Citi's Pandit hits paydirt

The taxpayer-backed bank says its CEO made $10.8 million last year. Citi also announces a shakeup to its board.

Colin Barr, senior writer

Vikram Pandit's stock awards have cratered along with Citi shares, but a hedge fund stake has held up better.
Citi shares have lost 95% of their value since Pandit came aboard in July 2007.

NEW YORK (Fortune) -- Citigroup, which has received hundreds of billions of dollars in federal aid, disclosed Monday that CEO Vikram Pandit received 2008 compensation valued at $10.8 million.

The bank also announced changes to its board and nominated four new independent directors, including former U.S. Bancorp (USB, Fortune 500) chief Jerry Grundhofer.

New York-based Citi, like many other banks that have received taxpayer funding, has come under fire for its spending on executive compensation and other perks.

But since Citi (C, Fortune 500) took its first round of exceptional federal aid last November, the bank has been trying to show it's being more responsible. Pandit said late last year he plans to take just $1 a year in salary until the bank returns to profitability.

Still, the bank disclosed in a regulatory filing Monday that Pandit received $958,333 in salary last year, up from the $250,000 he received in 2007. Pandit did not receive a cash bonus, however.

The lion's share of Pandit's overall compensation comes from the 1 million restricted shares and 3 million stock options Citi granted Pandit on Jan. 22, 2008, as a signing bonus and special retention award following his December 2007 appointment as CEO.

Pandit joined Citi in July 2007, after the company purchased the Old Lane hedge fund he had started up after departing Morgan Stanley (MS, Fortune 500).

Last year's compensation largely reflects stock and option grants whose value has plunged along with Citi's shares. The company granted Pandit stock and stock options worth $37.2 million in January 2008, reflecting his signing bonus and a special 2008 retention bonus.

But with Citi shares having fallen more than 90% since then, the current value of the awards -- which vest over periods as long as 10 years -- is just $1.8 million, Citi said.

Pandit's investment in Old Lane has fared somewhat better. When Citi bought the fund, Pandit and a co-founder each received $165 million in pretax payments for their partnership interests. They agreed to invest those proceeds -- amounting to around $100 million each after taxes - in the fund.

But like so many hedge funds, Old Lane was hit last year by redemption requests, prompting Citi to shut it down last summer. Pandit received distributions of $79.7 million after the fund was closed. That means Pandit took a 20% loss on his holdings in Old Lane -- a far better showing than the 53% thumping Citi common shareholders took over the same period.

Citi shakes up board to try and quiet Congressional critics

Citi also, as expected, announced several new independent directors to its board.

In addition to Grundhofer, the bank nominated three other candidates -- former Bank of Hawaii (BOH) chief Michael O'Neill, onetime Federal Reserve Bank of Philadelphia President Anthony Santomero and ex-Pimco executive William Thompson.

The move comes as the bank's newly appointed chairman, Dick Parsons, seeks to recast Citi in a form more palatable to regulators and legislators. Taxpayers could own as much as 36% of Citi following the latest restructuring of the government's bailout of the bank, which was announced Feb. 27.

Parsons took over as chairman earlier this year for investment banker Win Bischoff. He promised to "reconstitute" the board at Citi, which has been sharply criticized in Congress for its poor supervision of management and its compensation excesses.

Among the directors departing Citi recently have been Robert Rubin, the former Goldman Sachs (GS, Fortune 500) executive and Clinton administration Treasury Secretary.

Rubin made more than $100 million over a decade as the bank's chairman and senior counselor but declined responsibility for the bubble-era missteps of Pandit's predecessor, former CEO Chuck Prince.  To top of page

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