8-KLeadership Changes

CAPITAL ONE FINANCIAL CORP 8-K Report, Executive Changes (Jan 29, 2010)

Filed January 29, 2010For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) filed an 8-K on January 29, 2010, detailing the compensation plans approved for its Chairman and CEO, Richard D. Fairbank, and other named executive officers, effective January 27, 2010. The compensation structures are heavily weighted towards equity-based, performance-driven awards, with significant deferral periods, emphasizing alignment with shareholder interests and a "pay-for-performance" philosophy. Notably, Mr. Fairbank will receive no base salary or cash bonus, with his compensation entirely at-risk and subject to the company's performance over multiple time horizons. The compensation plans are designed to be "at-risk" and tied to company performance over three-year periods, with payouts often deferred. For Mr. Fairbank, performance will be measured against a peer group in the KBW Philadelphia Bank index. The plans for other named executive officers also incorporate a mix of salary, restricted stock units, and long-term incentive awards, with a significant portion being equity-based and subject to vesting and performance criteria.

Key Highlights

  • 1CEO Richard D. Fairbank's compensation is entirely equity-based, at-risk, and deferred for three years, with no salary or cash bonus.
  • 2Mr. Fairbank's potential equity award is tied to Capital One's performance relative to a peer group over a three-year period.
  • 3Mr. Fairbank received stock options with an exercise price of $36.55, exercisable after three years and expiring in ten years.
  • 4A portion of executive compensation is tied to future performance in 2010, with awards and settlement occurring later.
  • 5Compensation for other named executive officers includes a mix of base salary, restricted stock units, and long-term incentive awards.
  • 6A significant portion of the named executive officers' compensation is at-risk, equity-based, and subject to vesting schedules and performance evaluations.

Frequently Asked Questions

The primary focus is on aligning executive compensation with company performance and shareholder interests through equity-based awards that are 'at-risk' and subject to multi-year performance periods and deferrals. This includes eliminating salary and cash bonuses for the CEO.

Mr. Fairbank's compensation is entirely equity-based and at-risk. It consists of potential share awards tied to company performance, stock options, and potential future restricted stock units. All payout opportunities are deferred for three years, and he receives no base salary or cash bonus.

For CEO Richard Fairbank, performance will be assessed based on the company's cash return on average tangible assets relative to a peer group in the KBW Philadelphia Bank index. For other executives, performance metrics will be evaluated based on various company performance factors and individual performance, as determined by the Independent Directors.

The compensation plans and initial grants took effect on January 27, 2010. However, many awards, such as potential restricted stock units and long-term incentive awards for other named executive officers, are expected to be determined and potentially granted in late 2010 or early 2011, with vesting periods extending up to three years from the grant date.