Over the weekend, the government agreed to inject an additional $20 billion into Citigroup and back more than $300 billion of toxic assets on the bank’s books.

As part of Uncle Sam’s rescue of Citi, executives at the beleaguered bank had to agree to have their pay limited and subject to the approval of government officials.

In fact, an executive compensation provision is included in the four-page agreement between Citi, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. It mandates that “An executive compensation plan, including bonuses, that rewards long-term performance and profitability, with appropriate limitations, must be submitted to, and approved by, the [United States government].”

While details were not spelled out, Citi will be subject to the executive compensation rules that were worked into the Troubled Asset Relief Program, the $700 billion fund Treasury is tapping to fund its investment in Citi.

Thus, Citi’s top executives will have any potential severance or golden parachute payments eliminated or limited, while their annual compensation will be subject to a $500,000 cap on tax deductibility.

Brookly McLaughlin, a spokeswoman for the Treasury Department, did not return a call asking whether Citi executives would be subject to any additional executive compensation rules or oversight.

Executive compensation at Citigroup has been under scrutiny for some time. The hot-button issue cropped up again last week after executives at rival Goldman Sachs revealed that they will forgo any bonuses they might have earned for 2008.

New York state Attorney General Andrew Cuomo, for one, called on Citi bosses to follow Goldman’s lead and forgo any bonuses this year, particularly in light of the 52,000 job cuts the bank announced November 17.

Citi’s management has yet to comment on Cuomo’s suggestion. But voluntarily turning down their bonuses could turn out to be an expensive gesture.

According to Financial Week’s compensation benchmarking tool, Citi finance chief Gary Crittenden was the fifth-highest-paid CFO in the U.S. in 2007, raking in more than $19 million. Of that, a little more than $14 million came from Crittenden’s bonus.

In fact, Citi’s executives have been some of the highest-paid managers at any publicly traded company in recent years.

Last year, for instance, the top executive officers at Citigroup earned more that $70 million in combined compensation, according to the company’s proxy filing. And that does not include the reported $68 million exit package awarded to former chairman and CEO Charles Prince, who left the bank in November 2007.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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