The head of the energy trading unit at Citigroup (C) is due as much $100 million in 2009 as part of his deal with the bank. That deal appears to be based on a contract, so it is hard for the financial firm to just walk away.
According to an exclusive report in The Wall Street Journal, making any large payouts, even if they're based on previously agreed contracts, could subject Citigroup to political and investor fallout.
The question about the pay of the trading executive, Andrew J. Hall, pits the government's belief that it can control compensation packages at Citi, because of its 34 percent ownership, against the rule of law which says that Hall is due his compensation.The government runs the risk of creating an environment in which there is a fear that the pay package of any employee of a firm that does business with Washington can be altered at the government's whim.
Eventually, and perhaps soon, the dispute over one of these pay packages will go into the court system. It is nearly impossible to see how a judge would be willing to overturn a binding contract simply because the government is unhappy with it. One court victory by someone like Mr. Hall will cause a rash of suits by employees with firm agreements at companies where Washington is putting on pressure to cut compensation.
Douglas A. McIntyre is an editor at 24/7 Wall St.