WASHINGTON — 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.
The Obama administration reacted by pledging to aggressively implement a new law governing compensation at companies like Citigroup that have received billions of dollars in taxpayer-funded bailout support.
Administration officials, however, refused to say whether Citigroup had informed the government in advance of its decision to restructure salary levels.
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.
The higher salaries at Citigroup are not the equivalent of annual raises because bonuses are being lowered, according to a person familiar with the matter who requested anonymity because the plans have not been made public, who also said the changes would not affect the amount of an employee's compensation.
New York-based Citi said Wednesday that it's examining "ways to ensure its employee compensation practices are competitive in this very challenging market environment."
By shifting the mix in compensation packages, the change could allow Citi to pay most employees as much as they received in 2008 while adhering to bonus caps. The person said the employees included traders, who tend to be compensated more heavily with bonuses, and middle- and lower-level managers whose compensation is more heavily weighted toward salaries.
Before the financial crisis, top traders and investment bankers typically earned $125,000 to $250,000 in annual base salary and $1 million to $5 million in bonuses, said Alan Johnson, managing director of compensation consulting firm Johnson Associates.
A New York Times report Wednesday said some employees' salaries will rise as much as 50 percent because of the change in compensation structure.
The administration said its point person on the issue, Kenneth Feinberg, had begun the process of reviewing compensation at the seven firms receiving the most assistance from the $700 billion bailout fund Congress passed in October.
"Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives," the statement said.
Feinberg, a lawyer, was selected by the administration to be its "special master" to oversee compensation packages awarded to the seven companies, including Citigroup. He can reject pay plans he deems excessive and review compensation for the firms' top 100 salaried employees.
The 100 highest-paid employees at Citi will not be part of the bank's revised compensation program because of the government's additional review over that group's pay.
Sen. Christopher Dodd, D-Conn., a critic of financial firms' compensation practices, said the salary decision showed Citi executives "just don't get it" at a time when the country is mired in a deep recession with rising layoffs. He called Citi's compensation changes "pay hikes."