8-KLeadership Changes

CAPITAL ONE FINANCIAL CORP 8-K Report, Executive Changes (Feb 3, 2009)

Filed February 3, 2009For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

This 8-K filing from Capital One Financial Corporation announces changes to the compensation plan for CEO Richard D. Fairbank, effective January 29, 2009. In response to the prevailing economic climate and to further align executive interests with shareholders, Mr. Fairbank's compensation will be entirely equity-based and 'at-risk'. He will receive no salary, bonus, or other cash compensation. This new structure is designed to directly link his pay to the company's performance across short, medium, and long-term horizons. The compensation package includes a performance share award tied to relative total shareholder return (TSR) over a three-year period, a stock option grant with an exercise price reflecting the fair market value on the grant date, and an opportunity for an additional restricted stock award based on 2009 performance. Crucially, all equity received by Mr. Fairbank is subject to restrictions preventing its sale or transfer until the U.S. Treasury no longer holds Capital One's preferred stock issued under the TARP program, or one year after his retirement, ensuring a significant alignment with shareholder value realization.

Key Highlights

  • 1CEO Richard D. Fairbank's compensation is now entirely equity-based and at-risk, with no cash salary or bonus.
  • 2New compensation structure aims to strongly align executive interests with shareholder performance.
  • 3Includes a performance share award (0-200% of target shares) based on relative Total Shareholder Return (TSR) over three years (2009-2011).
  • 4A stock option grant of 970,403 options at an $18.28 exercise price, vesting in January 2012.
  • 5Opportunity for additional restricted stock award based on 2009 performance, with a minimum three-year vesting period.
  • 6All equity awards are subject to restrictions preventing sale or transfer until the U.S. Treasury exits its TARP investment in Capital One, or one year post-retirement.

Frequently Asked Questions

Capital One is shifting its CEO's compensation to be entirely equity-based and at-risk due to the economic conditions and to further align Mr. Fairbank's interests directly with those of the company's shareholders. This structure ties his pay heavily to Capital One's performance over various timeframes.

The package consists of three main parts: a performance share award contingent on the company's relative Total Shareholder Return (TSR) over three years, a stock option grant, and an opportunity for an additional restricted stock award based on 2009 performance. Importantly, all these awards are subject to significant restrictions.

Mr. Fairbank cannot sell or transfer any shares received or derived from these awards until the U.S. Treasury no longer holds Capital One's preferred stock issued under the TARP Capital Purchase Program. Alternatively, he can sell after one year of retirement. This ensures he remains heavily invested in the company's long-term success alongside the government's investment.

The performance share award is tied to Capital One's relative Total Shareholder Return (TSR) compared to a peer group of companies within the S&P financial index. Performance is assessed against percentiles, with payouts ranging from zero to 200% of the target number of shares based on whether the company's TSR falls below the 20th percentile, at the 50th percentile (target), or at the 100th percentile.