Citi Walks Away From Severance Deals
The latest casualty of the slippery slope: severance agreements. Citigroup's top brass has decided not to honor them, at least for some senior employees.
Citi has suspended periodic severance payments it had promised to five former top executives, The Wall Street Journal reports, citing unnamed sources. Just two of the five are identified: Michael Klein, former co-head of investment banking, and Kevin Kessinger, head of operations and technology. Both men left the company last year.
More ominous is this statement in the Journal's story: "Company officials also are curtailing bonus and severance payouts, including by barring any senior executives who leave the company after March 31 from receiving most exit payments."
Although public officials reportedly didn't push Citi to halt the payouts, the decision clearly was made with one eye on Washington. The Journal explains the company "wanted to avoid even the possibility of a public backlash over the money," and was mindful of "this spring's ire over American International Group Inc.'s retention bonuses." Citi is contractually obligated to make the payments but is "essentially ...wagering that the former executives will conclude that it would be publicly embarrassing for them to file lawsuits."
Citigroup has received $50 billion in taxpayer aid, and the government soon will own as much as 34 percent of its common stock. With little prospect of repaying that aid in the foreseeable future, it would be interesting to know whether the 300,000-employee company is prepared to live under a de facto hiring freeze that could result from the severance ban. Even in a recession, how many will accept an offer from a deeply troubled employer with the foreknowledge that any severance agreement you get isn't worth the paper it's written on?