Compensation Philosophy

Citi Group Organization is fully committed to all compensation perspectives, such as base salary, benefit, vacation, perquisites, pension, and pay on short-term incentive. This is envisioned in the companys objectives of regulatory guidance, alignment of shareholders interest, and retaining talents.

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Citi Group Company should align compensation with interest of shareholders by compensating executive on an important way to strengthen the relationship between performances and pay with an equal scorecard method. The company should with or without financial objectives ensure that it improves returns to shareholders on the risk adjustment. It should provide an important part of incentive compensation equally, to build ownership of culture and alignment of employees interest and that of the shareholders and all the stakeholders. The company should regulate the required level of ownership of share acquired by the executive official at 75% of net shares. The shares should be acquired in the incentive compensation program that hold substantial amount vested by the Citi Group Company stock. They should do so after a year of termination of their term of service. The compensation philosophy should provide claw backs, if there is an improper risk-taking and adverse results in materials in the years succeeding awarding incentive compensation. Incentive compensation size should reflect the performance of the organization, industry, and the environmental factors on maintaining its capital level.

Citi Group Organization should manage risk by developing and enforcing controls to reduce incentives, and to create imprudent risks to the organization; thus, rewarding thoughtful balance on return and risk. It should ensure that it observes the framework designed by exercising discretion within it in making appropriate trade-offs in return and risk. The organization should clearly communicate to its employees on the practices, which contribute to poor management of risk and imprudent risk-taking that leads to adverse impact on compensation of incentives. The compensation philosophy should set the management expectations regarding balancing risk, when engaging into incentive compensation programs, and involve appropriate and independent advisers to help the committee. Citi Group committees should only be appointed from the independent directors to provide fair review and approve overall organizations compensation philosophy. Its functions should involve controlling risks, such as independent risk, internal audit, compliance, compensating governance, and oversight.

Citi Group Company is a formal form of organization, whereby it has external factors, which are beyond its control, but affect its activities. These factors are political, socio-cultural, ecological, economical, technological, and legal. Organizations internal environment consists of the factors, which are within the companys control and influence the companys activities. These consist of human resources, financial resources, structures, technology, and processes. The companys environment is dynamic and it always changes. For the company to survive and succeed, it should ensure that it matches its activities to the external environment, since it is uncontrollable. Citi Groups mission is to be the favorite financial institution in each neighborhood, where it operates (Baker, 2006). This is accomplished by serving various financial dealers and providing financial services at considerable rates.

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This mission describes target market, which includes businessmen and micro-financial institutions. It states clearly the way it wishes to be the best in providing excellent customer service with knowledgeable and friendly clients. The companys strategy is its game plan to survive in a changing environment. This means keeping on changing due to shifts in the environment; thus, being not static. The company becomes effective and successful, when it appropriately responds to the changing environment, meaning it has strategic responses. These are actions an organization should align itself to the environment it operates in. Financial factors determine the operating levels of the organization, and also the financial position of that organization, if it can access financial facilities from the financial institutions lending funds. First, the organizational culture is influenced indirectly by the macro-environment of the company. Secondly, the direct factors that influence culture are micro-environmental factors. Lastly, leaders impact factors also play their role; these are primary and secondary methods and mechanisms of change of organizational culture (Fairfield, James, 2001).

Citi Group compensation philosophy develops and enforces controls that enable the company to manage risk in order to lower incentive, to invent imprudent risk for the company and its main functions, and to reward thoughtfully balance of return and risk. The companys compensation philosophy sets its regulation for one to be an executive official of the company to have 75% ownership of net shares. Executive official should acquire shares on incentive compensation programs. According to Avner & Louis (1999), compensation philosophy provides an important part of incentive compensation, which enables it to build its own culture and alignment of employees interest and that of stakeholders. An important framework for compensation of the executive in order to tighten the link on the pay and performance through balanced scorecard is well-elaborated by Citi Group. This boosts the understanding of compensation program incentive design and implementation through detailing compensation policies, and public disclosure practices and procedures.

The companys incentive compensation program is designed in recognition that global regulation of financial institutions incentive compensation evolves and companys programs must respond to the new trends and best practices (Armstrong, 2001). This compensation philosophy provides competitive compensation programs within global fund services in order to attract good talents to enable them to discharge the companys strategy successfully. Employees in this company are compensated based on their contribution, risk adjusted performance, and ability demonstrated over time. The compensation philosophy provides for compensation discretionary incentives plus equity rewards variable within prescribed guidelines by the committee and management using the main objective framework for asset goals and evaluation of performance for all well-paid professionals. It differentiates compensation to individuals reflecting employees prospective and current contribution based on financial and non-financial results, such as return and risk (Freeman, 2005). The Citi Group Company communicates clearly and consistently the companys compensation approach throughout the year and elaborating broadly the key values through a companys code of conduct, structure of management, and actions of management in general.

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