A raise by any other name really does not smell as sweet.
Citigroup Inc. is increasing the base salaries of many employees -- reportedly by as much as 50 percent for some workers -- as it restructures their compensation amid government restrictions on bonuses, reports the Associated Press.
Adjusting the balance between “fixed and variable compensation” is the alleged goal of Citigroup’s new round of salary increases. Corporate greed has gotten even more creative.
It seems only fair, since bonuses haven’t really been bonuses at all but more of a guaranteed payout completely unrelated to performance.
So let’s just give the badly performing execs hefty raises and call a spade a spade.
But wait, they’re not actually raises because bonuses are being lowered. Huh? According to an “anonymous person familiar with the matter” the changes would not affect the total amount of an employee’s compensation. So it’s not a raise, per se. But they would allow Citi to pay as well as they did in 2008 – and what a year that was! – while appearing to adhere to the government’s new bonus caps.
As one economist put it, this is merely a “change in the composition of total compensation.”
Let me see if I can follow this logic: Base salaries should be at least equal to total 2008 compensation because they could never do any worse than that so we should never pay them any less.
Citi and the other banks say they need to do this if they want to hold on to their talented employees. Yes, those same talented employees who caused the financial sector to implode taking down the rest of our economy with them. I can certainly see why they want to retain that talent pool.
Citigroup has received $45 billion from the government. A portion of those funds will soon be converted to common stock, giving the government a 34 percent stake in the bank – and the right to scrutinize compensation. So don’t call them bonuses call them a reformulated balance of compensation components. Whatever you call it, it still stinks.
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