Remuneration Report 2011/2012

Transcription

1 Remuneration Report 2011/2012 (Disclosure pursuant to 7 Instituts-Vergütungsverordnung) 1. General The disclosure covers the following Citigroup entities: Citigroup Global Markets Deutschland AG including the London Branch; Citibank N.A. in New York, Frankfurt Branch, Citigroup Global Markets Finance Corporation & Co. beschränkt haftende KG. In the following, the term "Citi" or "Company" refers to each of these entities unless otherwise specified. The remuneration disclosure sets out Citi's general principles which apply to all remuneration systems. Details of specific remuneration systems are set forth in the relevant plan terms and conditions as in force from time to time. Citi has implemented remuneration policies to secure compliance with relevant statutory and regulatory framework, in particular the requirements under Stock Corporation Law as amended by the Act on Adequateness of Board Remuneration (Gesetz zur Angemessenheit der Vorstandsvergütung) and the Regulation on Regulatory Requirements for the Compensation in Financial Institutions (Instituts- Vergütungsverordnung). It adheres to the implementation standards set forth in the FSB Principles for Sound Compensation Practices. 2. Citi's General Remuneration Principles Citi adheres to the following general remuneration principles: a) The structure of Citi's remuneration systems must be in line with the objectives set out in the Company s strategic and risk policies (Geschäftsund Risikostrategie im Sinne des KWG). In case of any amendments or changes to such strategic and risk policies, the remuneration systems will be adjusted accordingly. b) The remuneration systems must contribute to the Company staying within its risk tolerance level and avoid excessive risk taking and shall be designed to ensure an effective risk management by risk controlling units, compliance and internal audit. c) Fixed and variable compensation elements must be adequately balanced in

2 order to avoid that employees significantly depend on variable compensation but are effectively incentivized. Guaranteed severance payments, golden parachutes and similar arrangements which are not performance based are generally not admissible. An exception may only apply in connection with the commencement of service of an employee and must be limited to a maximum of one year. d) The variable compensation of business employees and employees in the relevant controlling units should be based on materially differing targets and objectives in order to avoid conflicts of interest. e) The remuneration systems shall be designed in such a way to effectively attract and incentivize directors and employees and to ensure Citi's competitiveness on the human resources market for the banking industry. To this effect, Citi will take into account adequate benchmarks. f) Variable remuneration elements shall in principle be granted only as discretionary special payments for the relevant business year. g) All employees will be asked to enter into an undertaking not to use hedging strategies or other countermeasures to undermine the risk alignment of their remuneration. h) Variable remuneration elements must be granted subject to changes of the statutory or regulatory requirements and must reflect any statutory or regulatory rights to interfere (in particular a right of the Federal Financial Supervisory Authority to prohibit or restrict payments pursuant to Section 45 par. 1 no. 4 of the German Banking Act). i) Citi's remuneration system for employees must be reviewed for its adequateness and amended, if required, at least on an annual basis. 3. General Structure of Citi's Remuneration Systems: The P&C Committee (Personnel and Compensation Committee) in New York regularly reviews the design and structure of Citi s remuneration systems to ensure that the employees' (including senior management) interests are aligned with stockholders interests and that the compensation programs are aligned with Citi s strategic priorities and market developments, including Citi s approach to risk. Central to the process that the P&C Committee uses for determining executive reward are performance evaluations that are based on a review of the performance 2

3 of each individual against scorecards/criteria that typically include: a) Citi s and the relevant business s financial performance b) Business practices of the business for which the individual was responsible, including the overall control ratings that take account of risk and compliance aspects c) Talent development, including development of diverse talent and improvements in objective surveys on employee-focused matters d) Delivery against agreed goals and/or execution on Citi s strategic plan, including Citi s approach to risk. Each of the factors comprising the performance results is considered in determining the nominal amount of reward recommendations. Generally, awards are discretionary and formulaic approaches are not used to weight factors, consistent with the P&C Committee s and Citi s belief that the adoption of any given formula could inadvertently encourage undesirable behaviour. Financial and non-financial criteria are typically included in any scorecard/appraisal and, in any given year, one criteria or another may be seen as of particular importance for that year, but all remain important (e.g. good financial results combined with poor controls or the significant loss of highly talented employees would not result in a positive scorecard) and judgment is used in considering the various factors to determine compensation recommendations. This non-formulaic approach may lead to significant differences in the compensation paid to individuals, as in making individuals awards, Citi will take into account the competitive marketplace for individuals with widely differing job responsibilities at Citi, the size of the business for which they are responsible, retention due to demand for exceptional skills in the marketplace, and their expected contribution to the future success of Citi. Employees will typically participate in an annual objective setting discussion with their line management, with performance and objectives reviewed during the year, followed by an annual performance appraisal towards the end of the year. In accordance with Citi s compensation principles, individual rewards reflect, among other things, an individual s performance and their contribution. Consistent with Citi s long-standing pattern of rewarding performance, it is material that employees understand the positive correlation between performance and rewards. 3

4 4. Specific Remuneration Principles for Management Board Members German law establishes additional specific requirements for the remuneration of board members. The supervisory board of Citigroup Global Markets Deutschland AG has established remuneration principles to ensure strict compliance with these requirements. 5. Further Detail on Citi's Remuneration Systems Citi will typically include the following or similar financial and non-financial criteria and evaluation factors in any scorecard/appraisal: a) Individual Success Contribution qualification, evaluation factors, client satisfaction, complexity of business towards Citi (German; EMEA), observance of internal guidelines and policies, specific scorecards within banking. b) Achievement of German business results measurement German franchise EMEA budget figures-cgmd Legal Entity View measured on a longterm view (taking into account risks and capital costs). c) Global Client Revenues -German s customer impact within EMEA regional Citi franchise. d) Continuity of business impact long term product stability in the German market e) Rules of the Road (Financials as per Management books) f) Attribution to corporate governance. 6. Current Remuneration Elements at Citi Subject to the general principles as set forth in this German Remuneration Policy, Citi's remuneration systems currently comprise the following specific elements: a) Fix Pay will cover day to day living expenses. b) Cash Bonus presently paid in cash in one lump sum c) Citigroup Inc. CAP Plan 4

5 The Capital Accumulation Program (CAP) is a global deferred equity plan whereby 25% - 60% of the variable payments are paid in stocks of Citigroup Inc., which are deferred over a period of 4 years and vest during the deferral period in equal instalments. For 2011/2012 compensation paid under the CAP Plan a "malus rule" which reflects individual negative performance contributions of the management board members, their organizational unit as well as a negative overall performance of the institution has been implemented. d) Citigroup Inc. Stock Option Plan There was no option plan setup for the remuneration process 2011/2012. e) Specific Compensation Elements for Employees based in London classified as Code Staff Employees of the London Branch of Citigroup Global Markets Deutschland AG who are based in London may be entitled to any of the following deferred compensation awards: (i) Deferred Variable Remuneration 30%-50% of the total variable compensation are paid in form of deferred equity under the CAP Plan over a deferral period of 3 years. Awards vest annually on a pro rata basis and are subject to an additional 6 months' retention period on each vested tranche % of the total variable compensation are paid in form of deferred cash which will vest rateably over 3 years and is subject to performance based vesting. The deferred cash will earn a fixed return when pre-tax profits are positive but will lose value when pretax profits are negative. (ii) Immediate Variable Remuneration 20%-30% of the total variable compensation are paid in form of a cash bonus (immediate cash). 5

6 20%-30% of the total variable compensation are paid in form of shares of Citigroup Inc. or share linked instruments. Awards will vest immediately on the award date and are subject to a 6 months' retention period. f) Specific Compensation Elements for Employees classified as Covered Employees as per US remuneration rules Following Citi s global compensation policies certain employees of Citigroup Global Markets Deutschland AG may be classified as Covered Employees. For those employees the remuneration structure as per Citi s global compensation policies will apply. (i) Deferred Variable Remuneration 20-30% of the total variable compensation are paid in form of deferred equity under the CAP Plan over a deferral period of 4 years. Awards vest annually on a pro rata basis % of the total variable compensation are paid in form of deferred cash which will vest rateably over 4 years subject to performance based vesting. (ii) Immediate Variable Remuneration 40%-60% of the total variable compensation are paid in form of a cash bonus (immediate cash). 7. Regional Remuneration Committee In accordance with German stock corporation law, the management board (Vorstand) of Citigroup Global Markets Deutschland AG ("Management Board") is competent and responsible for the remuneration of the employees of the Company while the supervisory board (Aufsichtsrat) of Citigroup Global Markets Deutschland AG ("Supervisory Board") is competent and responsible for the remuneration of the members of the Management Board. Within this legal framework, Citi has installed a Regional Remuneration Committee ("RRC") which supports and advises the Supervisory Board and the Management Board in all matters related to the compensation system. The 6

7 Regional Remuneration Committee evaluates, in coordination with regional senior business managers, the overall bonus set of the Management Board on a name by name and an overall base. If further evaluates proposed special remuneration elements and the adequateness and competitiveness of Citi's remuneration systems compared to competitors and the overall banking market. The RRC is established within the UK and headed by the Chairman of the German Supervisory Board. Its participants currently are: John Harker HR ownership of German Management Board Michael Corbat Nikolaus Naerger Brad Gans Hans Reich compensation numbers CEO EMEA ownership of the EMEA bank focus CCO Germany German Supervisory Board member Chairman of the German Supervisory Board 8. Supervisory Board Approvals The German Supervisory Board will inter alia specifically monitor and approve the following aspects with respect to Citi's remuneration systems: a) Overall compensation set up for the German Management Board and the German senior management. b) Adequate business set up and consideration of Citi s risk strategy and risk profile. c) Adequate use of performance related instruments within the remuneration systems to sustain yield of product/business (e.g. malus and claw-back clauses). 7

8 9. Disclosure 1 Business Total Compensation in EUR 000's Fix Payments in EUR 000's Variable Payments in EUR 000's Number of Beneficiaries of Variable Payments GLOBAL MARKETS 27,535 13,866 13, GLOBAL BANKING 18,267 9,025 9, GTS 5,437 4, GLOBAL OPERATIONS / TECHNOLOGY 13,880 13, GLOBAL COMPLIANCE / CONTROL / RISK 1,202 1, FINANCE 1,827 1, OTHER 2,823 2, TOTALS 70,971 45,856 25, * * * * * 1 Remuneration disclosure relates to the calendar year FK