(Bloomberg) -- A group of former Citigroup Inc. bankers is urging the firm’s board to cancel bonuses for hundreds of managers, slash spending on consultants and take other steps to accelerate the company’s turnaround.
The group is demanding the panel claw back and halt rewards that bosses across Citigroup are collecting for their work overhauling systems and reshaping business lines, according to a copy of a five-page letter they sent to the board this month. Citigroup’s board has received their letter, and the group aims to speak with the compensation committee’s chair, according to people familiar with the matter.
The anonymous authors claim to represent 10 former managing directors who are awaiting a total of $12.7 million in deferred compensation tied to the company’s stock. Bloomberg hasn’t been able to verify the identities of all the participants. One former managing director who has been in contact with members of the group but hasn’t joined said they have met on video calls to discuss their asks.
The letter comes one year after Chief Executive Officer Jane Fraser unveiled a plan to simplify the sprawling global bank — cutting 20,000 roles, restructuring business lines, and vowing to satisfy regulatory demands it shore up systems. But despite revenue growth across the bank, investors reacted negatively this month to quarterly results, which included a decline in return on tangible common equity — a key measure of profitability that Fraser aims to lift.
“This anonymous letter contains a multitude of factual inaccuracies and a range of misguided statements that we strongly contest,” a spokesperson for Citigroup said in an emailed statement. “That said, we acknowledge that our stakeholders want to see us make progress as quickly as possible – we share that objective and are making the tough decisions to make that happen.”
Though the bank’s stock has climbed 25% this year, it’s underperforming many of its main US competitors. It’s alone among the six largest US lenders in trading below book value.
The letter also encouraged the board to slash spending on outside consultants by at least 50%. Such spending by the bank is already down: the firm paid consultants $300 million last year, compared with $700 million in each of the two prior years, according to a January presentation to investors.
Citigroup enacted a Transformation Bonus Program in late 2021 to closely tether many executives’ rewards to improving the firm’s risk management, controls and culture. The program sets target bonuses for more than 250 employees, and then later pays out a percentage of those amounts — 94% in 2022 and 80% in 2023 — based on how the transformation project performs as a whole.
Chief Financial Officer Mark Mason and Chief Operating Officer Anand Selvakesari each received $1 million on top of their standard compensation for 2023, according to documents for the firm’s annual shareholder meeting.
Such payouts are “unwarranted,” the group wrote, given regulators’ dissatisfaction with the pace of improvements so far, and the executive team’s operation “reflects longstanding internal loyalties to Fraser rather than the type of independent thinking, managerial execution and strategic redirection needed by Citi at this critical time,” they wrote.
“Transformations of this scale are not linear and they inevitably attract criticism from those who would approach the effort differently or who ignore the progress we have made,” the Citigroup spokesperson said. “And they often result in colleague departures, some intentional and some regrettable.”
--With assistance from Sridhar Natarajan.
(Updates with type of meeting and a description of the bank’s relative value from second paragraph.)
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