Citibank 2013 Annual Report Download - page 195

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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 also were made 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.
Prior to 2009, a mandatory deferral requirement of at least 25% applied
to incentive awards valued at $20,000 or more. Deferrals were in the form of
CAP awards. In some cases, participants were entitled to elect to receive stock
options in lieu of some or all of the value that otherwise would have been
awarded as restricted or deferred stock. CAP awards granted prior to 2011
were not subject to clawback provisions or performance criteria.
Except for awards subject to variable accounting (as described below), the
total expense recognized for stock awards represents the grant date fair value
of such awards, which is generally recognized as a charge to income ratably
over the vesting period, except for awards to retirement-eligible employees
and stock payments (e.g., immediately vested awards). Whenever awards
are made or are expected to be made to retirement-eligible employees, the
charge to income is accelerated based on when the applicable conditions to
retirement eligibility are or will be met. If the employee is retirement eligible
on the grant date, the entire expense is recognized in the year prior to grant.
For immediately vested stock payments, the charge to income is recognized
in the year prior to grant. For employees who become retirement eligible
during the vesting period, expense is recognized from the grant date until
eligibility conditions are met.
Expense for immediately vested stock awards that generally are made in
lieu of cash compensation also is recognized in the year prior to grant in
accordance with U.S. GAAP.
Annual incentive awards made in January 2011 and January 2010 to
certain executive officers and other highly compensated employees were
administered in accordance with the Emergency Economic Stabilization Act
of 2008, as amended (EESA), pursuant to structures approved by the Special
Master for TARP Executive Compensation (Special Master). These structures
included stock awards subject to vesting requirements over periods of up to
three years and/or sale restrictions. Certain of these awards are subject to
discretionary performance-based vesting conditions. These awards, and CAP
awards to participants in the EU that are subject to certain discretionary
clawback provisions, are subject to variable accounting, pursuant to which
the associated charges fluctuate with changes in Citigroup’s common
stock price over the applicable vesting periods. For these awards, the total
amount that will be recognized as expense cannot be determined in full
until the awards vest. For stock awards subject to discretionary performance
conditions, compensation expense was accrued based on Citigroup’s
common stock price at the end of the reporting period and on the estimated
outcome of meeting the performance conditions.
In January 2009, certain senior executives received 30% of their annual
incentive awards as performance-vesting equity awards conditioned primarily
on stock-price performance. Because the price targets were not met, only a
fraction of the awards vested. The fraction of awarded shares that vested was
determined based on a ratio of the price of Citigroup’s common stock on
January 14, 2013 (the award termination date) to the award’s price targets of
$106.10 and $178.50. None of the shares awarded or vested were entitled to
any payment or accrual of dividend equivalents. The grant-date fair value of
the awards was recognized as compensation expense ratably over the vesting
period.
This fair value was determined using the following assumptions:
Weighted-average per-share fair value $22.97
Weighted-average expected life 3.85 years
Valuation assumptions
Expected volatility 36.07%
Risk-free interest rate 1.21%
Expected dividend yield 0.88%
Sign-on and Long-Term Awards
As referenced above, from time to time, restricted or deferred stock awards
and/or stock option grants are made outside of Citigroup’s annual incentive
programs to induce employees to join Citigroup or as special retention
awards to key employees. Vesting periods vary, but generally are 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
awards, these awards do not usually provide for post-employment vesting by
retirement-eligible participants. If these stock awards are subject to certain
clawback provisions or performance conditions, they may be subject to
variable accounting.
Deferred cash awards often are granted to induce new hires to join the
Company and usually are intended to replace deferred incentives awarded
by prior employers that were forfeited when the employees joined Citigroup.
As such, the vesting schedules and terms and conditions of these awards
generally are structured to match the vesting schedules and terms and
conditions of the forfeited awards. The expense recognized in 2013 and 2012
for these awards was $93 million and $147 million, respectively.
A retention award of deferred stock to then-CEO Vikram Pandit was made
on May 17, 2011, and was scheduled to vest in three equal installments
on December 31, 2013, 2014 and 2015. The award was cancelled in its
entirety when Mr. Pandit resigned in October 2012. Because of discretionary
performance vesting conditions, the award was subject to variable accounting
until its cancellation in the fourth quarter of 2012.