Citibank 2014 Annual Report Download - page 179

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7. INCENTIVE PLANS
Discretionary Annual Incentive Awards
Citigroup grants immediate cash bonus payments, deferred cash awards,
stock payments and restricted and deferred stock awards as part of its
discretionary annual incentive award program involving a large segment of
Citigroup’s employees worldwide. Most of the shares of common stock issued
by Citigroup as part of its equity compensation programs are to settle the
vesting of the stock components of these awards.
Discretionary annual incentive awards are generally 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) are
generally paid entirely in the form of an immediate cash bonus. Pursuant
to Citigroup policy and/or regulatory requirements, certain employees and
officers are subject to mandatory deferrals of incentive pay and generally
receive 25% to 60% of their awards in a combination of restricted or deferred
stock and deferred cash. Discretionary annual incentive awards to many
employees in the EU are subject to deferral requirements regardless of the
total award value, with 50% of the immediate incentive delivered in the form
of a stock payment or stock unit award subject to a restriction on sale or
transfer or hold back (generally, for six months).
Deferred annual incentive awards are generally delivered as two
awards—a restricted or deferred stock award under Citi’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 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. 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. 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 in the 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.
In addition, 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 and later 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 failed to supervise or escalate the behavior of other employees
who did.
Certain CAP and other stock-based awards, including those to participants
in the EU that are subject to certain discretionary clawback provisions, are
subject to variable accounting, pursuant to which the associated value of the
award fluctuates with changes in Citigroup’s common stock price until the
date that the award is settled, either in cash or shares. For these awards, the
total amount that will be recognized as expense cannot be determined in full
until the settlement date.
Compensation Allowances
In 2013 and 2014, certain employees of Citigroup’s U.K. regulated entities
were granted fixed allowances, in addition to salary and annual incentive
awards. Generally, these cash allowances are payable in equal installments
during the service year and the following year or two years. The payments
cease if the employee does not continue to meet applicable service or other
requirements. The allowance payments are not subject to performance
conditions or clawback. Discretionary incentives awarded for performance
years 2013 and 2014 to employees receiving allowances were at reduced levels
and subject to greater deferral requirements, of up to 100% in some cases.
Sign-on and Long-Term Retention Awards
Stock awards, deferred cash awards and grants of stock options may be made
at various times during the year as sign-on awards to induce new hires to
join Citi or to high-potential employees as long-term retention awards.
Vesting periods and other terms and conditions pertaining to these awards
tend to vary by grant. 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.” These awards
do not usually provide for post-employment vesting by retirement-eligible
participants. Any stock option grants are for Citigroup common stock with
exercise prices that are no less than the fair market value at the time of grant.
Outstanding (Unvested) Stock Awards
A summary of the status of unvested stock awards granted as discretionary
annual incentive or sign-on and long-term retention awards for the 12
months ended December 31, 2014, is presented below:
Unvested stock awards Shares
Weighted-average
grant date
fair value
per share
Unvested at January 1, 2014 61,136,782 $39.71
New awards 17,729,497 49.65
Canceled awards (2,194,893) 41.31
Vested awards (1) (26,666,993) 40.94
Unvested at December 31, 2014 50,004,393 $42.52
(1) The weighted-average fair value of the shares vesting during 2014 was approximately $52.02
per share.