Yes, I know I’m being a tad bit facetious here, but not really. After getting US$45 billion in government aid, the US government and we the people of America own roughly 36% of Citigroup. The interesting debate is whether Citigroup employee, Andrew J Hall should be paid his $100 million bonus as described in his contract.
Most initial responses are with a vehement “HELL NO!” Who on earth deserves to get paid that much, people must think. However, what if Andrew Hall was responsible for bringing in $1 billion in revenue? Is it so egregious to pay the man responsible, a 10% cut? After all, $900,000,000 sure does employ and pay for many other Citigroup employee’s salaries! Should Citigroup risk not paying their star, and his team of employees for the overall sake of the firm and shareholders? As one colleague aptly put it, “RB, we live in America not North Korea!”
The problem lies with such an eye-popping number. If Andrew brought in $1 million in revenue, nobody would balk at him earning a $100,000 bonus. It’s not Andrew’s fault that Citigroup almost went under due to its sub-prime lending standards. It’s estimated that Tiger Woods routinely earns in over US$70 million a year. The reason is simply because he brings in more to his sponsors than what he earns, otherwise his earnings would be unsustainable. Although I’m envious as the next person, especially as a partial owner of Citigroup since I’m a tax payer, shouldn’t we support the honoring of a contract? Perhaps we should look into who drew up this contract for Andrew in the first place instead.
Citigroup has treated me well in the past, and I’ve been a long time client. That said, recently, I’ve been disappointed since they raised my credit card rates for no reason, even though the Fed Fund rate and 10-yr treasury yield are at all time lows. Their savings and CD rates are also among the lowest I’ve seen compared to other banks. I’m also amazed that they publicly announced a 50% pay raise to many of their employees recently as well. Citigroup will remain as my “Go Broke Bank” bank, however I’m voting with my feet and moved all my savings out of Citigroup and to a local boutique bank. Let them make a big spread off of someone else. Citigroup will always be just a bank for easy access, and not much more.
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Updated on 2/8/2015. Let the bull market continue!