Citigroup DEF 14A 2009
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
399 Park Avenue
New York, NY 10043
March 20, 2009
We cordially invite you to attend Citis annual stockholders meeting. The meeting will be held on Tuesday, April 21, 2009, at 9am at the Hilton New York, 1335 Avenue of the Americas in New York City. The entrance to the Hilton is on Avenue of the Americas (6th Ave.) between West 53rd and West 54th Streets.
At the meeting, stockholders will vote on a number of important matters. Please take the time to carefully read each of the proposals described in the attached proxy statement.
The Board would also like to recognize our retiring directors, Sir Win Bischoff, Kenneth Derr, Roberto Hernandez, Robert Rubin, and Franklin Thomas for their many contributions to Citi. The collective wisdom and insight of these directors have been an invaluable source of strength for Citi.
Please join me in thanking them. And thank you for your support of Citi.
Richard D. Parsons
Chairman of the Board
This proxy statement and the accompanying proxy card are being mailed to
Citis stockholders beginning about March 20, 2009.
399 Park Avenue
New York, NY 10043
Citis annual stockholders meeting will be held on Tuesday, April 21, 2009, at 9am at the Hilton New York, 1335 Avenue of the Americas in New York City. The entrance to the Hilton is on Avenue of the Americas (6th Ave.) between West 53rd and West 54th Streets. You will need an admission ticket or proof of ownership of Citi stock to enter the meeting.
At the meeting, stockholders will be asked to
The close of business on February 27, 2009 is the record date for determining stockholders entitled to vote at the annual meeting. A list of these stockholders will be available at Citis headquarters, 399 Park Avenue, New York City, before the annual meeting.
Please sign, date and promptly return the enclosed proxy card in the enclosed envelope, or vote by telephone or Internet (instructions are on your proxy card), so that your shares will be represented whether or not you attend the annual meeting.
By order of the board of directors
Michael S. Helfer
March 20, 2009
The board of directors of Citi is soliciting your vote at the 2009 annual meeting of Citis stockholders.
The meeting is scheduled to begin at 9am on April 21, 2009 at the Hilton New York at 1335 Avenue of the Americas in New York City. The entrance to the Hilton is on Avenue of the Americas (6th Ave.) between West 53rd and West 54th Streets.
An agenda will be distributed at the meeting.
You will have one vote for every share of Citi common stock you owned on February 27, 2009 (the record date).
5,512,970,301, consisting of one vote for each of Citis shares of common stock that were outstanding on the record date. There is no cumulative voting.
A majority of the votes that can be cast, or 2,756,485,152. We urge you to vote by proxy even if you plan to attend the annual meeting, so that we will know as soon as possible that enough votes will be present for us to hold the meeting.
Yes, according to a Schedule 13 G Information Statement filed by State Street Bank and Trust Company on February 17, 2009, State Street may be deemed to beneficially own 6.2% of Citis common stock. State Street, the custodian for Citis 401(k) Plan, disclaimed beneficial ownership of all such shares in the Information Statement.
In 2008 and 2009, Citi issued to the U.S. Treasury warrants to purchase 465,117,176 shares of common stock, of which warrants to purchase 360,075,159 shares of common stock are exercisable within 60 days. The exercise prices for the warrants are $10.61 and $17.85. The warrants exercisable within 60 days represent approximately 6.2% of Citis voting stock. However, none of the warrants have been exercised and the exercise prices are above Citis closing price on March 6 of $1.03. See Citis Annual Report on Form 10-K filed on February 27, 2009 for additional information.
For further information, see Stock OwnershipOwners of More than 5% of Our Common Stock in this proxy statement.
You can vote either in person at the annual meeting or by proxy whether or not you attend the annual meeting.
To vote by proxy, you must either
To ensure that your vote is counted, please remember to submit your vote by April 20, 2009.
Citi employees who participate in equity programs may receive their proxy cards separately.
If you want to vote in person at the annual meeting, and you hold your Citi stock through a securities broker (that is, in street name), you must obtain a proxy from your broker and bring that proxy to the meeting.
Yes. Just send in a new proxy card with a later date, or cast a new vote by telephone or Internet, or send a written notice of revocation to Citis Corporate Secretary at the address on the cover of this proxy statement. If you attend the annual meeting and want to vote in person, you can request that your previously submitted proxy not be used.
If you return a signed proxy card without indicating your vote, your shares will be voted, in accordance with the boards recommendation, for the nominees listed on the card, for kpmg as independent registered public accounting firm for 2009, for the Citigroup 2009 Stock Incentive Plan, for Citis 2008 Executive Compensation and against the other proposals.
You may vote for or against each director nominee, or abstain from voting on a director nominee. Each nominee for director will be elected if the votes for the director exceed the votes against the director. Abstentions will not be counted either for or against the director but will be counted for purposes of establishing a quorum.
You may vote for or against the ratification of kpmg, or abstain from voting on this proposal. If you abstain from voting on the ratification of kpmg, your shares will be counted as present for purposes of establishing a quorum, and the abstention will have the same effect as a vote against this proposal.
You may vote for or against Citis 2008 Executive Compensation, or abstain from voting on this proposal. If you abstain from voting on Citis 2008 Executive Compensation, your shares will be counted as present for purposes of establishing a quorum, and the abstention will have the same effect as a vote against this proposal.
You may vote for or against or you may abstain from voting on the other proposals. If you abstain from voting on the Citigroup 2009 Stock Incentive Plan or any stockholder proposal, your shares will be counted as present for purposes of establishing a quorum, and the abstention will have the same effect as a vote against that proposal.
Citi has adopted a by-law providing a majority vote standard for director elections. The by-law amendment provides that if a nominee receives, in an uncontested election, a number of votes cast against his or her election that is greater than the number of votes cast for the election of the director, such director shall offer to resign from his or her position as a director. Unless the board decides to reject the offer or to postpone the effective date of the offer, the resignation shall become effective 60 days after the date of the election.
The ratification of kpmgs appointment, the Citigroup 2009 Stock Incentive Plan, Citis 2008 Executive Compensation and the stockholder proposals each require the affirmative vote of a majority of the shares of common stock represented at the annual meeting and entitled to vote thereon in order to be approved.
In 2006, the board adopted a confidential voting policy as a part of its Corporate Governance Guidelines. Under the policy, all proxies, ballots, and vote tabulations are kept confidential for registered stockholders who request confidential treatment. If you are a registered stockholder and would like your vote kept confidential, please check the appropriate box on the proxy card or follow the instructions when submitting your vote by telephone or by the Internet. If you hold your shares in street name or through an employee benefit plan, your vote already receives confidential treatment and you do not need to request confidential treatment in order to maintain the confidentiality of your vote.
The confidential voting policy will not apply in the event of a proxy contest or other solicitation based on an opposition proxy statement. For
further details regarding this policy, please see the Corporate Governance Guidelines attached as Annex A to this proxy statement.
If you dont vote your shares held in street name, your broker can vote your shares on matters that the New York Stock Exchange (nyse) has ruled discretionary. The election of directors, the ratification of kpmgs appointment, and Citis 2008 Executive Compensation are discretionary items. nyse member brokers that do not receive instructions from beneficial owners may vote on these proposals in the following manner: (1) a Citi affiliated member is permitted to vote your shares in the same proportion as all other shares are voted with respect to each such proposal; and (2) all other nyse member brokers are permitted to vote your shares in their discretion. The brokers will not be able to vote your shares for the Citigroup 2009 Stock Incentive Plan and the stockholder proposals if you fail to provide instructions.
If you dont vote your shares registered directly in your name, not in the name of a bank or broker, your shares will not be voted.
We dont know of any other matters that will be considered at the annual meeting. If a stockholder proposal that was excluded from this proxy statement is brought before the meeting, we will vote the proxies against the proposal. If any other matters arise at the annual meeting that are properly presented at the meeting, the proxies will be voted at the discretion of the proxy holders.
Your proxy will still be good and may be voted at the postponed or adjourned meeting. You will
still be able to change or revoke your proxy until it is voted.
Yes, you will need an admission ticket or proof of ownership of Citi stock to enter the meeting. When you arrive at the annual meeting, you may be asked to present photo identification, such as a drivers license. If you are a stockholder of record, you will find an admission ticket attached to the proxy card sent to you. If you plan to attend the meeting, please so indicate when you vote and bring the ticket with you to the meeting. If your shares are held in the name of a bank, broker or other holder of record, your admission ticket will be included in your proxy materials. If you dont bring your admission ticket, or opted to receive your proxy materials electronically, you will need proof of ownership to be admitted to the meeting. A recent brokerage statement or letter from a bank or broker is an example of proof of ownership. If you arrive at the meeting without an admission ticket, we will admit you only if we are able to verify that you are a Citi stockholder. Due to seating limitations, Citi will not be able to accommodate guests at the annual meeting. Any persons needing special assistance should contact Shareholder Relations at the following email address: email@example.com.
This proxy statement and the 2008 annual report are available on Citis website at www.citigroup.com. Click on Corporate Governance, then Financial Disclosure, and then Annual Reports & Proxy Statements. Most stockholders can elect not to receive paper copies of future proxy statements and annual reports and can instead view those documents on the Internet.
If you are a stockholder of record, you can choose this option and save Citi the cost of producing and mailing these documents by following the instructions provided when you vote over the Internet. If you hold your Citi stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect not to receive paper copies of future proxy statements and annual reports.
If you choose not to receive paper copies of future proxy statements and annual reports, you will receive an e-mail message next year containing the Internet address to use to access Citis proxy statement and annual report. Your choice will remain in effect until you tell us otherwise. You do not have to elect Internet access each year. To view, cancel or change your enrollment profile, please go to www.InvestorDelivery.com.
How We Have Done
If you received these materials by mail, you should have also received Citis annual report to stockholders for 2008 with them. The 2008 annual report is also available on Citis website at www.citigroup.com. We urge you to read
these documents carefully. In accordance with the Securities and Exchange Commissions (sec) rules, the Five-Year Performance Graph appears in the 2008 Annual Report on Form 10-K.
Citi continually strives to maintain the highest standards of ethical conduct: reporting results with accuracy and transparency; and maintaining full compliance with the laws, rules and regulations that govern Citis businesses. Citi is active in ensuring its governance practices are at the leading edge of best practices. Among other initiatives, Citi in recent years has:
The current charters of the audit and risk management, nomination and governance, and personnel and compensation committees, as well as Citis Corporate Governance Guidelines, Code of Conduct and Code of Ethics, are available in the Corporate Governance section of Citis website: www.citigroup.com. Citi stockholders may obtain printed copies of these documents by writing to Citigroup Inc., Corporate Governance, 425 Park Avenue, 2nd floor, New York, NY 10022.
The nomination and governance committees mandate is to review and shape corporate governance policies and identify qualified individuals for nomination to the board of directors. All of the members of the committee meet the independence standards contained in the nyse corporate governance rules and Citis Corporate Governance Guidelines, which are attached to this proxy statement as Annex A. A copy of the committees charter is attached to this proxy statement as Annex C.
On January 21, 2009, Citi announced that Richard D. Parsons, the lead director and chair of the boards nomination and governance committee, would succeed Sir Win Bischoff as chairman of the board of directors, effective February 23, 2009. During the period that Citi has an independent chair, there will not be a lead director. In 2004, Citi designated the chair of the nomination and governance committee as lead director. Since 2004 and until February 23, 2009, Citi has had an independent lead director. Details regarding the selection, duties, term, and tenure of the independent lead director are specified in Citis Corporate Governance Guidelines, attached as Annex A to this proxy statement.
The committee considers all qualified candidates identified by members of the committee, by other members of the board of directors, by senior management and by security holders. In 2008, the committee engaged Heidrick & Struggles for a portion of the year and Spencer Stuart thereafter to assist in identifying and evaluating potential nominees. Stockholders who would like to propose a director candidate for consideration by the committee may do so by
submitting the candidates name, résumé and biographical information to the attention of the Corporate Secretary, Citigroup Inc., 399 Park Avenue, New York, NY 10043. All proposals for nominations received by the Corporate Secretary will be presented to the committee for its consideration.
The committee reviews each candidates biographical information and assesses each candidates independence, skills and expertise based on a variety of factors, including the following criteria, which have been developed by the committee and approved by the board:
account and balance the legitimate interests and concerns of all of Citis stockholders and our other stakeholders in reaching decisions, rather than advancing the interests of a particular constituency.
Application of these factors involves the exercise of judgment by the committee and the board.
Based on its assessment of each candidates independence, skills and qualifications and the criteria described above, the committee will make recommendations regarding potential director candidates to the board.
The committee follows the same process and uses the same criteria for evaluating candidates proposed by stockholders, members of the board of directors and members of senior management.
For the 2009 annual meeting, we received timely notice of director nominations from thirteen stockholders who nominated themselves or another person to stand for election at the annual meeting. The qualifications of these individuals were discussed at meetings of the nomination and governance committee and the views of Spencer Stuart on the candidates were considered. After deliberation, the committee decided not to include these individuals on the slate of candidates it proposed to the full board for consideration. The committee used the above-mentioned criteria to evaluate the candidates.
Citis Corporate Governance Guidelines embody many of our long-standing practices, policies and procedures, which are the foundation of our commitment to best practices. The Guidelines are reviewed at least annually, and revised as necessary, to continue to reflect best practices. The full text of the Guidelines, as approved by the board, is set forth in Annex A to this proxy statement. The Guidelines outline the responsibilities, operations, qualifications and composition of the board.
Our goal is that at least two-thirds of the members of the board be independent. The board has recently announced that it unanimously decided to have a majority of new directors as soon as feasible. Certain nominees are included in this proxy statement for election by stockholders. When additional candidates are identified, approved and subsequently appointed as directors by the board, the Company will file a Form 8-K to announce the appointments. A description of our independence criteria and the results of the boards independence determinations are set forth below.
The number of other public company boards on which a director may serve is subject to a case-by-case review by the nomination and governance committee, in order to ensure that each director is able to devote sufficient time to performing his or her duties as a director. Interlocking directorates are prohibited (inside directors and executive officers of Citi may not sit on boards of companies where a Citi outside director is an executive officer).
The Guidelines require that all members of the committees of the board, other than the public affairs committee and the executive committee, be independent. Committee members are appointed by the board upon recommendation of the nomination and governance committee. Committee membership and chairs are rotated periodically. The board and each committee have the power to hire and fire independent legal, financial or other advisors, as they may deem necessary, without consulting or obtaining the approval of management.
Meetings of the non-management directors are held as part of every regularly scheduled board meeting and are presided over by the independent chairman.
If a director has a substantial change in professional responsibilities, occupation or business association, he or she is required to notify the nomination and governance committee and to offer his or her resignation from the board. The nomination and governance committee will evaluate the facts and circumstances and make a recommendation to the board whether to accept the resignation or request that the director continue to serve on the board. If a director assumes a significant role in
a not-for-profit entity, he or she is asked to notify the nomination and governance committee.
Directors are expected to attend board meetings, meetings of the committees and subcommittees on which they serve and the annual meeting of stockholders. All of the directors then in office attended Citis 2008 annual meeting.
The nomination and governance committee nominates one of the members of the board to serve as chairman of the board on an annual basis. The nomination and governance committee also conducts an annual review of board performance, and each committee conducts its own self-evaluation. The board and committees may engage an outside consultant to assist in conducting the self-evaluations. The results of these evaluations are reported to the board.
Directors have full and free access to senior management and other employees of Citi. New directors are provided with an orientation program to familiarize them with Citis businesses and its legal, compliance, regulatory and risk profile. Citi provides educational sessions on a variety of topics, which all members of the board are invited to attend. These sessions are designed to allow directors to, for example, develop a deeper understanding of a business issue or a complex financial product.
The board reviews the personnel and compensation committees report on the performance of senior executives in order to ensure that they are providing the best leadership for Citi. The board also works with the nomination and governance committee to evaluate potential successors to the ceo.
If a director, or an immediate family member who shares the directors household, serves as a director, trustee or executive officer of a foundation, university, or other not-for-profit organization and such entity receives contributions from Citi and/or the Citi Foundation, such contributions will be reported to the nomination and governance committee at least annually.
The Guidelines affirm Citis stock ownership commitment, which is described in greater detail in this proxy statement. In 2008, the stock ownership commitment was reviewed in
connection with the reorganization of Citis senior management structure and was simplified as part of Citis continuing efforts to streamline the organization and become more efficient. The members of the management executive committee, consisting of the most senior executives of the Company, and the members of the board of directors have agreed to hold 75% of the shares of common stock they acquire through Citis equity programs as long as they remain subject to the stock ownership commitment. Those members of the senior leadership committee, which consists of the management executive committee and an additional 36 executives of the Company who are not also members of the management executive committee, have agreed to hold 50% of the shares of common stock they acquire through Citis equity programs as long as they remain subject to the stock ownership commitment.
The Guidelines restrict certain financial transactions between Citi and its subsidiaries on the one hand and directors, senior management and their immediate family members on the other. Personal loans to executive officers and directors of Citi and its public issuer subsidiaries and members of the management executive committee, or immediate family members who share any such persons household, are prohibited, except for mortgage loans, home equity loans, consumer loans, credit cards, charge cards, overdraft checking privileges and margin loans to employees of a broker-dealer subsidiary of Citi made on market terms in the ordinary course of business. See Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation on page 10 of this proxy statement.
The Guidelines prohibit investments or transactions by Citi or its executive officers and those immediate family members who share an executive officers household in a partnership or other privately-held entity in which an outside director is a principal or in a publicly-traded company in which an outside director owns or controls more than a 10% interest. Directors and those immediate family members who share the directors household are not permitted to receive initial public offering allocations. Directors and their immediate family members may participate in Citi-sponsored investment activities, provided
they are offered on the same terms as those offered to similarly situated non-affiliated persons. Under certain circumstances, or with the approval of the appropriate committee, members of senior management may participate in certain Citi-sponsored investment opportunities. Finally, there is a prohibition on certain investments by directors and executive officers in third-party entities when the opportunity comes solely as a result of their position with Citi.
The board has adopted categorical standards to assist the board in evaluating the independence of each of its directors. The categorical standards, which are set forth below, describe various types of relationships that could potentially exist between a director or an immediate family member of a director and Citi and set thresholds at which such relationships would be deemed to be material. Provided that no relationship or transaction exists that would disqualify a director under the categorical standards and no other relationships or transactions exist of a type not specifically mentioned in the categorical standards that, in the boards opinion, taking into account all facts and circumstances, would impair a directors ability to exercise his or her independent judgment, the board will deem such person to be independent.
In 2008, the board and the nomination and governance committee reviewed directors responses to a questionnaire asking about their relationships with Citi, and those of their immediate family members and primary business or charitable affiliations and other potential conflicts of interest, as well as data collected by Citis businesses related to transactions, relationships or arrangements between Citi on the one hand and a director, immediate family member of a director, or a primary business or charitable affiliation of a director, on the other. The board reviewed the relationships or transactions between the directors or immediate family members of the directors or their primary business or charitable affiliations on the one hand and Citi on the other and determined that the relationships or transactions complied with the Corporate Governance Guidelines and the related
categorical standards. The board also determined that, applying the guidelines and standards, which are intended to comply with the nyse corporate governance rules, and all other applicable laws, rules and regulations, each of the following directors standing for re-election and the nominees standing for election are independent: C. Michael Armstrong, Alain J.P. Belda, John M. Deutch, Jerry A. Grundhofer, Andrew N. Liveris, Anne M. Mulcahy, Michael E. ONeill, Richard D. Parsons, Judith Rodin, Robert L. Ryan, Anthony M. Santomero and William S. Thompson, Jr.
In addition, no member of the audit and risk management committee, nor any immediate family member who shares such individuals household, nor any entity in which an audit and risk management committee member is a partner, member or executive officer shall, within the last three years, have received any payment for accounting, consulting, legal, investment banking or financial advisory services provided to the Company.
by the Company to, and to the Company from, any company of which a director is an executive officer or employee or where an immediate family member of a director is an executive officer, must not exceed the greater of $1 million or 2% of such other companys consolidated gross revenues in any single fiscal year.
Annual contributions in any of the last three calendar years from the Company and/or the Citigroup Foundation to a foundation, university, or other non-profit organization (Charitable Organization) of which a director, or an immediate family member who shares the directors household, serves as a director, trustee or executive officer (other than the Citigroup Foundation and other Charitable Organizations sponsored by the Company) may not exceed the greater of $250,000 or 10% of the Charitable Organizations annual consolidated gross revenue.
The board may determine that a director is independent notwithstanding the existence of an immaterial relationship or transaction between the Company and (i) the director, (ii) an immediate family member of the director or (iii) the directors or immediate family members business or charitable affiliations, provided Citis proxy statement includes a specific description of such relationship as well as the basis for the boards determination that such relationship does not preclude a determination that the director is independent. Relationships or transactions between the Company and (i) the director, (ii) an immediate family member of the director or (iii) the directors or immediate
family members business or charitable affiliations that comply with the Corporate Governance Guidelines, including but not limited to the director independence standards that are part of the Corporate Governance Guidelines and the sections titled Financial Services, Personal Loans and Investments/Transactions, are deemed to be categorically immaterial and do not require disclosure in the proxy statement (unless such relationship or transaction is required to be disclosed pursuant to Item 404 of sec Regulation S-K).
For purposes of the Corporate Governance Guidelines, (i) the term immediate family member means a directors or executive officers (designated as such pursuant to Section 16 of the Securities Exchange Act of 1934) spouse, parents, step-parents, children, step-children, siblings, mother- and father-in law, sons- and daughters-in-law, and brothers and sisters-in-law and any person (other than a tenant or domestic employee) who shares the directors household; (ii) the term primary business affiliation means an entity of which the director or executive officer, or an immediate family member of such a person, is an officer, partner or employee or in which the director, executive officer or immediate family member owns directly or indirectly at least a 5% equity interest; and (iii) the term related party transaction means any financial transaction, arrangement or relationship in which (a) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, (b) the Company is a participant, and (c) any related person (any director, any executive officer of the Company, any nominee for director, any shareholder owning in excess of 5% of the total equity of the Company, and any immediate family member of any such person) has or will have a direct or indirect material interest.
The board has adopted a policy setting forth procedures for the review, approval and monitoring of transactions involving Citi and related persons (directors and executive officers or their immediate family members). A copy of
Citis Policy on Related Party Transactions is available in the Corporate Governance section of Citis website: www.citigroup.com. Under the policy, the nomination and governance committee is responsible for reviewing and approving all related party transactions involving directors or an immediate family member of a director. Directors may not participate in any discussion or approval of a related party transaction in which he or she or any member of his or her immediate family is a related person, except that the director shall provide all material information concerning the related party transaction to the nomination and governance committee. The nomination and governance committee is also responsible for reviewing and approving all related party transactions valued at more than $50 million involving an executive officer or an immediate family member of an executive officer. The transaction review committee, comprised of the chief financial officer, chief risk officer, general counsel, chief compliance officer, and head of corporate affairs, is responsible for reviewing and approving all related party transactions valued at less than $50 million involving an executive officer or an immediate family member of an executive officer. The policy also contains a list of categories of transactions involving directors or executive officers, or their immediate family members, that are pre-approved under the policy, and therefore need not be brought to the nomination and governance committee or transaction review committee for approval.
The nomination and governance committee and the transaction review committee will review the following information when assessing a related party transaction:
Robert Rubin entered into an Aircraft Time Sharing Agreement with Citiflight, Inc. (a subsidiary of Citigroup Inc.) on August 10, 2006 that allows him to reimburse Citi for the cost of his personal use of corporate aircraft. Mr. Rubin reimbursed Citi $633,918 related to his personal use of corporate aircraft during 2008. Vikram Pandit entered into an Aircraft Time Sharing Agreement with Citiflight on December 12, 2007, that allows him to reimburse Citi for any personal use of Citis aircraft. Mr. Pandit reimbursed Citi $171,808 related to his personal use of corporate aircraft during 2008.
During 2008, certain Citi and Banamex executives used, for Citi-related travel, private aircraft owned by Aeropersonal, a company in which Roberto Hernández has an ownership interest. The nomination and governance committee reviewed and ratified the executives business-related use of aircraft owned by Aeropersonal during 2008 and approved the business-related use of Aeropersonals services by Citi and Banamex executives in 2009. Citi reimbursed Aeropersonal $1,002,126 for business-related services provided to Citi and Banamex executives.
In April 2007, Citi entered into an agreement to purchase 100% of the outstanding partnership interests in Old Lane Partners L.P. (Old Lane), a hedge fund firm co-founded by Vikram Pandit and John Havens in which each of Vikram Pandit, John Havens and Brian Leach had an interest. At the time of the Old Lane acquisition in 2007, a substantial portion of the purchase price paid to the former owners of Old Lane was required to be invested in the Old Lane Fund until July 2011, the fourth anniversary of the closing of the transaction. Accordingly, on behalf
of each of Vikram Pandit and John Havens $100,273,630 was invested (a substantial portion of which was subject to forfeiture until July 2011) and on behalf of Brian Leach $10,862,222 was invested in the Old Lane Fund. In June 2008, Citi purchased substantially all of the assets in the Old Lane Fund and redeemed substantially all of the interests of investors in the Old Lane Fund. In connection with the redemptions of investors interests, distributions were made in respect of a portion of the investments made by the former owners of Old Lane in the Old Lane Fund, including $79,706,630, each, in the case of Mr. Pandit and Mr. Havens, and $8,634,283, in the case of Mr. Leach. The amounts distributed are invested, and all future distributions will be invested, in an account at the Citi Private Bank for the remainder of the period ending July 2011. The funds may be earlier withdrawn in the event the executive dies or his employment with Citi terminates by reason of his disability or without cause or for good reason or, in the case of Mr. Leach, upon termination of his employment with Citi for any reason. A substantial portion of Mr. Pandits and Mr. Havens investment remains subject to forfeiture if the executives employment with Citi terminates for cause or without good reason before July 2011.
State Street may be deemed to be the beneficial owner of more than 5% of the outstanding shares of our common stock as a result of its role as custodian of our 401(k) plan and other unaffiliated accounts and investment funds. For further information, see Stock Ownership Owners of More than 5% of Our Common Stock in this proxy statement. We and certain of our subsidiaries have engaged in transactions in the ordinary course of business with State Street and certain of its affiliates during 2008. These transactions were on substantially the same terms as comparable transactions with unrelated third parties.
Officers and employees of Citi and members of their immediate families who share their household or are financially dependent upon them who wish to purchase or sell securities in brokerage transactions are generally required by Citis policies to do so through a Citi broker-dealer affiliate. Certain of our directors and members of their immediate families have
brokerage accounts at our broker-dealer affiliates. Transactions in such accounts are offered on substantially the same terms as those offered to other similarly-situated customers. Citis affiliates also may, from time to time, enter into transactions on a principal basis involving the purchase or sale of securities, derivative products and other similar transactions in which our directors, officers and employees, or members of their immediate families have an interest. All of these transactions are entered into in the ordinary course of business on substantially the same terms, including interest rates and collateral provisions, as those prevailing at the time for comparable transactions with our other similarly situated customers. For certain transactions with officers and employees, these affiliates may offer discounts on their services.
Citi has established funds in which employees have invested. In addition, certain of our directors and executive officers have from time to time invested their personal funds directly or directed that funds for which they act in a fiduciary capacity be invested in funds arranged by Citis subsidiaries on the same terms and conditions as the other outside investors in these funds, who are not our directors, executive officers, or employees. Other than certain grandfathered investments, in accordance with sarbanes-oxley and the Citi Corporate Governance Guidelines, executive officers may invest in certain Citi-sponsored investment opportunities only under certain circumstances and with the approval of the appropriate committee.
In 2008, Citi performed investment banking, financial advisory and other services in the ordinary course of our business for certain organizations in which some of our directors are officers or directors. Citi may also, in the ordinary course of business, have sponsored investment opportunities in which such organizations participated. In addition, in the ordinary course of business, Citi may use the products or services of organizations in which some of our directors are officers or directors.
The persons listed on page 36 were the only members of the personnel and compensation committee during 2008. No member of the personnel and compensation committee was a
part of a compensation committee interlock during fiscal year 2008 as described under sec rules. In addition, none of our executive officers served as a director or member of the compensation committee of another entity that would constitute a compensation committee interlock. No member of the committee had any material interest in a transaction with Citi or is a current or former employee of Citi or any of its subsidiaries.
Certain directors and executive officers have immediate family members who are employed by Citi or a subsidiary. The compensation of each such family member was established by Citi in accordance with its employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. None of the directors or executive officers has a material interest in the employment relationships nor do any of them share a household with these employees. These employees are two of the approximately 326,000 employees of Citi. One of them reports to an executive officer of Citi. With respect to this one individual, and in any other instance where a relative may report to an executive officer, that individuals compensation is reviewed by an independent compensation consultant. A sibling of Manuel Medina-Mora, an executive officer, is employed by Banamex, a subsidiary of Citi, and received 2008 compensation of $1,510,726. An adult spouse of an adult child of Lewis Kaden, an executive officer, is employed by Citis Global Consumer Group and received 2008 compensation of $292,333.
Other than certain grandfathered margin loans, in accordance with sarbanes-oxley and the Citi Corporate Governance Guidelines, no margin loans may be made to any executive officer unless such person is an employee of a broker-dealer subsidiary of Citi and such loan is made in the ordinary course of business. Before and during 2008, certain executive officers have incurred indebtedness to Smith Barney, a division of Citi and a registered broker-dealer, and/or other broker-dealer subsidiaries of Citi, on margin loans against securities accounts. The margin loans were made in the ordinary course of business on substantially the same terms (including interest rates and collateral) as those
prevailing for comparable transactions for other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features.
Certain transactions involving loans, deposits, credit cards, and sales of commercial paper, certificates of deposit, and other money market instruments and certain other banking transactions occurred during 2008 between Citibank and other Citi banking subsidiaries on the one hand and certain directors or executive officers of Citi, members of their immediate families, corporations or organizations of which any of them is an executive officer or partner or of which any of them is the beneficial owner of 10% or more of any class of securities, or associates of the directors, the executive officers or their family members on the other. The transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, that prevailed at the time for comparable transactions with other persons not related to the lender and did not involve more than the normal risk of collectibility or present other unfavorable features. Personal loans made to any director, executive officer or member of the management committee must comply with sarbanes-oxley, Regulation O and the Corporate Governance Guidelines, and must be made in the ordinary course of business.
Citigroup Capital Partners I (Master Fund), LP (formerly SSB Capital Partners (Master Fund) I, LP) and Citigroup Employee Fund of Funds I, LP are funds that were formed in 2000. Citigroup Capital Partners II Employee Master Fund, L.P. was formed in 2006. Each invests either directly or via a master fund in private equity investments. Citi matches each dollar invested by an employee with an additional two dollar commitment to each fund, or feeder fund, in which an employee has invested, up to a maximum of $1 million for each fund in which the employee has invested. Citis match is made by a loan to the fund or funds in which the employee has invested. Each employee, subject to vesting, receives the benefit of any increase in the value of each fund in which he or she invested attributable to the loan made by Citi, less the interest paid by the fund on the loan, as well as any increase in the value of the fund attributable to the employees own investment.
One-half of the loan is full recourse to the employee via a guaranty and the other half is non-recourse to the employee. Before any distributions (other than tax distributions) are made to an employee, distributions are paid by each fund to Citi to pay interest on and to repay the loan.
Interest on the loans accrues quarterly at a rate determined from time to time by Citi as of the first business day of each quarter equal to the greater of (i) the three-month London Inter-Bank Offered Rate plus 75 basis points (as determined by Citi), and (ii) the short-term applicable federal rate calculated in accordance with Section 1274(d) of the Internal Revenue Code of 1986, as amended (irc) (as determined by Citi).
In 2008, two employees who participated in the Citigroup Capital Partners II Employee Master Fund, L.P. became executive officers and, pursuant to the funds offering memorandum and in compliance with Sarbanes-Oxley, were required to repay their outstanding leverage. During 2008, Shirish Apte reimbursed Citi $664,000 and James Forese reimbursed Citi $1.66 million for leverage outstanding to the Citigroup Capital Partners II Employee Master Fund, L.P.
During 2008, no loans were made under the Citigroup Employee Fund of Funds I, LP to any current or former executive officer. For the Citigroup Capital Partners I (Master Fund), LP, no loans were made to any current or former executive officer that exceeded $120,000. The
following distributions with respect to investments in these two funds were made to current and former executive officers in 2008:
* Amount does not exceed $120,000.
Citis business practices committees, at the corporate level and in each of its business units, review business activities, sales practices, products, potential conflicts of interest, complex transactions, suitability and other reputational concerns providing guidance to ensure that Citis business practices meet the highest standards of ethics, integrity and professional behavior. These committees, comprised of our most senior executives, focus on reputational risk while our businesses ensure that our policies are adhered to and emphasize our commitment to the franchise.
Business practices concerns may be surfaced by a variety of sources, including business practices working groups, other in-business committees or the control functions. The business practices committees guide the development of business practices and may change them when necessary or appropriate. These issues are reported on a regular basis to the Citi business practices committee and the board.
The board has adopted a Code of Ethics for Financial Professionals governing the principal executive officers of Citi and its reporting subsidiaries and all Citi professionals worldwide serving in a finance, accounting, treasury, tax or investor relations role. A copy of the Code of Ethics is available on our website at www.citigroup.com. Click on Corporate Governance and then Code of Ethics for Financial Professionals. It has also been filed as an exhibit to our 2002 Annual Report on Form 10-K. We intend to disclose amendments to, or waivers from, the Code of Ethics, if any, on our website.
Citi strongly encourages employees to raise possible ethical issues. Citi offers several channels by which employees and others may report ethical concerns or incidents, including, without limitation, concerns about accounting, internal controls or auditing matters. We provide an Ethics Hotline that is available 24 hours a day, seven days a week with live operators who can connect to translators in multiple languages, a dedicated e-mail address, fax line, a web-link and conventional mailing address. Individuals may choose to remain anonymous. We prohibit retaliatory actions against anyone who, in good faith, raises concerns or questions regarding ethics, discrimination or harassment matters, or reports suspected violations of other applicable laws, regulations or policies. Calls to the Ethics Hotline are received by a vendor, which reports
the calls to Citis Ethics Office of Global Compliance for review and investigation.
The board has adopted a Code of Conduct, which outlines the laws, rules, regulations and Citi policies that govern the activities of Citi and sets the standards of business behavior and ethics that apply across Citi. The Code of Conduct applies to every director, officer and employee of Citi and each of its subsidiaries. All employees, directors and officers are required to read and follow the Code of Conduct. In addition, other persons performing services for Citi may be subject to the Code of Conduct by contract or agreement. A copy of the Code of Conduct is available on our website at www.citigroup.com. Click on Corporate Governance and then Code of Conduct.
Stockholders or other interested parties who wish to communicate with a member or members of the board of directors, including the Chairman or the non-management directors as a group, may do so by addressing their correspondence to the board member or members, c/o the Corporate Secretary, Citigroup Inc., 399 Park Avenue, New York, NY 10043. The board of directors has approved a process pursuant to which the office of the Corporate Secretary will review and forward correspondence to the appropriate person or persons for response.
Citi has long encouraged stock ownership by its directors, officers and employees to align their interests with the long-term interests of stockholders.
As part of our commitment to aligning employee and stockholder interests, members of the management executive committee and members of the board of directors have agreed to hold 75% of the shares of common stock they acquire through Citis equity programs as long as they remain subject to the stock ownership commitment. Senior leadership committee members have agreed to hold 50% of the shares of common stock they acquire through Citis
equity programs as long as they remain subject to the stock ownership commitment. A summary of the stock ownership commitment appears in Citis Corporate Governance Guidelines, which are attached to this proxy statement as Annex A.
Exceptions to the stock ownership commitment include gifts to charity, certain estate planning transactions, and certain other limited circumstances. In addition, the commitment relates to the net number of shares received in connection with the exercise of employee stock options or paying withholding taxes under other equity compensation programs.
The following table shows the beneficial ownership of Citi common stock by our directors, nominees and certain executive officers at February 27, 2009.
(A) The share numbers in these columns have been restated to reflect equitable adjustments made to all Citi options outstanding on August 20, 2002 in respect of the distribution to all stockholders of shares of Travelers Property Casualty Corp. For each option grant, the number of options was increased by a factor
of 1.0721990 and the exercise price was decreased by a factor of .9326627. The expiration and vesting dates of each option did not change.
At February 27, 2009, no director, nominee or executive officer owned as much as 1% of Citis common stock.
The following table shows the beneficial ownership of Citi preferred stock by our directors and certain executive officers at February 27, 2009.
All of the directors, nominees and executive officers as a group beneficially owned approximately .63% of Citis common stock.
Of the shares shown on the preceding page, all of which are deemed to be beneficially owned under sec rules, some portion may not be held directly by the director or executive officer. The following table details the various forms in which directors or executive officers indirectly hold shares. Such indirectly-held shares may be shares:
The board of directors has nominated all of the current directors for re-election at the 2008 annual meeting except for Sir Win Bischoff and Messrs. Derr, Hernandez, Rubin and Thomas, who are retiring from the board effective at the annual meeting. Directors are not eligible to stand for re-election after reaching the age of 72. The board has recently announced that it
unanimously decided to have a majority of new directors as soon as feasible. Certain nominees are included in this proxy statement for election by stockholders. When additional candidates are identified, approved and subsequently appointed as directors by the board, the Company will file Forms 8-K to announce the appointments.
The following tables give information provided by the nominees about their principal occupation, business experience, and other matters.
The one-year terms of all of Citis directors expire at the annual meeting.
The board of directors met 25 times in 2008. During 2008, the audit and risk management committee met 12 times, the personnel and compensation committee met 15 times and the nomination and governance committee met 8 times.
Each director attended at least 75 percent of the total number of meetings of the board of directors and board committees of which he or she was a member in 2008.
Citis non-management directors meet in executive session without any management directors in attendance each time the full board convenes for a regularly scheduled meeting, which is usually 7 times each year, and, if the board convenes a special meeting, the non-management directors may meet in executive session. Until the appointment of Richard Parsons as Chairman, the lead director presided at each executive session of the non-management directors. The independent chairman now presides at such sessions.
The standing committees of the board of directors are:
The audit and risk management committee, which assists the board in fulfilling its oversight responsibility relating to (i) the integrity of Citis financial statements and financial reporting process and Citis systems of internal accounting and financial controls; (ii) the performance of the internal audit function Audit and Risk Review; (iii) the annual independent integrated audit of Citis consolidated financial statements and internal control over financial reporting, the engagement of the independent registered public accounting firm and the evaluation of the independent registered public accounting firms qualifications, independence and performance; (iv) policy standards and guidelines for risk assessment and risk management; (v) the compliance by Citi with legal and regulatory requirements, including Citis disclosure controls and procedures; and (vi) the fulfillment of the other responsibilities set out in its charter, as adopted by the board. The report of the committee required by the rules of the sec is included in this proxy statement. Subcommittees of the audit and risk management committee cover Citis corporate and consumer businesses.
The board has determined that each of Mrs. Mulcahy, Dr. Rodin, and Messrs. Deutch, Liveris, Ricciardi and Ryan qualifies as an audit committee financial expert as defined by the sec and, in addition to being independent according to the boards independence standards as set out in its Corporate Governance Guidelines, is independent within the meaning of applicable sec rules, the corporate governance rules of the nyse, and the fdic guidelines.
The audit and risk management committee charter, as adopted by the board, is attached to this proxy statement as Annex B. A copy of the charter is also available in the Corporate Governance section of Citis website: www.citigroup.com.
The nomination and governance committee, which is responsible for identifying individuals qualified to become board members and recommending to the board the director nominees for the next annual meeting of stockholders. It leads the board in its annual review of the boards
performance and recommends to the board director candidates for each committee for appointment by the board. The committee takes a leadership role in shaping corporate governance policies and practices, including recommending to the board the Corporate Governance Guidelines and monitoring Citis compliance with these policies and the Guidelines. The committee is responsible for reviewing and approving all related party transactions involving directors or an immediate family member of a director and any related party transaction involving an executive officer or immediate family member of an executive officer, if the transaction is valued at $50 million or more. See Certain Transactions and Relationships, Compensation Committee Interlocks and Insider Participation on page 10 of this proxy statement for a complete description of the Policy on Related Party Transactions. The committee, as part of its executive succession planning process, evaluates and nominates potential successors to the ceo and provides an annual report to the board on ceo succession. The committee also reviews director compensation and benefits, Citis Code of Conduct, the Code of Ethics for Financial Professionals and other internal policies to monitor that the principles contained in the Codes are being incorporated into Citis culture and business practices. The nomination and governance committee may also exercise all powers of the board of directors between meetings of the board.
The board has determined that, in addition to being independent according to the boards independence standards as set out in its Corporate Governance Guidelines, each of the members of the nomination and governance committee is independent according to the corporate governance rules of the nyse. Each of such directors is a non-employee director, as defined in Section 16 of the Securities Exchange Act of 1934, and is an outside director, as defined by Section 162(m) of the irc.
The nomination and governance committee charter, as adopted by the board, is attached to this proxy statement as Annex C. A copy of the charter is also available in the Corporate Governance section of Citis website: www.citigroup.com.
The personnel and compensation committee, which is responsible for determining the compensation for the ceo, and approving the compensation structure for senior management, including the management executive committee, members of the senior leadership committee, the most senior managers of corporate staff, and other highly paid professionals in accordance with guidelines established by the committee from time to time. The committee annually reviews and discusses the Compensation Discussion and Analysis (cd&a) with management. The committee has also produced an annual report on executive compensation that is included in this proxy statement (on page 36 below). Further, the committee approves broad-based and special compensation plans for all of Citis businesses.
The committee regularly reviews Citis management resources, succession planning and development activities, as well as the performance of senior management. The committee is also charged with monitoring Citis performance toward meeting its goals on employee diversity.
The committee is responsible for evaluating the performance of and determining the compensation for the ceo and approving the compensation for the management executive committee. The committee also approves the compensation structure for senior management, including members of the senior leadership committee, the most senior managers of corporate staff and other highly paid professionals, in accordance with guidelines established by the committee from time to time. The committee regularly reviews the design and structure of Citis compensation programs to ensure that managements interests are aligned with stockholders and that the compensation programs are aligned with Citis strategic priorities. See the cd&a on page 37 of this proxy statement.
In order to ensure uninterrupted operation of Citi in the event of the unplanned departure or unavailability of Citis ceo, Citis personnel and compensation committee evaluates a number of individuals who could be asked to assume the ceos duties in the event of an unexpected vacancy. The committee then discusses the list with the board which then formalizes its choices
of one or more of such individuals. This process is conducted at a regularly scheduled board meeting on an annual basis.
With respect to regular succession of the ceo and senior management, Citis board evaluates internal, and, when appropriate, external, candidates. To find external candidates, Citi seeks input from the members of the board and senior management and/or from recruiting firms. To develop internal candidates, Citi engages in a number of practices, formal and informal, designed to familiarize the board with Citis talent pool. The formal process involves an annual talent review conducted by senior management at which the board studies the most promising members of senior management. The board learns about each persons experience, skills, areas of expertise, accomplishments and goals. This review is conducted at a regularly scheduled board meeting on an annual basis. On an informal basis, members of senior management are periodically asked to make presentations to the board at board meetings and at the board strategy sessions. These presentations are made by senior managers at the various business units as well as those who serve in corporate functions. The purpose of the formal review and informal interaction is to ensure that board members are familiar with the talent pool inside Citi from which the board would be able to choose successors to the ceo and evaluate succession for other senior managers as necessary from time to time.
The committee also has the authority to retain and/or engage special consultants or experts to advise the committee, as the committee may deem appropriate or necessary in its sole discretion, and receives funding from Citi to engage such advisors. The committee has retained Independent Compensation Committee Adviser, LLC (icca) to provide the committee with comparative data on executive compensation and advice on Citis compensation programs for senior management. icca does no other work for Citi. The amount the personnel and compensation committee approved for payment to icca in 2008 is disclosed in the cd&a on page 50 of this proxy statement. Citi has retained Mercer Human Resource Consulting for benchmarking and analyses with respect to executive compensation and benefit practices, and other compensation matters for all
employees, including the named executive officers. The committee instructed the consultants to meet with senior management to review Citis process, financial performance, and market data. The consultants were asked to evaluate the compensation recommendations for senior management in light of these factors and managements description of the performance assessment. Towers Perrin also provided market data regarding compensation trends in the financial services industry.
The board has determined that in addition to being independent according to the boards independence standards as set out in its Corporate Governance Guidelines, each of the members of the personnel and compensation committee is independent according to the corporate governance rules of the nyse. Each of such directors is a non-employee director, as defined in Section 16 of the Securities Exchange Act of 1934, and is an outside director, as defined by Section 162(m) of the irc.
The personnel and compensation committee charter is attached to this proxy statement as
Annex D. A copy of the charter, as adopted by the board, is also available in the Corporate Governance section of Citis website: www.citigroup.com.
The public affairs committee, which is responsible for reviewing Citis policies and programs that relate to public issues of significance to Citi and the public at large and reviewing relationships with external constituencies and issues that impact Citis reputation. The committee also has responsibility for reviewing public policy and reputation issues facing Citi, reviewing political and charitable contributions made by Citi and the Citi Foundation, reviewing Citis policies and practices regarding supplier diversity, and reviewing Citis sustainability policies and programs, including environmental and human rights.
The public affairs committee charter, as adopted by the board, is attached to this proxy statement as Annex E. A copy of the charter is also available in the Corporate Governance section of Citis website: www.citigroup.com.
The following table shows the current membership of each of the foregoing committees.
Calpine Corporation, in connection with the departure of its Chairman, President and Chief Executive Officer, named Mr. Derr Chairman of the Board and Acting Chief Executive Officer in November 2005. Mr. Derr, who had previously held the position of Lead Director of Calpine, was Acting Chief Executive Officer for approximately two weeks. Mr. Derr continues to serve on Calpines Board. On December 20, 2005, Calpine Corporation filed for federal bankruptcy protection under Chapter 11.
There are no legal proceedings to which any director, officer, nominee or principal shareholder, or any affiliate thereof, is a party adverse to Citi or has a material interest adverse to Citi.
Directors compensation is determined by the board. Since its initial public offering in 1986, Citi has paid outside directors all or a portion of their compensation in common stock, to ensure that the directors have an ownership interest in common with other stockholders. The nomination and governance committee makes recommendations to the board with respect to compensation of directors. The committee periodically reviews benchmarking assessments in order to determine the level of compensation to attract qualified candidates for board service and to reinforce our practice of encouraging stock ownership by our directors. In 2008, the committee reviewed the current compensation program and determined that no changes were required. Effective January 1, 2005, the last time director compensation was adjusted, non-employee directors, other than Mr. Hernández, who, except as described below, has waived receipt of compensation for his services as a director, receive an annual cash retainer of $75,000 and a deferred stock award valued at $150,000. The deferred stock award is granted on the same date that annual incentives are granted to the senior executives. The deferred stock
award vests on the second anniversary of the date of the grant, and directors may elect to defer receipt of the award beyond that date. Directors may elect to receive all or a portion of their deferred stock award and cash retainer in the form of common stock, and directors may elect to defer receipt of this common stock. Directors also may elect to receive their cash retainer in the form of an option to purchase shares of Citi common stock. Stock options are also granted on the same date that stock options are granted to the senior executives. The options vest and become exercisable on the second anniversary of the grant date and expire six years after the grant date. Beginning in 2009, directors may no longer elect to receive stock options.
Directors who are employees of Citi or its subsidiaries do not receive any compensation for their services as directors.
Except as described below, directors receive no additional compensation for participation on board committees or subcommittees. Committee and subcommittee chairs receive additional compensation of $15,000 per year, except for the chairs of the audit and risk management committee and each subcommittee thereof, who receive additional compensation of $35,000 per year. This additional compensation is paid in the same manner as the annual cash retainer, but directors may not elect stock options for this portion of their fee. Additional compensation for special assignments may be determined on a case by case basis. On January 1, 2009, Messrs. Deutch, Ricciardi and Ryan were elected to the Citibank, N.A. Board of Directors and each will receive $50,000 as an annual retainer for his service. Citibank, N.A. is a wholly-owned subsidiary of Citi.
Citi reimburses its board members for expenses incurred in attending board and committee meetings or performing other services for Citi in their capacities as directors. Such expenses include food, lodging and transportation.
The following table provides information on 2008 compensation for non-employee directors.
Non-Employee Director Compensation Table
* As Citis stock price has declined significantly since the granting of these awards, the value of the awards shown in the table does not reflect their current value.
(a) Directors may elect to receive all or a portion of the cash retainer in the form of common stock and may elect to defer receipt of common stock. Directors also may elect to receive their cash retainer in the form of an option to purchase shares of Citi common stock. Directors may elect to receive a portion of their deferred stock awards in the form of an option to purchase shares of Citi common stock. Beginning in 2009, directors may no longer elect to receive any of their compensation in the form of options to purchase shares of common stock.
The following directors elected to receive all or a portion of their 2008 retainer and deferred stock award in stock options:
(b) The fair value of the stock awards and stock options appearing in the Non-Employee Director Compensation Table were calculated in accordance with the December 2006 sec regulations. In determining the compensation expense for all equity awards required to be disclosed in the table under the December 2006 sec regulations, it was assumed that sfas 123(r) was in effect on the grant date of each such equity award. The number of shares of deferred stock granted in 2008 and the grant date fair
value of those awards, determined in accordance with sfas 123(r), are set forth below:
* Mr. Ricciardi, who joined the Board on July 21, 2008, received an award of deferred stock with a grant price of $19.356.
The Stock Awards column in the Non-Employee Director Compensation Table also includes shares of common stock that directors elected to receive in exchange for all or a portion of their cash retainer and chair fees, as applicable. These directors also elected to defer receipt of the shares.
The aggregate number of deferred stock awards outstanding at the end of 2008 was:
(c) The amount reported in this column was calculated in accordance with the December 2006 sec regulations which are based on income statement expense under sfas 123(r), and which, depending on the circumstances of each director, may differ from the grant-date fair value formula applied uniformly for compensation purposes. The assumptions made when calculating the amounts in this column are found in footnote 8 to the Consolidated Financial Statements of Citigroup Inc. and its Subsidiaries, as filed with the sec on Form 10-K for 2008. Aggregate total
numbers of stock option awards outstanding are shown in the Director Stock Option Grant Table below. The grant date fair value of the options they received in 2008 was:
For the awards granted to all directors who elected to receive options as part of their compensation for 2008, the exercise price was $24.45. The number of shares in the option grant is calculated by dividing the dollar amount elected by the fair market value of Citi common stock on the grant date and multiplying that amount by four.
(d) Travelers Property Casualty Corp., formerly a subsidiary of Citi, sponsored a Directors Charitable Award Program originally adopted by the Travelers Corporation, a Citi predecessor, under which all members of its board of directors were eligible, subject to certain vesting requirements, to have the program make charitable contributions to eligible tax-exempt organizations recommended by the directors up to an aggregate of $1,000,000. In connection with Citis distribution of shares of Travelers to its stockholders, at which time Travelers became a separate public company, Citi assumed responsibility under the program with respect to the vested interests of all participants in the program. Travelers initially funded the program through the purchase of life insurance policies on the lives of the directors. Generally, eligible directors were paired for purposes of buying second-to-die life insurance policies. The proceeds of these policies are used to fund the contributions to the organizations selected by the directors immediately upon the death of both vested directors in five equal, annual installments. Mr. Armstrong, a current member of Citis board, was a director of Travelers and a participant in the Directors Charitable Award Program. The annual costs Citi incurs in connection with the administration of this program which are attributable to Mr. Armstrong amount to $2,877.
(e) George David retired from the board on April 22, 2008.
(f) In consideration of his service as non-executive chairman of Banco Nacional de México, an indirect wholly owned subsidiary of Citi, and other duties and services performed for such entity and its affiliates during 2008, including governmental and client relations and strategic development, Citi, or certain of its
Mexican affiliates, provided certain security services to Roberto Hernández and members of his immediate family as well as office, secretarial and related services, and aircraft usage for Citi business-related purposes. The aggregate amount of such expenses for Mr. Hernández for 2008 is estimated to be approximately $2,218,000.
The following chart shows the amount of dividend equivalents and interest paid to the non-employee directors in 2008 with respect to shares of Citi common stock held in their deferred stock accounts.
(A) Dividend equivalents are paid quarterly, in the same amount per share and at the same time as dividends are paid to stockholders. Interest accrues on the amount of the dividend equivalent from the payment date until the end of the quarter, at which time the dividend equivalent is either distributed to the director in cash or reinvested in additional shares of deferred stock. Differences in the amounts paid to directors can be attributed to a variety of factors including length of service and elections
made by individual board members with respect to the form in which they receive their cash retainers or deferred stock awards. Generally, directors who have served on the board for longer periods of time have accumulated more shares in their deferred stock accounts than directors with a shorter tenure and as a result receive higher dividend equivalent payments. The number of shares owned by each director is reported on page 16.
Director Stock Option Grant Table
The Audit and Risk Management Committee (Committee) operates under a charter that specifies the scope of the Committees responsibilities and how it carries out those responsibilities. A copy of the Committee charter is attached to Citigroups proxy statement as Annex B.
The Board of Directors has determined that all six members of the Committee are independent based upon the standards adopted by the Board, which incorporate the independence requirements under applicable laws, rules and regulations.
Management is responsible for the financial reporting process, the system of internal controls, including internal control over financial reporting, risk management and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. kpmg llp, Citigroups independent registered public accounting firm (independent auditors) is responsible for the integrated audit of the consolidated financial statements and internal control over financial reporting. The Committees responsibility is to monitor and oversee these processes and procedures. The members of the Committee are not professionally engaged in the practice of accounting or auditing and are not professionals in these fields. The Committee relies, without independent verification, on the information provided to us and on the representations made by management regarding the effectiveness of internal control over financial reporting, that the financial statements have been prepared with integrity and objectivity and that such financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Committee also relies on the opinions of the independent auditors on the consolidated financial statements and the effectiveness of internal control over financial reporting.
The Committees meetings facilitate communication among the members of the Committee, management, independent risk managers, the internal auditors, and Citigroups independent auditors. The Committee separately met with each of the internal and independent auditors with and without management, to discuss the results of their examinations and their observations and recommendations regarding Citigroups internal controls. The Committee also discussed with Citigroups independent auditors all communications required by generally accepted auditing standards.
The Committee reviewed and discussed the audited consolidated financial statements of Citigroup as of and for the year ended December 31, 2008 with management, the internal auditors, and Citigroups independent auditors.
The Committee has received the written disclosures required by pcaob Rule 3526 Communication with Audit Committees Concerning Independence. The Committee discussed with the independent auditors any relationships that may have an impact on their objectivity and independence and satisfied itself as to the auditors independence.
The Committee has reviewed and approved the amount of fees paid to the independent auditors for audit, audit related and tax compliance services. The Committee concluded that the provision of services by the independent auditors is compatible with the maintenance of their independence.
Based on the above-mentioned review and discussions, and subject to the limitations on our role and responsibilities described above and in the Committee charter, the Committee recommended to the Board that Citigroups audited consolidated financial statements be included in Citigroups Annual Report on Form 10-K for the year ended December 31, 2008 for filing with the sec.
John M. Deutch (Chair)
Andrew N. Liveris
Anne M. Mulcahy
Lawrence R. Ricciardi
Robert L. Ryan
Dated: February 26, 2009
In accordance with its written charter, the Personnel and Compensation Committee (the committee) evaluated the performance of and determined the compensation for the Chief Executive Officer and approved the compensation structure for senior management, including the senior leadership committee, the most senior managers of corporate staff, and other highly paid professionals.
The committee reviewed and discussed the Compensation Discussion and Analysis with members of senior management and, based on this review, the committee recommended to the Board of Directors of Citigroup Inc. that the Compensation Discussion and Analysis be included in Citis annual report on Form 10-K and proxy statement on Schedule 14A filed with the Securities and Exchange Commission.
The committee certifies that it has reviewed with Citis senior risk officer the senior executive officer incentive compensation arrangements and has made reasonable efforts to ensure that such arrangements do not encourage senior executive officers to take unnecessary and excessive risks that threaten the value of the financial institution.
Alain J.P. Belda (Chair)
C. Michael Armstrong
Kenneth T. Derr
Richard D. Parsons
February 17, 2009
Compensation Discussion and Analysis
Citi and the entire financial services industry are facing unprecedented challenges and profound change and 2008 was a particularly challenging year. Citis overarching priority has been to reposition the Company to capitalize on the best opportunities for global growth in a rapidly changing financial environment. This repositioning includes reducing the assets on the balance sheet, reducing expenses, and streamlining businesses for future profitable growth. It also includes a redesign of the compensation structure and a substantial turnover of top management.
The objectives of Citis executive compensation programs have been to attract and retain the best talent, motivate and reward executives to perform by linking incentive compensation to demonstrable performance-based criteria, align the long term interests of management with those of stockholders, and deliver compensation at levels that are competitive to the financial services market. These objectives still hold true and remain as part of Citis compensation philosophy; reflecting 2008 financial results and the evolving financial services landscape, Citi has made changes to the structure of compensation that will better result in meeting these objectives.
The extraordinary events of 2008 have significantly decreased total compensation for 2008. The final awards made by the committee are shown on page 45.
Citis compensation programs are designed to support:
The compensation structure has been redesigned to better meet the objectives summarized above. In particular, awards are now more closely tied to future performance and risk management is now a more integrated part of the compensation. Set forth below is a discussion of each element of compensation, the reason Citi pays each element, how each amount is determined, and how that element fits into Citis compensation philosophy. Note that the American Recovery and Reinvestment Act of 2009, which is described in this report, and other subsequent legislation and regulations will modify or could modify the executive compensation policies set forth herein prospectively and/or retroactively.
Executives have a range of base salaries, and as a matter of company policy, annual base salary is capped at $1,000,000 for the members of the management executive
committee. Base pay was frozen for 2009 across Citi, and none of the members of the management executive committee received a base pay increase from 2008 to 2009.
Incentive Compensation Structure