Vikram Pandit, the CEO of Citigroup, has agreed not to receive bonus for the fiscal year 2008 as the company is struggling to cope with the financial downturn in the past 12 months.
Apart from him, a number of top executives and senior bankers in the company will face the same fate and will probably have to forget their plan on buying that new yachts or private jets.
The Citi folks join a growing list of other top banking executives in Wall Street who have taken similar step as a sign of respect to the ailing economy.
Other executives from other banks and financial institutions who would not be receiving bonus include Jamie Dimon (JPMorgan & Chase) and Llyod Blankfein (Goldman Sachs), John Thain (Merrill Lynch).
Citi’s anchor bank, Citibank suffered its worst financial hiccups in 30 years which began with the US credit crunch and the subprime mortgage early in 2007. It held its status as the world’s largest bank for many years before overtaken by other banks from China, America and Europe and as of mid 2007, it was ranked at number 7th. To avoid going bankrupt, the US government recently rescued Citibank with an aid in excess of $50 billion.
More than 20,000 people in a number of divisions in Citibank have also lost their jobs in the past few months.
Vikram was appointed chief executive in 2007. Prior to joining Citibank, he worked with Morgan Stanley before setting up a hedge fund, which was subsequently bought by Citi, in an effort to bring him aboard.
Banks are facing mounting criticism from the public and taxpayers for their exuberant bonus pay out despite the global financial turmoil.
Billions of government money is now being used to bail out ailing companies and instead of strategizing their way to brace the difficult times, more money is continued to be spent to reward the highly paid bankers.
More than $70 billion are made available by top banks in Wall Street as staff in banking and financial institutions are waiting in line for fat year-end bonuses and compensation.
The biggest victims of all? The tax payers.
However, a few of the world’s top bank executives intend to lead by example and made themselves exceptions.
Jamie Dimon, the chief executive of JPMorgan Chase & Co, had been reported to have declined his share of 2008 bonuses, which would mount up to a few million dollars. JPMorgan was bailed out through a $25 billion cash injection by the US Treasury Department recently.
Apart from Dimon, Goldman Sachs CEO Llyod Blankfein as well as Merrill Lynch CEO John Thain have also followed suit by agreeing not to receive their bonus this year. Apart from its CEO, Goldman will also impose a major bonus pay cut to about 400 of the bank’s partners below the $1 million figure as the company recorded its first quarterly loss in a space of 10 years. Last year, each partner received a staggering amount between $5 million to $29 million in bonus pay out, making them as Wall Street and London’s highest paid partner executives.
Merrill Lynch was rescued through an acquisition by Bank of America on the same day another investment firm, Lehman Brothers went bankrupt.