Citigroup gives pay hikes to top execs in stock

NEW YORK: Citigroup, still partly owned by the government after a rescue during the financial meltdown, is giving raises to top executives that could amount to millions of dollars. CEO Vikram Pandit, who is drawing a salary of $1 for the second year in a row, did not get a raise, but the chairman of the bank hinted it plans a big payout for him next year. The announcement Friday by Citi, which remains weaker than most of the large American banks two years after the meltdown, raised questions among experts on corporate governance. By paying the raises in company stock, not cash, Citi has decided to follow previously issued guidelines that limited salaries to $500,000 for the top 25 executives at financial institutions still receiving large amounts of federal help. "The question is do they deserve higher salaries, and are they evading rules to avoid losing talent?" asked Charles Elson, director of the Weinberg Center for corporate governance at the University of Delaware. Citi is fighting to keep talented bankers from jumping ship to any of its rivals on Wall Street, all of whom have repaid their federal bailout money and are not under the same kind of compensation restrictions. Edward Skyler, a spokesman for the bank, said the compensation levels "correspond with similarly situated executives in the industry." Citi was the hardest-hit US bank during the credit crisis of 2008, and received $45 billion in government bailout money under the Troubled Asset Relief Program, part of which was converted to stock last year. The government is gradually selling its stake and still owns about 17 per cent of the bank. Though Citi has posted profits recently, Citi continues to be weighed down by large amounts of bad loans and investments it made in the run-up to the crisis. Pandit, who pledged last year to take a $1 salary until the bank returned to profitability, elected to keep that figure for this year, but he seems set for a big payday in 2011. Citi's chairman, Richard Parsons, said in a statement that beginning next year the bank's board "intends to compensate Vikram commensurate with the job of CEO of Citi." Rolfe Kopelan, a managing partner at search firm Capstone Partnership and an expert on corporate compensation, said $1 still seems appropriate for Pandit. "It's not ridiculous when you're living on public funds, and when you're one of the major causes of the recession," Kopelan said. The biggest raise disclosed in Citi's regulatory filing will go to John Havens, head of the bank's institutional clients group. He will get a cash salary of $500,000 this year, the maximum under the cap, and $9 million of salary paid in stock. That compares with a salary of $975,000 last year for Havens, also in a blend of cash and stock. Including other awards of stock and options last year, Havens' total compensation last year came to $11.2 million. Citibank did not disclose how much Havens might be awarded in other stock grants, but he could be eligible for a bonus this year of up to 50 per cent of his salary, or $4.75 million. Manuel Medina-Mora, head of consumer banking for the Americas, will also get a cash salary of $500,000 and $7.45 million of salary in stock, making him eligible for a bonus of up to $4 million. Last year, Medina-Mora's base salary was $972,000, and his total compensation including other awards of stock and options was $9.8 million. Chief Financial Officer John Gerspach's salary will be $500,000 in cash and $4.17 million in stock, making him eligible for a bonus of up to $2.3 million. Last year, his cash and stock salary was $3.3 million, and his total compensation including other stock awards was $5 million. Under an amendment to the bank bailout law of 2008, Citi is still subject to the compensation restrictions as long as the government remains a shareholder. That means the top 25 executives cannot receive bonuses exceeding 50 per cent of their salaries. In deciding to give their salary raises in stock, Citi chose to abide by a previous rule that governed the bailout, under which top executives could not receive more than $500,000 of their salary in cash. The Associated Press' calculation for executive pay aims to isolate the value the company's board placed on the CEO's total compensation package. The figure includes salary, bonus, incentives, perks and the estimated value of stock options and awards. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list with federal regulators.

PepsiCo CEO Indra Nooyi sees great growth, hurdles for India

NEW YORK: PepsiCo Inc Chairman and Chief Executive Indra Nooyi has a clear message for her homeland of India -- improve your infrastructure, work force and sanitation, attract more foreign investment, and develop faster. At a panel discussion on Tuesday evening hosted by the Yale-India Initiative, Nooyi said it was tough for her to talk about India, since she has "one foot there and one foot here." She called India a "must-invest" market, citing its demographics, ample work force and pace of innovation. "We see a growth market for the next 50 years at least, which is not the case in many of the other markets we participate in," said Nooyi, the highest-ranking Indian-born woman in corporate America. "We are in India for the long haul." Still, Nooyi said she wanted to talk about India constructively in terms of what can be done better, "so you can attract more investment and India itself can develop faster." The biggest obstacle is infrastructure, she said. "If I use the word 'appalling,' that would be a bit of an understatement," said Nooyi, who hails from the southern city of Chennai. "When we talk about reaching every nook and corner of India we need an infrastructure. ... We need power 24 hours a day in every part of the country. We need water." "I'm not saying developments haven't been made, but it's not as fast as it needs to be," added Nooyi, who has a reputation for being a demanding manager. The next two obstacles are a work force that largely lacks the proper skills and a poor level of health and hygiene, she said. "We think that if you improve education you can improve the hygiene standards in India and you can reduce the incidence of disease," said Nooyi. "And the economy itself will become much more healthy going forward." In 1989 PepsiCo established its business in India, where it now has more than 36 bottling plants including 13 owned by the company and 23 that are franchise-owned. In the latest quarter, its beverage sales volume rose at a double-digit rate. US ECONOMY STILL DELICATE Nooyi, who played in an all-girl rock band in her youth and now enjoys ballroom dancing, came to the United States to attend Yale School of Management. She graduated in 1980. Now a U.S. citizen, she has worked for PepsiCo since 1994. She was named to the top job in October 2006. Nooyi, who turns 55 in October, told Reuters that she is completely focused on making PepsiCo "the defining corporation of the 21st century." But further out, she sees a possibility of public service.

Optimising growth to benefit the poor

The decision to withhold forest clearance to a mining project in the tribal area of Orissa is a turning point in the evolving national consensus around sustainable development, because it focuses attention on a neglected dimension of sustainability - the social dimension, or impact on the poor. It is timely, because we will be making increasing demands on natural resources as we consume vast quantities of steel, cement, aluminium, chemicals and fertilisers needed for infrastructure, urbanisation and food security essential for the eradication of poverty. Almost all the mining will take place in the tribal areas. As the finance minister pointed out to the Standing Committee leaping the 'double-digit growth barrier' and, ensuring that the growth is tempered with inclusiveness , equity and concern for the aam admi can be met only through sustained investment in infrastructure. We plan to invest. 4.1 trillion ($880 billion) in the period 2012-17, in the XII Plan, as compared with $541 billion in the current Plan. It has yet to be recognised that the stress on infrastructure, and related mining, because of the vast areas covered, requires a corresponding shift from focus on the exploitation of natural resources (the economic-environmental dimension) to the role, allocation and valuation of ecosystem services provided by these natural resources (the social dimension). Currently, the different 'environmental' clearances consider only a part of the problem, and the interests of the tribal's are invariably neglected. For example, environmental impact assessment essentially considers the technology used and environmental damage by the pollution caused directly on air, water and soil, ignoring the changes in ecosystem services that result and the consequential economic and welfare impacts on the local population. The Forest Rights Act provides detailed procedures, and safeguards, only in cases where the rights of tribals are affected in critical wildlife habitats of national parks and sanctuaries, and these provisions need to be extended to diversion of forest lands for development of infrastructure projects. A new poverty index, recently developed by the United Nations, stresses the role of services such as electricity, water and sanitation in the eradication of poverty. It shows that the numbers of poor is more than economic indicators indicate, and has important implications for defining the resettlement or alternatives package in terms of not only compensation for land, and establishment of schools and hospitals but also access to modern services. The Forest Rights Act's definition of 'community forest resource' recognises that reserve forests were created out of the traditional , or customary, boundary of villages, over which all the local inhabitants had 'unlimited' rights. Therefore, there is no need to determine the nature and extent of these historical rights based on the restrictive approach taken by colonial administrators in recording such rights. We also know that markets fail to capture most ecosystem service values. Existing price signals only reflect - at best - the share of total value that relates to provisioning services like food, fuel or water and their prices may be distorted. Even these services, where carried out as part of community management of shared resources, often bypass markets. The values of other ecosystem services are generally not reflected in markets apart from a few exceptions, such as tourism. This is mainly explained by the fact that many ecosystem services are considered 'public goods' or 'common goods' : they are often open access in character, but are really a community resource, and have now been recognised as such in the tribal areas, under the Forest Rights Act.

Inflation could be a spoiler for Indian markets: Vasu Menon, OCBC Bank

In an interview with ET Now, Vasu Menon, VP-Wealth Management, OCBC Bank, spoke on the Indian markets and equities. Excerpts: Do you think the gains for Indian markets have been too soon and too fast? Clearly the Indian market has done exceptionally well this year. The index is up almost 14% in local currency terms, and in US dollar terms it is almost up 16%. There has been a huge surge of foreign fund inflows in the Indian equities. You have had about close to $15 billion flowing into Indian equities, that is about 60% more than what you had last year. Clearly the story is good. The Indian growth story is good. The Indian economy is growing at 8.8%, corporate governance is strong in India, you have the monsoon, you have strong domestic demand. So the story is strong. Relative to China, India looks like it’s doing fairly well on the economic front. So yes at this juncture at 20000, it looks like it is going to hit a bit of resistance. If you look at the PE multiples for the Indian stock market, 2010 earnings are trading at probably about 19 times and 2011 earnings are probably trading at about 16 to 17 times. That is relatively high compared to the MSCI Asia ex-Japan index which is probably trading at about 13.5 for 2010 and about close to 11.5 for 2011. So India is trading at a premium. Probably you could see a little bit of pullback, but the long-term picture is still very positive for India. So from the short to medium term, what are the investment themes and sectors that you are betting on when it comes to Indian equities? I do not cover Indian equities. But I think if you look at India, clearly one area that is still lacking is infrastructure. Compared to China I think India still has a lot of room for infrastructure spending. The government will clearly have to commit quite a bit of resources in that area and I think that is going to augur well for infrastructure-related stocks in India. The other area which looks pretty good is the consumer related sector because India has got an affluent population, a young population. The economy is booming, and affluence is growing. The consumer sector is booming and anybody who invests in the Indian stock market, cannot ignore those key sectors.

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Symtoms of Global Crash

The economic crisis problems revealed are symptoms, and the remedies proposed address symptoms

Many experts are discussing and writing about the problems causing the financial and economic crisis and recession. They discuss problems in managing “asset value”, in managing complex financial securities, in preventing large sudden financial losses, in confusing interrelationships between institutions, in understanding the real financial situation or credit worthiness of a bank or other enterprise, in the need for some sort of regulation, and on and on. None of the problems discussed are the real problem. They are symptoms of one real problem. Remedies discussed are not directed at solving any real problem. Remedies address the symptoms to prevent failures and to keep the business and financial system functioning, in spite of the fundamental unsolved problem.

The symptoms are complex and confusing and do not indicate any solution

The symptoms of the problem are difficult to understand. Since they are symptoms, it is difficult to find real solutions. Symptoms cannot be solved; symptoms can only be alleviated. Money spent to bail-out companies, to provide capital or loans for continued operations, or to provide insurance or guarantees only enable continuance of unsolved problems. Mergers and takeovers do not solve problems, but either damage a healthy enterprise or make a strong enterprise stronger. In analyzing all the symptoms there is no obvious course of action for government intervention, enterprise reorganizations, new best business management practices, new financial structures, or other possible measures.

The common answer is more regulation to reduce the impact of problems

Over the years, there have been recessions, financial crises, business failures, and corporate governance scandals that indicate business, financial, and economic management problems. The underlying problem has never been identified or solved. Governments respond with the tools they have in monetary and interest rate policy, spending to alleviate symptoms and stimulate the economy, and more regulation and compliance reporting, which only adds to overheads and at best identifies recurring symptoms. Symptoms continue to recur because no effort is ever made to identify and solve the fundamental underlying problem.

The business symptoms of the fundamental problem are well-known and affect every enterprise

The business symptoms of the fundamental problem are well-known. Thousands of business management books have been written and thousands of “solutions” have been implemented. The books and “solutions” address the symptoms and not the real problem. Since the fundamental problem has never been solved, the symptoms remain today in reorganizations, unknown costs, unknown “asset value”, intangible assets, unknown investment returns, unknown capital solution worth, unknown business net worth, unmanaged value and quality chains, unmanaged performance effectiveness, unmanaged human capital worth, incomplete and inaccurate accounts and financial reporting, accounting complications added by each crisis, faulty financial and risk models, unknown business data and unreported business management information, business and information complexity, business alignment, business collaboration and integration, data reconciliation and information management, excessive waste and costs, and on and on. These symptoms are the unsolvable problems of 20^th century management addressed in four hundred articles at the Business Change Forum.

The one fundamental problem causing the symptoms is straight forward; the failure to manage the business

All the symptoms of the economic crisis and all the symptoms encountered by every bank, financial institution, corporation, association, government agency, or other enterprise are caused by only one fundamental problem. The business is not organized and managed.

The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. The failure to organize and manage the business is the one fundamental problem addressed at the Business Change Forum. Every symptom of the economic crisis and recession and every symptom of problems within an enterprise are caused by this one fundamental problem.

The fundamental problem must be solved first to provide the structure for new practices, solutions, and regulations

The response to the economic crisis is straight forward once we understand the fundamental unsolved problem, which must be solved first. The objective must be to organize and manage the business of every enterprise to eliminate structures laid over every business that distort information, prevent actual business data capture, mislead management and regulators, and prevent direct business management.

The organized and managed business has one current and strategic business structure that is used for all business organization, planning, directing, control, reporting, and governance. Actual business data is captured against the structure and actual business management information is reported by the structure. The one business structure is the foundation for a new set of best business management practices; new professional principles and standards, compatible structures for markets, industries, and economies; new services and solutions that can be used by any business; new structures for business consolidation, collaboration, and integration, and new government policies and regulations to oversee managed businesses.

The knowledge to organize and manage the actual business is available today as Result-performance Management (R-pM). The guidance and procedures needed are provided today in the Business Management Toolkit. Business management is explained and the Business Management Toolkit is available today at result-performance-management.com.

A Government Business Management Program can solve the problem, eliminate symptoms, and provide future stability

Once the fundamental problem is understood, the solution is manageable. A solution should take the form of a government-led Business Management Program within a nation or across cooperating nations. The program must produce results in business management support for local enterprises; new business services and solutions required for business management; new professional principles and standards; coordinated government programs; a new structure for business, financial, industry, market, and economic management; and appropriate government business assistance, policies, regulations, and reporting requirements.

The program eliminates the business, financial, and economic symptoms, provides significant competitive advantages to local businesses, spurs economic growth, enables management of industries like the financial or automotive industry, enables management of market supply and demand, and enables management of business and economic cycles to provide on-going stability. The cost of the program is insignificant compared to the potential costs of bailouts and lost government revenues due to the downturn.

The Solution to the Economic Crisis is explained in free downloads

Three free white papers explain the dead-end 20^th century management problems that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building an structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.

• How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20^th century management problems and the 21^st century business management solution
• The Only Solution to the Economic Crisis; Manage the Business explains how to manage the business to capture actual business data and provide management the information needed for actual business, corporation, industry, and economic management
• A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management and manage economic cycles to prevent future crisis

These three white paper downloads are available free to R-pM Community Members atResult-performance Management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and password. Your email address is protected and used only for download problems and occasional R-pM Member news and white papers.