Can Citigroup (C) Renege On $100 Million Pay Package?

According to The Wall Street Journal, the head of the Citigroup (C) energy trading unit has a contract that could bring him as much as $100 million in compensation this year. The government’s new “pay czar” may have something to say about that because of the 34% interest that taxpayers hold in the big bank.

The issue over the pay package of Andrew J. Hall raises the question of whether the government has the right –under any circumstance — to interfere with a binding legal agreement even if it will cause Congressional and public outrage. The answer should be that it is none of the government’s business. A deal is a deal no matter how heinous it may seem in the current environment of austerity and the reluctance of management and the Administration to richly compensate employees at the firms that nearly bought the world’s financial system to its knees.

Once the government begins to alter pay contracts at one company in which is has ownership or with which it does business, it moves onto a slippery slope that will end up putting it these disputes into the legal system. When it comes to the sovereign rights of individuals to have their contracts with employers honored, the courts are likely to uphold those rights.

Douglas A. McIntyre