Wednesday, September 06, 2006

Citigroup and restricted stock dividend payments to executives

The August 25, 2006 Wall Street Journal reported in the article "Citigroup Payouts to Chiefs Irk Holders" that the top executives received dividend payments on restricted stock from the moment they are awarded. This is DESPITE the fact that they do not actually gain control of the stock until years down the line.

Wow, how is this not illegal? The individual doesn't actually own the stock until years down the road yet they can receive dividends on it ahead of time. One measure of fairness in the system would be to determine if the opportunities given to one shareholder translate equally to another. See, someday, say in 10 years, I too plan to own citibank shares. So, shouldn't I too be able to receive dividends on those shares? Perhaps I'll send a note and ask for my dividends on this stock which I intend to own in the future.

Shame on you for accepting the payments, Mr. Prince. And shame on the Citibank board for permitting this shenanigan. If you want to pay him, cut him a check. Don't muddy the waters like this, calling it a 'dividend' on stock he doesn't even have control of.

From the article, "is slated to pay Mr. Prince $1.4 million this year on unvested restricted and deferred stock he held through February of this year, including his most recent restricted stock grant from the company." This is on top of $13 million in salary and bonuses plus $9.7 million in restricted stock awards.

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