This excerpt taken from the C DEF 14A filed Mar 20, 2009.
Current Grant Practices and Shares Available for Grant under Existing and Proposed Plans
Upon the approval of the amended and restated 1999 plan in April 2005, all of our other equity incentive plans were terminated as sources of shares for new awards, except for the Citigroup 2000 employee stock purchase plan (which is a broad-based plan that was approved by stockholders in January 2000 and that is qualified under Section 423 of the irc) (stock purchase plan), and a plan that was not terminated until the sale of Travelers Life & Annuity Company to MetLife, Inc. later in 2005.
Since that time we have granted equity awards in the form of restricted and deferred stock awards and non-qualified stock options to employees in nearly 100 countries pursuant to a variety of equity award programs, including annual grants and sign-on awards. Generally, annual grants are made pursuant to our cap programs; sign-on awards are made throughout the year as needed to induce outside talent to accept employment with Citi. Smith Barney financial advisors and certain other employees participate in voluntary cap programs pursuant to which they may elect to receive restricted or deferred stock awards vesting over two-year periods (and/or six-year stock options vesting 25% per year) in lieu of commissions or other compensation. Awards under voluntary cap are made each July and January based on production in the preceding six-month periods. Other salaried employees at Citi are eligible to receive annual discretionary awards of restricted or deferred stock vesting over four-year periods pursuant to global cap if their annual incentive awards exceed a specified threshold. The number of shares awarded equals a pre-
established percentage of the total annual incentive award. The percentage delivered as a cap award increases with the size of the total incentive award. Prior to 2009, the minimum percentage of an annual incentive delivered in the form of a global cap award was 25% and the maximum was 40%. Also prior to 2009, participants in global cap were given the same opportunity to receive stock options in lieu of all or some of their stock award (receiving four option shares for each share of restricted or deferred stock they elected not to receive) as participants in voluntary cap. This stock option election was eliminated for global cap participants effective with the 2009 awards.
In 2009, global cap awards were made to employees worldwide with incentive compensation in excess of $100,000. This threshold is higher than the threshold used in prior years ($20,000 in the U.S. and approximately $40,000 - $45,000 outside the U.S.), and we expect to continue to make equity awards to individuals with higher levels of incentive compensation. The change in the eligibility threshold reduced the number of countries in which we offer cap; awards were made in 2009 in the U.S. and in 61 other countries.
In 2009, we also introduced performance-vesting awards as a significant element of the executive compensation structure. Members of the management executive committee did not receive cap awards in January 2009. However, members who did receive incentive awards received 40% of the award in the form of a performance vesting stock award and a performance priced option grant.
For 2009-2010, we expect that awards will no longer be made to Smith Barney financial advisors and other employees following their transfer to the joint venture to be formed with Morgan Stanley. Additional information regarding this transaction can be found in our 2008 annual report on Form 10-K. Planning for other equity award programs is still underway and is dependent on approval by stockholders of the 2009 plan, and possibly a charter amendment increasing the authorized shares.
Additional information on our equity plans and grant practices can be found elsewhere in this proxy statement under the headings
Compensation Discussion and Analysis, Compensation Tables, Equity Compensation Plan Information, and in Note 8 to the financial statements contained in our 2008 annual report on Form 10-K.
Under the heading Equity Compensation Plan Information on page 87, as required by sec rules, we provide information about shares of common stock that may be issued under our existing equity compensation plans as of December 31, 2008. The tables below update and supplement that data. We believe this additional
information is useful for gaining a complete understanding of the 2009 plan proposal.
Tables I and II illustrate the overhang from our equity plans, and Table III shows our burn rates over the prior three calendar years.
Overhang refers to a ratio used to measure the potential stockholder dilution represented by outstanding employee equity awards and shares available for future grants. We monitor simple overhang and fully diluted overhang, which are calculated as follows:
The following table shows as of the February 27, 2009 record date the number of shares remaining available for grant under the 1999 plan, the number of shares subject to outstanding (vested and unvested) and
unexercised stock options, and the number of shares subject to outstanding (unvested) full-value awards (i.e., restricted and deferred stock awards).