Citibank lays groundwork for bigger executive pay

Have your job benefits been cut?  Are you working more for less? Perhaps you’ve been laid-off? You fool, go get a job at Citibank:

After all those losses and bailouts, rank-and-file employees of Citigroup are getting some good news: their salaries are going up. The troubled banking giant, which to many symbolizes the troubles in the nation’s financial industry, intends to raise workers’ base salaries by as much as 50 percent this year to offset smaller annual bonuses, according to people with direct knowledge of the plan.

(New York Times)

Get this straight: unemployment is over 9% nationally and rising but Citibank, recipient of two taxpayer bailouts, says it need to raise salaries to be competitive. Your first reaction – like mine was – may be outrage. After all, you’re probably working just to keep the pile of bills from getting much higher. But then, if you think about it, how can you really be upset that another average Joe or Jane is getting a raise? We should be so lucky, right?

Maybe if that were true, we’d let it slide. But it’s not. Something bigger is going on here than the bank needing to be competitive for the masses of clerks and tellers out here. I bet Citi’s goal here is to lay the groundwork to make sure the top executives can get more money later on. It is the only explanation that makes sense right now.Why do I think that? Two facts:
Citigroup laid off 73,000 people in 2008.
The major Wall Street firms shed at least 160,000 jobs last year among them, likely much more (comprehensive data for layoffs the last third of the year is hard to pin down immediately).

All of those folks didn’t get scooped up by mutual funds or hedge funds or another investment bank – those places all had bad years too, and haven’t been adding payroll. Competing banks that were largely unscathed from the derivatives turmoil – like banks based out of Canada, Spain and China – don’t lavish as much money on employees as Wall Street and, in fact, now feel justified in not being as generous to staffers.

So consider how many of Citi’s 300,000 employees you really think feel so secure they aren’t worried about getting laid off and actually need a raise or they will bolt for the door? Very few, I bet.

I think Citi is boosting some salaries of some mid- to high-level people to lay the groundwork for even greater boosts of pay  poackages to top traders and executives, the kind of folks who will fall under the purview of ‘Compensation Czar’ Kenneth Feinberg.

Under Feinberg’s powers, he has a say over the compensation of each bailout-receiving bank’s 100 highest paid employees. We already know Feinberg is a big fan of using compensation mutiples to determine how much someone is worth from his controversial stint as 9/11 victim compensation chief.

Citi’s top dogs know this too. So when the top 100 executives want to justify their new, larger pay packages to Feinberg they can point to the higher salaries they have to pay the second and third tier employees ‘for competitive reasons’ and make a case for further boosting their own compensation.

If so-and-so if worth $2.5 million a year, aren’t I, a Managing Director, worth 14 times that?

And Feinberg, looking at the numbers and the fact Ctiti ‘had’ to boost salaries will likely say

Yes, you are.