Although the current economic circumstances seem to make the $100 million compensation package offered by Citigroup (NYSE:C) to its superstar trader Andrew Hall sound outrageous, he in fact had the contract in place before the crisis began, and has added extraordinary value to the company.
Now that contract may become the focus of the battle over ongoing government interference in the market and banking industry by attempting to void it and not allow Hall to receive what has been promised him. He’s rightly ready to fight over the issue, and unless there’s some political and/or legal shenanigans, he will win it, as a contract is a contract, and it’s enforceable by law. It doesn’t matter what anyone else thinks about it, or if the general public agrees as to whether it’s suitable reward for the performance of Hall.
Some are saying it will become a battle between the “pay tsar”, Kenneth Feinberg, appointed by the Obama administration and Citigroup.
All of us know this is a politically motivated issue, and with the overall populace of the United States still seething some over the economic crisis and who is to blame, the banking industry is the obvious place the media is guiding their attention to, and it’s working so far.
As far as the circumstance in general, it would be a complete disaster for Citigroup to lose Hall, as his performance as chief executive at Citi’s Phibro energy trading business has been top notch, and many at the company are looking for the revenue from the unit to help pay back the remaining money owed the taxpayers; that’s how good Hall’s performance and capabilities are.
But worse than that, if the ignorant Kenneth Feinberg and Obama try to go after Hall and Citigroup over this in an attempt to gain some political capital, it’ll end up with lawsuits filed, along with the loss of the leading generator of revenue at Citigroup. How can that in any way help anyone in this circumstance? It can’t, which is why it’s outrageous that it’s going this direction at all.
Commenting on it, a Citigroup spokesman said: “Retaining and attracting the best talent is important to the success of Citi and all its stakeholders. Citi continues to examine ways to ensure its employee-compensation practices are competitive in this very challenging market environment.”
To me, the real question that must be asked is why the American car industry and its overpriced union workers aren’t receiving the rage of the media over their outrageous bailout as well. How about cutting back on their above-market wages in order to make them more competitive with car companies that offer better cars at lower prices?
Either way, maybe the banking industry will think twice before going to bed with the government again.
