Citibank 2012 Annual Report Download - page 192

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Profit Sharing Plan
In October 2010, the Committee approved awards under the 2010 Key
Employee Profit Sharing Plan (KEPSP), which may entitle participants to
profit-sharing payments based on an initial performance measurement
period of January 1, 2010 through December 31, 2012. Generally, if a
participant remains employed and all other conditions to vesting and
payment are satisfied, the participant will be entitled to an initial payment
in 2013, as well as a holdback payment in 2014 that may be reduced
based on performance during the subsequent holdback period (generally,
January 1, 2013 through December 31, 2013). If the vesting and performance
conditions are satisfied, a participant’s initial payment will equal two-thirds
of the product of the cumulative pretax income of Citicorp (as defined in the
KEPSP) for the initial performance period and the participant’s applicable
percentage. The initial payment will be paid after January 20, 2013 but no
later than March 15, 2013.
The participant’s holdback payment, if any, will equal the product
of (i) the lesser of cumulative pretax income of Citicorp for the initial
performance period and cumulative pretax income of Citicorp for the
initial performance period and the holdback period combined (generally,
January 1, 2010 through December 31, 2013), and (ii) the participant’s
applicable percentage, less the initial payment; provided that the holdback
payment may not be less than zero. The holdback payment, if any, will be
paid after January 20, 2014 but no later than March 15, 2014. The holdback
payment, if any, will be credited with notional interest during the holdback
period. It is intended that the initial payment and holdback payment will
be paid in cash; however, awards may be paid in Citigroup common stock
if required by regulatory authority. Regulators have required that U.K.
participants receive at least 50% of their initial payment and at least 50% of
their holdback payment, if any, in shares of Citigroup common stock that
will be subject to a six-month sales restriction. Clawbacks apply to the award.
Independent risk function employees were not eligible to participate in
the KEPSP, as the independent risk function participates in the determination
of whether payouts will be made under the KEPSP. Instead, key employees
in the independent risk function were eligible to receive deferred cash
retention awards, which vest two-thirds on January 20, 2013 and one-third
on January 20, 2014. The deferred cash awards incentivize key risk employees
to contribute to the Company’s long-term profitability by ensuring that
the Company’s risk profile is properly aligned with its long-term strategies,
objectives and risk appetite, thereby, aligning the employees’ interests with
those of Company shareholders.
On February 14, 2011, the Committee approved grants of awards under
the 2011 KEPSP to certain executive officers, and on May 17, 2011 to the
then-CEO Vikram Pandit. These awards have a performance period of
January 1, 2011 to December 31, 2012 and other terms of the awards are
similar to the 2010 KEPSP. The KEPSP award granted to Mr. Pandit was
cancelled upon his resignation in October 2012.
Expense recognized in 2012 in respect of the KEPSP was $246 million.
Performance Share Units
Certain executive officers were awarded a target number of performance
share units (PSUs) on February 19, 2013 for performance in 2012. PSUs will
be earned only to the extent that Citigroup attains specified performance
goals relating to Citigroup’s return on assets and relative total shareholder
return against peers over a three-year period covering 2013, 2014 and 2015.
The actual number of PSUs ultimately earned could vary from zero, if
performance goals are not met, to as much as 150% of target, if performance
goals are meaningfully exceeded. The value of each PSU is equal to the value
of one share of Citi common stock. The value of the award will fluctuate
with changes in Citigroup’s share price and the attainment of the specified
performance goals, until it is settled solely in cash after the end of the
performance period.
Variable Incentive Compensation
Citigroup has various incentive plans globally that are used to motivate and
reward performance primarily in the areas of sales, operational excellence
and customer satisfaction. These programs are reviewed on a periodic basis to
ensure that they are structured appropriately, aligned to shareholder interests
and adequately risk balanced. For the years ended December 31, 2012 and
2011, Citigroup expensed $670 million and $1.0 billion, respectively, for
these plans globally.