Citigroup's New Bonus Structure: What Happened To "Greed Is Good"

Citigroup (C) has decided to change its bonus structure so that senior management will be paid on the results of the entire bank instead of the success of their individual operations. It will lump the "all stars" in with the mediocre and cause the kind of executive revolt that Citi can ill afford.

According to the FT, the big money center bank "is planning to overhaul its bonus system for hundreds of top managers in an effort to increase co-operation and minimise in-fighting among the disparate parts of the sprawling financial services conglomerate."

The program will undermine the key element to what makes Wall St. a great money machine. Groups of bankers who do well contribute huge sums to their firm’s earnings. They make tens of millions of dollars for doing so, but it is capitalism at its best, a systems which fosters short-sightedness and back-stabbing. But, the system makes money.

The argument against the current pay-for -performance programs is that they cause trouble like the mortgage-backed paper catastrophe. But, that collapse was systemic. Every banker on Wall St thought the investments were golden. Even it they were sharing bonuses with IT department at their firms they would not have seen the carnage coming.

On occasion, the current compensation structure fails to produce results, but likely over the history of the money community it has made a lot of people rich and their employers along with that.

Douglas A. McIntyre