8-KOther Events

CAPITAL ONE FINANCIAL CORP 8-K Report (Dec 18, 2003)

Filed December 18, 2003For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

This 8-K filing from Capital One Financial Corporation, dated December 17, 2003, discloses the 2004 annual compensation package for its Chairman and CEO, Richard D. Fairbank. Instead of traditional salary, bonuses, or retirement contributions, Mr. Fairbank will receive 360,000 stock options and up to 355,410 performance-based shares. This compensation structure is designed to align executive interests with those of shareholders by incentivizing long-term value creation. The performance-based shares are contingent on Capital One's compound earnings per share growth rate relative to a peer group over a three-year period (2004-2006). The target performance level is set at the 75th percentile of the peer group, which would result in the issuance of 236,940 shares. The Compensation Committee views this as a key component in retaining a high-caliber executive and fostering decisions that enhance stockholder value.

Key Highlights

  • 1CEO compensation for 2004 will be solely equity-based, consisting of stock options and performance shares.
  • 2Richard D. Fairbank will receive 360,000 stock options with an exercise price of $56.275, vesting over three years.
  • 3Up to 355,410 performance-based shares are contingent on Capital One's EPS growth relative to 33 peer companies over three years.
  • 4Target performance for performance shares requires Capital One's EPS growth to be at the 75th percentile of its peer group.
  • 5Performance shares are scheduled to vest on March 31, 2007, with an alternative structure for restricted stock units if approved by shareholders.
  • 6The compensation structure aims to align CEO interests with long-term stockholder value.
  • 7The Compensation Committee believes this structure is crucial for retaining a talented senior executive.

Frequently Asked Questions

The main purpose of this 8-K filing is to disclose the 2004 annual compensation package for Capital One's Chairman and CEO, Richard D. Fairbank. This package is heavily weighted towards equity-based incentives.

Instead of salary, cash incentives, or retirement contributions, Mr. Fairbank will receive 360,000 stock options and up to 355,410 performance-based shares of Capital One common stock.

The number of performance-based shares issued depends on Capital One's fully diluted compound earnings per share growth rate compared to a peer group of 33 companies over a three-year period (January 1, 2004, to December 31, 2006). Specifically, achieving the 75th percentile within the peer group would result in the issuance of 236,940 shares.

Capital One states that this compensation program is designed to align the interests of its CEO with those of its stockholders by incentivizing management decisions that drive long-term stockholder value. It is also considered important for retaining a highly talented senior executive.