Citigroup's bonus headache
How to deal with the $100 million man.
That's the question that Citigroup (C) and the government continue to wrestle with. Andrew Hall is the hotshot energy trader at Citigroup in line for a $100 million bonus. Under normal circumstances, Citigroup would gladly hand over the bonus and thank Hall for bringing in enormous amounts of money.
But these are not normal circumstances. Citigroup has received $45 billion in bailout money and will soon be 34% owned by the government. A government which, by the way, promised to crack down on excessive Wall Street bonuses.
Hall has become the central figure in the growing conflict over bonuses between Washington and Wall Street. He's a very sharp cookie, and as such is demanding that Citigroup get its ducks in a row and commit to paying him the $100 million bonus that he's due this year.
Citigroup is in an extremely uncomfortable position. It promised Hall the money, and he may leave if he doesn't get it. But Citigroup is not the same company it was back when it made that promise. So now, the bank is scrambling.
One option it's pursuing is selling the Phibro commodities business that Hall heads. That would be a quick way out of this mess. But who would buy it? Citigroup even asked Warren Buffett, reports The New York Times, but Buffett wasn't exactly thrilled about the purchase.
Citigroup is also thinking about asking Phibro employees to work without contracts in return for a percentage of the profits. But this idea probably got laughed out the door at the Connecticut dairy farm site that Phibro calls home.
So now, out of sheer desperation, Citigroup may ask Hall to accept his bonus in stock instead of cash, Bloomberg reports. Considering that Citigroup's shares have plunged 76% in the last year to the $4 range, I'd say Hall's answer will fall somewhere between "No way" and "My lawyers will ruin you."
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The solid report comes a month after the retailer closed all of its Canadian operations.
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