Summary
This 8-K filing from Capital One Financial Corporation reports on the compensation arrangements for its key executives, specifically Chairman, CEO, and President Richard D. Fairbank, and other Executive Officers including the CFO and General Counsel. For 2008, Mr. Fairbank will receive no salary or other traditional cash/equity incentives. Instead, he has been granted 1,661,780 nonstatutory stock options valued at $17 million. These options vest fully on the third anniversary of the grant date or earlier upon death, disability, or a change in control, aligning his compensation directly with long-term stock performance.
Key Highlights
- 1Richard D. Fairbank, CEO, will receive no salary, bonus, or other cash/equity incentives for 2008.
- 2Mr. Fairbank was granted 1,661,780 nonstatutory stock options with a Black-Scholes valuation of $17 million.
- 3The stock options have an exercise price of $50.99, equal to the fair market value on the grant date.
- 4Options vest fully on the third anniversary of the grant date, or upon death, disability, or a change in control.
- 5The $17 million valuation of the stock option grant will be expensed by Capital One in the fourth quarter of 2007.
- 6Performance share agreements were approved for other Executive Officers, including the CFO and General Counsel, tied to total shareholder return over a three-year period (2008-2010).
- 7The performance share agreements for Messrs. Perlin and Finneran include provisions for pro-rata vesting upon certain terminations and non-compete clauses.
Frequently Asked Questions
The primary purpose of this 8-K filing is to disclose material changes regarding the compensation of Capital One's executive officers, specifically detailing the 2008 compensation package for the CEO and the terms of performance share agreements for other senior executives.
For 2008, CEO Richard D. Fairbank's compensation is entirely equity-based in the form of 1,661,780 nonstatutory stock options. He will receive no salary, annual cash incentive, long-term incentives, or retirement plan contributions for the year. This structure is designed to align his interests directly with stockholder value through stock price appreciation.
The stock options granted to Mr. Fairbank will become fully exercisable on the third anniversary of the grant date. However, they will also become fully exercisable upon his death, disability, or a change in control of the company. If he retires, the options will continue to vest post-retirement with specific exercisability terms.
Capital One will recognize the entire $17 million valuation of the stock option grant as an expense in the fourth quarter of 2007. This reflects the accounting treatment for stock-based compensation.