Citibank 2013 Annual Report Download - page 198

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As of December 31, 2013, there was $0.6 million of total unrecognized
compensation cost related to stock options; this cost is expected to be
recognized over a weighted-average period of 0.1 years. Valuations and
related assumptions for Citigroup option programs are presented below.
Citigroup uses a lattice-type model to value stock options.
For options granted during 2013 2012 2011
Weighted-average per-share fair value,
at December 31 N/A N/A $13.90
Weighted-average expected life
Original grants N/A N/A 4.95yrs
Valuation assumptions
Expected volatility N/A N/A 35.64%
Risk-free interest rate N/A N/A 2.33%
Expected dividend yield N/A N/A —
Expected annual forfeitures
Original and reload grants N/A N/A 9.62%
N/A Not applicable
Profit Sharing Plan
In October 2010, the Committee approved awards under the 2010 Key
Employee Profit Sharing Plan (KEPSP), which entitled 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 would be entitled to an initial payment in 2013,
as well as a holdback payment in 2014 that would be reduced based on
performance during the subsequent holdback period (generally, January 1,
2013 through December 31, 2013). Because the vesting and performance
conditions were satisfied, the participant’s initial payment equaled 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 payments were paid in 2013 and were paid in cash,
except for U.K. participants who received 50% of their payment in Citigroup
common stock that was subject to a six-month sale restriction.
Participants who satisfied the vesting and performance conditions for the
KEPSP holdback payment were entitled to such payment equal to 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. The holdback payment will be paid
after January 20, 2014 but no later than March 15, 2014. The holdback
payment will be credited with notional interest during the holdback period.
The holdback payment will be paid in cash; however, a portion of the awards
will be paid in Citigroup common stock if required by regulatory authority.
Regulators 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 sale 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 had 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 2013 and 2012 in respect of the KEPSP was $78
million and $246 million, respectively.
Performance Share Units
Certain executive officers were awarded a target number of performance
share units (PSUs) on February 19, 2013 for performance in 2012, and to
a broader group of executives on February 18, 2014, for performance in
2013. 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 the three-year period beginning with
the year of award. 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 for each award, 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, 2013, 2012
and 2011, Citigroup expensed $1.1 billion, $670 million and $1.0 billion,
respectively, for these plans globally.