Citibank 2013 Annual Report Download - page 194

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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 2013, 2012 and 2011:
In millions of dollars 2013 2012 2011
Charges for estimated awards to
retirement-eligible employees $ 468 $ 444 $ 338
Option expense 10 99 161
Amortization of deferred cash awards,
deferred cash stock units and performance
stock units 230 198 208
Immediately vested stock award expense (1) 54 60 52
Amortization of restricted and deferred stock
awards (2) 862 864 871
Total $1,624 $ 1,665 $ 1,630
(1) 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 discretionary 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.
Discretionary annual incentives generally are awarded in the first quarter
of the year based upon the previous year’s performance. Awards valued at
less than U.S. $100,000 (or the local currency equivalent) generally are 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. Certain employees are
subject to reduced deferral requirements that apply to awards valued at less
than U.S. $100,000 (or local currency equivalent). Discretionary 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 generally are 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 or deferred
cash award.
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 generally is
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 or accrued for participants who have
a CAP award subject to the performance-vesting conditions 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
and later 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.” Deferred cash awards made to these employees
in February 2014 are subject to an additional clawback provision pursuant
to which unvested awards may be canceled if the employee engaged in
misconduct or exercised materially imprudent judgment, or who failed to
supervise or escalate the behavior of other employees who did.
CAP awards made to certain employees in February 2013 and later 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 pretax loss by a participant’s business in the calendar year preceding the
scheduled vesting date. For CAP awards made in February 2013 and later, 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
U.S. $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 normally would 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