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C » Topics » Why Should You Vote to Approve the 2009 Plan?

This excerpt taken from the C DEF 14A filed Mar 20, 2009.
Why Should You Vote to Approve the 2009 Plan?
The 2009 plan will replace the 1999 plan, which expires on April 30, 2009. The board of directors recommends a vote for the 2009 plan because it believes it is in the best interests of Citi and its stockholders for the following reasons:
 
•  Aligning employee and stockholder interests. Our equity compensation programs, which emphasize awards of restricted or deferred stock, are our principal means of aligning the interests of employees with those of stockholders. With a stock ownership commitment that requires members of the management executive committee and the board of directors to hold 75% of the shares received during their term of service with Citi, and members of the senior leadership committee to hold 50%, and policies that require highly compensated employees to receive up to 40% of their annual incentives in stock awards, our executives and other employees have significant long-term personal financial stakes tied to the performance of our
common stock. If the 2009 plan is approved, we will be able to maintain our means of aligning the interests of our employees with the interests of our stockholders.
 
•  Attracting and retaining talent. A talented, motivated and effective management team and workforce are essential to executing a successful turnaround of our company. Equity compensation has been an important component of total compensation at Citi for many years because it is effective at getting managers and employees to think and act like owners. Even during this time of immense uncertainty in the world economy, equity compensation remains a vital component of compensation at other financial services companies, and at other companies with which we compete for talent worldwide. Moreover, pursuant to limits on executive compensation that were recently enacted by Congress as an amendment to eesa, equity-based awards are a favored vehicle for compensating senior executives. If the 2009 plan is approved, our ability to offer competitive compensation packages to attract new talent and to retain our best performers will be enhanced. We believe the plan is vital to our goal of returning the company to profitability.
 
•  Avoiding disruption in compensation programs. If the 2009 plan is approved, we will not have to restructure existing compensation programs throughout Citi for reasons not directly related to the achievement of our business objectives. To remain competitive without an employee equity plan, it will likely be necessary to replace components of compensation previously awarded in equity with cash, or with other instruments that may not necessarily align employee interests with those of stockholders as well as equity awards would have. Additionally, replacing equity with cash will increase cash compensation expense and be a drain on cash flow that would be better utilized if reinvested in our core businesses.
 
•  Commitment to sound equity compensation practices and pay-for-performance. We believe that equity compensation, by its very nature, is performance-based compensation. We are


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also mindful that equity grants dilute stockholder equity and must therefore be used judiciously. As described below, we have changed our equity compensation practices to reduce the number of shares granted and the dilutive effects of our programs. We have also introduced performance-vesting awards and performance priced stock options for our most senior executives. As described elsewhere in this proxy statement (see “Compensation Discussion and Analysis” and Proposal 4), incentive awards were reduced for senior executives and several executives did not receive any incentive awards in respect of 2008. The 2009 plan will allow us to maintain our focus on providing performance-based pay for our executives and employees.
 
•  Plan features designed to protect stockholder interests. As described below, the 2009 plan includes a number of enhancements from the 1999 plan, which are designed to further protect stockholder interests. With a plan term of only five years and a limited initial share authorization (as discussed below), the 2009 plan ensures that stockholders will have more frequent opportunities to review and approve our equity compensation practices.
 
You are urged to read the entire proposal below and the text of the 2009 plan attached to this proxy statement as Annex F for a complete understanding of the proposal and the 2009 plan.
 
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