual incentives are generally awarded in the first quarter of the
year based upon previous years’ performance. Awards valued at less than
US$100,000 (or local currency equivalent) are generally paid entirely in
the form of an immediate cash bonus. Pursuant to Citigroup policy and/
or regulatory requirements, employees and officers with higher incentive
award values are subject to mandatory deferrals of incentive pay, and
generally receive 25%-60% of their award in a combination of restricted or
deferred stock and deferred cash awards. In some cases, reduced deferral
requirements apply to awards valued at less than US$100,000 (or local
currency equivalent). Annual incentive awards made to many employees in
the EU are subject to deferral requirements between 40%-60%, regardless of
the total award value, with 50% of the immediate incentive delivered in the
form of a stock payment subject to a restriction on sale or transfer (generally,
for six months).
Deferred annual incentive awards are generally delivered as two
awards—a restricted or deferred stock award under the Company’s Capital
Accumulation Program (CAP) and a deferred cash award. The applicable
mix of CAP and deferred cash awards may vary based on the employee’s
minimum deferral requirement and the country of employment. In some
cases, the entire deferral will be in the form of either a CAP award or
deferred cash.
Subject to certain exceptions (principally, for retirement-eligible
employees), continuous employment within Citigroup is required to vest
in CAP and deferred cash awards. Post-employment vesting by retirement-
eligible employees and participants who meet other conditions is generally
conditioned upon their refraining from competition with Citigroup during
the remaining vesting period, unless the employment relationship has been
terminated by Citigroup under certain conditions.
Generally, the CAP and deferred cash awards vest in equal annual
installments over three- or four-year periods. Vested CAP awards are delivered
in shares of common stock. Dividend equivalent payments are paid to
participants during the vesting period, unless the CAP award is subject to the
performance-vesting condition described below. Deferred cash awards are
payable in cash and earn a fixed notional rate of interest that is paid only if
and when the underlying principal award amount vests. Generally, in the EU,
vested CAP shares are subject to a restriction on sale or transfer after vesting,
and vested deferred cash awards are subject to hold-back (generally, for six
months in each case).
Unvested CAP and deferred cash awards made in January 2011 or
later are subject to one or more clawback provisions that apply in certain
circumstances, including in the case of employee risk-limit violations or
other misconduct or where the awards were based on earnings that were
misstated. Deferred cash awards made to certain employees in February
2013 are subject to a discretionary performance-based vesting condition
under which an amount otherwise scheduled to vest may be reduced in
the event of a “material adverse outcome” for which a participant has
“significant responsibility.”
CAP awards made to certain employees in February 2013 and deferred
cash awards made to certain employees in January 2012 are subject to a
formulaic performance-based vesting condition pursuant to which amounts
otherwise scheduled to vest will be reduced based on the amount of any
pre-tax loss by a participant’s business in the calendar year preceding the
scheduled vesting date. For the February 2013 CAP awards, a minimum
reduction of 20% applies for the first dollar of loss.
The annual incentive award structure and terms and conditions described
above apply generally to awards made in 2011 and later, except where
indicated otherwise. Annual incentive awards in January 2009 and 2010 of
US$100,000 or more (or local currency equivalent) were generally subject
to deferral requirements between 25%-40%. In 2010, because an insufficient
number of shares were available for grant under the 2009 Stock Incentive
Plan, an alternative award structure was applied, primarily for deferrals of
incentive awards in the U.S. and U.K. Under this structure, portions of the
amounts that would normally have been deferred in the form of CAP awards
were instead awarded as two types of deferred cash awards—one subject to a
four-year vesting schedule and earning a LIBOR-based return, and the other
subject to a two-year vesting schedule and denominated in stock units, the
value of which fluctuated based on the price of Citigroup common stock.
Other terms and conditions of these awards were the same as the CAP awards
granted in 2010. In 2009, some deferrals were also in the form of a deferred
cash award subject to a four-year vesting schedule and earning a LIBOR-
based return, in addition to a CAP award.