The troubled banking giant, which to many symbolizes the troubles in
the nation’s financial industry, intends to raise workers’ base
salaries by as much as 50 percent this year to offset smaller annual
bonuses, according to people with direct knowledge of the plan.

The
shift means that most Citigroup employees will make as much money as
they did in 2008, although some might earn more and others less. The
company also plans to award millions of new stock options to employees
in an effort to retain workers and neutralize a precipitous drop in the
value of their stock holdings.

Like Citigroup, financial companies, like Bank of America and Morgan Stanley,
are raising employees’ base salaries to try to shift attention away
from bonuses and curb excessive risk-taking. So are banks like UBS and other European competitors.

The
Citigroup proposals, discussed internally this week, present a crucial
test for the Obama administration, which has vowed to rein in runaway
compensation at companies that have received large taxpayer-financed
bailouts. Citigroup has gotten not one but two rescues from Washington.
Soon the government will assume a 34 percent stake in the company,
whose share price has plunged nearly 84 percent in the last year.

Despite
Washington’s new role at Citigroup, and public anger over big paydays
on Wall Street, administration officials have little power to prevent
the company and others in the industry from raising salaries for
rank-and-file employees.

Kenneth R. Feinberg,
the administration’s new “pay czar,” has the authority to set
compensation for only the top 100 employees at troubled companies. The
rest — which at Citigroup, means fewer than 300,000 people — can be
paid as executives see fit, provided any increase does not rank them
among the 100 most highly paid workers.

Outsize pay on Wall
Street, particularly the industry’s bonus culture, is widely seen as
having encouraged the risk-taking that led to the gravest financial crisis
since the Depression. But industrywide, total compensation is expected
to rise 20 to 30 percent this year, approximately to the levels of
2005, before the crisis, according to Johnson Associates, a
compensation consulting firm. Total industry pay would still be below
the record levels of 2007, but only a bit.

“You can say it is
outrageous,” said Alan Johnson, the president of the firm. “But maybe
it’s a little like the canary in the mine, and you say that things are
getting better.”

Indeed, despite the simmering anger over Wall Street pay, some

For more information on Citigroups new stock options and salary increases.