NEW YORK, US - CITIGROUP said on Wednesday its top two executives would would forego bonuses and others would get 'substantially reduced' bonuses in light of the troubles facing the ailing banking giant.

A memo to employees from chief executive Vikram Pandit said the actions were part of a major overhaul of executive compensation to confront the problems for the company and banking sector.

The new plan may also include 'clawbacks' to 'recoup executive compensation that over time proves to be based on inaccurate financial or other information', according to the memo.

Mr Pandit said Citi had finalised an agreement for the US government's investment of US$20 billion (S$28.7 billion) in the banking firm announced last month that required limits on executive compensation.

Citigroup, which in October reported a quarterly loss of US$2.8 billion, its fourth straight quarter in the red, said Mr Pandit and chairman Win Bischoff would forego bonuses for 2008.

'The most senior leaders should be affected the most,' Mr Pandit said.

'Win and I believe this is fair, in light of the challenges of the year and the need for compensation elsewhere in the organisation.'

The memo said bonuses for the 'senior leadership committee 'will be reduced substantially'. Members of Citi's executive committee would see bonuses 'cut even more' and in some cases given as deferred compensation.

Mr Pandit said the principles to guide the company's executive pay would include 'pay for performance' and 'meritocracy', adding that 'compensation will vary based on each person's performance - again, relative to the overall performance of the company'.

Severance compensation will be subject to 'significant new limitations' for executives and that the top five executives 'no longer can receive severance'.

He noted that former Treasury secretary Robert Rubin, an advisor to the company who has no direct management responsibilities, 'has elected to take no bonus for the second consecutive year'.

'The overall objective for all of us at Citi is to build shareholder value, serve our clients and customers superbly well and create growth opportunities for our employees,' Mr Pandit said.

'Adherence to the principles of compensation outlined above is fundamental to achieving these goals.' -- AFP