Departing Citigroup CEO Vikram Pandit will receive $6.7 million for 2012, according to a company announcement released today.
Pandit famously took a salary of $1 in 2009 and 2010.
In spite of that gracious pledge, Pandit will still have earned $67 million since he joined the company in December 2007. Additionally, Citi purchased Old Lane Partners, the small investment company owned by Pandit, shortly before he took the top position at Citi. Citi paid Pandit $165 million for his share of Old Lane.
Pandit was in line to receive even more but the company decided to not offer him a severance package. As part of that action, Citi did decide to transform forty percent of his 2012 stock options into an immediate cash payment. Normally options are granted with a specific strike price and an expiration date. The strike price’s value is a reflection of the share price of the relevant stock (usually common) at the date of the grant. The value is somewhat of a judgment but most people agree to use a formula created by Myron Scholes, a professor at the University of Chicago and one of the fathers of modern portfolio theory.
History has already decided that Myron Scholes is great. He won the Nobel Prize in Economic Science. Citigroup must think that Pandit is great – the company has decided that Pandit deserves tens of millions of dollars. During his tenure, the value of Citigroup shares declined 88.17 percent. Most of that decline took place during 2008, when Citigroup’s shares dropped 81 percent. In 2008, Pandit was granted compensation with a total value of $38.2 million.
Editor’s note: I didn’t intend to write a banktalk today, given that it is a bank holiday, but corporate largesse knows no vacation.