SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed | by the Registrant [X] |
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] | Preliminary Proxy Statement [ ] Soliciting Material Under Rule 14a-12 |
[ ] | Confidential, For Use of the |
Commission Only (as permitted by |
Rule 14a-6(e)(2)) |
[X] | Definitive Proxy Statement |
[ ] | Definitive Additional Materials |
Capital One Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] | No fee required. |
[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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2) | Aggregate number of securities to which transaction applies: |
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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[ ] | Fee paid previously with preliminary materials: |
[ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
1) | Amount previously paid: |
2) | Form, Schedule or Registration Statement No.: |
3) | Filing Party: |
4) | Date Filed: |
Notice of Capital One Financial Corporations
2017 Annual Stockholder Meeting
Important Notice Regarding the Availability of Proxy Materials for
The Stockholder Meeting To Be Held On May 4, 2017
The Proxy Statement and Annual Report to Stockholders are available at www.proxyvote.com
The Annual Stockholder Meeting of Capital One Financial Corporation (Capital One or Company) will be held at Capital Ones headquarters at 1680 Capital One Drive, McLean, Virginia 22102, on May 4, 2017, at 10:00 a.m. local time.
Items of Business
As a stockholder you will be asked to:
➊ | Elect ten nominated directors, who are listed in the proxy statement, as directors of Capital One; |
➋ | Ratify the Audit Committees selection of Ernst & Young LLP as independent auditors of Capital One for 2017; |
➌ | Approve, on a non-binding advisory basis, Capital Ones 2016 Named Executive Officer compensation; |
➍ | Approve, on a non-binding advisory basis, the frequency with which Capital One will hold a stockholder vote to approve Capital Ones Named Executive Officer compensation; |
➎ | Approve and adopt Capital Ones Amended and Restated Associate Stock Purchase Plan; and |
➏ | Consider a stockholder proposal requesting stockholders right to act by written consent, if properly presented at the meeting. |
Stockholders also will transact other business that may properly come before the meeting.
Record Date
You may vote if you held shares of Capital One common stock as of the close of business on March 13, 2017 (Record Date).
Proxy Voting
Your vote is important. You may vote your shares via the Internet, by telephone, by mail or in person at the Annual Stockholder Meeting. Please refer to the section How do I vote? in the Proxy Statement for detailed voting instructions. If you vote via the Internet, by telephone or in person at the Annual Stockholder Meeting, you do not need to mail in a proxy card.
Annual Meeting Admission
Due to space limitations, attendance is limited to stockholders and one guest each. Admission to the meeting is on a first-come, first-served basis. Registration begins at 9:00 a.m. local time. A valid government-issued picture identification and proof of stock ownership as of the Record Date must be presented to attend the meeting. If you hold Capital One stock through a broker, bank, trust or other nominee, you must bring a copy of a statement reflecting your stock ownership as of the Record Date. If you plan to attend as the proxy of a stockholder, you must present a legal proxy from your bank, broker, trust or other nominee vote. Cameras, recording devices and other electronic devices are not permitted. If you require special assistance at the meeting because of a disability, please contact the Corporate Secretary at the address below.
We look forward to seeing you at the meeting.
On behalf of the Board of Directors,
John G. Finneran, Jr.
Corporate Secretary
Capital One Financial Corporation
1680 Capital One Drive
McLean, VA 22102
March 21, 2017
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Consideration of 2016 Say on Pay Vote and Stockholder Engagement |
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Capital Ones Voluntary Non-Qualified Deferred Compensation Programs |
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2016 Potential Payments and Benefits Upon Termination or Change of Control Table |
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2017 PROXY STATEMENT
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TABLE OF CONTENTS |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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Section I About This Proxy Statement
MEETING INFORMATION | ||
Date: |
Thursday, May 4, 2017 | |
Time: |
10:00 a.m. local time | |
Location: |
1680 Capital One Drive, McLean, Virginia, 22102 |
HOW TO VOTE |
Your vote is important. You may vote your shares via the Internet, by telephone, by mail or in person at the Annual Meeting. Please refer to the section How do I vote? in the questions below for detailed voting instructions. If you vote via the Internet, by telephone or in person at the Annual Meeting, you do not need to mail in a proxy card.
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INTERNET |
TELEPHONE OR CELLPHONE |
IN PERSON | ||||
Visit www.proxyvote.com You will need the 16-digit number in your notice, proxy card or voting instruction form. |
Dial toll-free (1-800-690-6903) or the telephone number on your voting instruction form. You will need the 16-digit number in your notice, proxy card or voting instruction form. | If you received a paper copy of your proxy materials, send your completed and signed proxy card or voting instruction form using the enclosed postage-paid envelope. | By following the instructions below under Can I attend the Annual Meeting? on page 2 and requesting a ballot when you arrive. |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION I ABOUT THIS PROXY STATEMENT |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION I ABOUT THIS PROXY STATEMENT |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION I ABOUT THIS PROXY STATEMENT |
Item | Matter to be Voted On | Board Recommendation |
Voting Requirement | |||||||||
1. | Election of ten candidates for director: Richard D. Fairbank, Ann Fritz Hackett, Lewis Hay, III, Benjamin P. Jenkins, III, Peter Thomas Killalea, Pierre E. Leroy, Peter E. Raskind, Mayo A. Shattuck III, Bradford H. Warner and Catherine G. West |
FOR | Each candidate will be elected as a director of Capital One if a majority of the votes cast in his or her election is voted in favor of such election. Capital One also maintains a resignation policy, which requires that any director who fails to receive a majority of votes cast in favor of his or her election tender a resignation for the Board of Directors consideration. Cumulative voting for the election of directors is not permitted. For more information regarding Capital Ones director nomination process see page 11. | |||||||||
2. | Ratification of the Audit Committees selection of Ernst & Young LLP as independent auditors of the Company for 2017 | FOR | This item will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal. | |||||||||
3. | Advisory approval of Capital Ones 2016 Named Executive Officer compensation | FOR | This item will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal. | |||||||||
4. | Advisory vote to determine the frequency with which Capital One will hold a stockholder vote to approve its Named Executive Officer compensation |
EVERY YEAR | This item will be determined based on which option (every year, every two years, or every three years) receives a majority of the votes cast. | |||||||||
5. | Approval and adoption of Capital Ones Amended and Restated Associate Stock Purchase Plan | FOR | This item will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal. | |||||||||
6. | Stockholder proposal requesting stockholders right to act by written consent | AGAINST | This item will be approved if a majority of votes cast on the proposal are voted in favor of the proposal. |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION I ABOUT THIS PROXY STATEMENT |
As described under What if I hold my shares in street name and I do not provide my broker, bank, trustee or other nominee with instructions about how to vote my shares? on page 3, under NYSE rules, if you hold your shares in street name and you do not submit voting instructions to the broker, bank, trust or other nominee that holds your shares, the firm will only have discretionary authority to vote your shares with respect to Item 2. If you do not submit voting instructions, the firm that holds your shares will not have discretion to vote your shares with respect to Items 1, 3, 4, 5 and 6. Abstentions and broker non-votes are not considered votes cast and thus do not have an effect on the outcome of the vote as to Items 1, 2, 3, 4, 5 and 6.
You should carefully read the descriptions of each proposal. The Board of Directors is not aware of any other matter that will be presented at the Annual Meeting. If any other matter is properly presented at the Annual Meeting, the persons named on the accompanying proxy card will, absent stockholder instructions to the contrary, vote such proxy at their discretion.
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2017 PROXY STATEMENT
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Section II Corporate Governance at Capital One
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Information About Our Director Nominees
Name | Age | Occupation | Independent | Other Public Boards | ||||||||||||
Richard D. Fairbank |
66 | Chair, CEO and President, Capital One Financial Corporation | No | 0 | ||||||||||||
Ann Fritz Hackett |
63 | Partner and Co-Founder, Personal Pathways, LLC | ✓ | 1 | ||||||||||||
Lewis Hay, III |
61 | Former Chairman, Chief Executive Officer and President, NextEra Energy, Inc. | ✓ | 2 | ||||||||||||
Benjamin P. Jenkins, III |
72 | Former Senior Advisor, Managing Director and Vice Chairman for Retail Banking, Morgan Stanley & Co. | ✓ | 0 | ||||||||||||
Peter Thomas Killalea |
49 | Owner and President, Aoinle, LLC | ✓ | 0 | ||||||||||||
Pierre E. Leroy |
68 | Managing Partner, Aspiture, LLC | ✓ | 0 | ||||||||||||
Peter E. Raskind |
60 | Owner, JMB Consulting, LLC | ✓ | 0 | ||||||||||||
Mayo A. Shattuck III |
62 | Chairman, Exelon Corporation | ✓ | 3 | ||||||||||||
Bradford H. Warner |
65 | Former President of Premier and Small Business Banking, Bank of America Corporation | ✓ | 0 | ||||||||||||
Catherine G. West |
57 | Former Special Advisor, Promontory Financial Group | ✓ | 0 |
Board Meetings and Attendance
∎ Each director attended at least 97% of the aggregate number of the meetings of the Board of Directors and the committees occurring during the year while they were members
∎ The Board of Directors held eighteen meetings in 2016
∎ All 11 members of the Board at the time of Capital Ones 2016 Annual Meeting attended such meeting and Capital One expects all of its continuing directors to attend the Annual Meeting
A Word of Appreciation
We would like to offer a word of thanks to director Patrick W. Gross, who will retire from our Board of Directors effective May 4, 2017 in accordance with our Corporate Governance Guidelines. Mr. Gross has been a director of Capital One since 1995, guiding Capital One into becoming one of the largest financial institutions in the nation. We thank Mr. Gross for his many valuable contributions to Capital One, and we wish him well in his future endeavors.
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Information About Our Current Board Committee Membership and 2016 Committee Meetings
Director | Audit | Governance & Nominating |
Compensation | Risk | ||||||||||||||
Richard D. Fairbank |
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Patrick W. Gross |
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Ann Fritz Hackett |
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Lewis Hay, III |
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Benjamin P. Jenkins, III |
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Peter Thomas Killalea |
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Pierre E. Leroy |
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Peter E. Raskind |
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Mayo A. Shattuck III |
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Bradford H. Warner |
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Catherine G. West |
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# TOTAL MEETINGS HELD IN 2016 |
13 | 6 | 7 | 8 |
Chair Member
Information About Our Corporate Governance Policies and Principles
Capital One is dedicated to strong and effective corporate governance that creates an appropriate framework for the Board to provide ongoing oversight of the Companys activities, and for management to operate in an ethical environment that fosters strong risk management.
The Board of Directors has adopted Corporate Governance Guidelines to formalize the Boards governance practices and to provide its view of effective governance. Our Corporate Governance Guidelines embody many of our long-standing practices, policies and procedures, which collectively form a corporate governance framework that promotes the long-term interests of our stockholders, ensures responsible decision-making and accountability, and fosters a culture that allows our Board and management to pursue Capital Ones strategic objectives. The Board reviews and periodically updates these principles and practices as legal, regulatory, and best practice developments evolve.
The Board has also adopted Capital Ones Code of Business Conduct and Ethics (Code of Conduct), which applies to Capital Ones directors and associates, including Capital Ones Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and other persons performing similar functions. The Code of Conduct reflects Capital Ones commitment to honesty, fair dealing and integrity and guides the ethical actions and working relationships of Capital Ones directors, officers and associates in their interactions with investors, current and potential customers, fellow associates, competitors, governmental entities, the media and other third parties with whom Capital One has contact.
The Board of Directors believes that these policies, principles and practices are vital to the future success and growth of Capital One and create a foundation for the effective functioning of the Board of Directors, its committees and Capital One as a whole. They are also critical to preserving the trust of our stakeholders, including stockholders, associates, customers, suppliers, governmental entities and the general public.
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
We encourage you to visit the Corporate Governance section of our website at www.capitalone.com under About Us/Investors where you can find our:
∎ Corporate Governance Guidelines ∎ Code of Business Conduct and Ethics ∎ Committee Charters ∎ Certificate of Incorporation and Bylaws |
Our Board of Directors, acting through the Governance and Nominating Committee, seeks a Board that, as a whole, possesses the mix of experiences, skills, expertise and qualifications appropriate to support the success of the Company and that functions effectively in light of the Companys current and evolving business circumstances. The Board believes that the collective combination of backgrounds, skills and experiences of its members has produced a Board that is well-equipped to exercise oversight responsibilities for Capital Ones stockholders and other stakeholders and to help guide the Company to achieve its long-term strategic objectives.
All of our director nominees have:
✓ | Demonstrated business acumen |
✓ | The ability to exercise sound judgment |
✓ | A high degree of engagement |
✓ | A commitment of service to Capital One, the Board of Directors and the long-term interests of stockholders |
✓ | A reputation for integrity, honesty, professionalism, and adherence to high ethical standards |
In addition, our director nominees have specific experiences that, in the aggregate, meet an articulated set of director skills established by the Governance and Nominating Committee that align with the Companys long-term strategy and operational objectives, including:
Strategy | ∎ Experience setting a long-term corporate vision or direction, developing desirable products and customer segments, assessing geographies in which to operate, and evaluating competitive positioning | |||||
Digital/Technology | ∎ Leadership and understanding of technology, digital platforms and new media, cybersecurity risk, and data analytics | |||||
Retail/Commercial Banking | ∎ Retail and/or commercial banking industry experience at an executive level | |||||
Risk Management/Compliance |
∎ Significant understanding with respect to the identification, assessment and oversight of risk management programs and practices | |||||
Senior Executive Management | ∎ Experience as a chief executive officer or other senior executive at a public company | |||||
Public Accounting/Financial Reporting | ∎ Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements | |||||
Financial Services | ∎ Leadership experience as an executive or board member in the financial services industry | |||||
Compensation/Human Resources |
∎ Understanding of the issues involved with executive compensation, succession planning, human resource management, and talent management and development | |||||
Public Company Board Service | ∎ Experience serving as a director on a large public company board |
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Our Board has significant experience in strategy development, risk management and the financial services industry through executive leadership positions, consulting engagements, and/or extended service on Capital Ones Board of Directors and its committees.
Eight of our director nominees have significant understanding of technology platforms and systems and their associated risks, six of our director nominees have held senior executive responsibilities at large banks, and five of our director nominees serve or have served as chief executive officers. In addition, our director nominees have public company board experience and broad financial expertise, including experience with financial statements and the financial reporting required of large public companies.
The Board of Directors is composed of directors with a variety of tenures, reflecting a diversity of perspectives that creates an effective balance between directors who have longer experience with Capital Ones operations, history and business cycles and directors who bring fresh perspectives. Accordingly, we believe our director nominees collectively possess the appropriate combination of skills and qualifications, independence, knowledge of Capital One and its industry, and business acumen that enables it to operate as an engaged and effective Board.
Criteria for Director Candidates
The Governance and Nominating Committee and the Board of Directors consider each nominee in the context of the Board as a whole, with the objective of assembling a Board that meets the criteria set forth below and, through its collective skills and experience, promotes the success of Capital Ones business. The Governance and Nominating Committee and the Board regularly review the Boards membership in light of Capital Ones business model and strategic objectives and consider whether the Board as a whole continues to possess the skills and experience necessary to oversee the Company in achieving these goals, and may seek additional directors from time to time as a result of its considerations.
All director candidates, including incumbent directors and those recommended by stockholders, are evaluated based upon the following criteria:
Experience |
∎ Diversity of experience
∎ Strong educational background
∎ Substantial tenure and breadth of experience in leadership capacities
∎ Business and financial acumen
∎ Background relevant to Capital Ones business strategy
∎ Understanding of the intricacies of a public company
∎ Experience in risk management |
Personal Characteristics |
∎ Reputation for high personal and professional ethics, integrity and honesty, good character and judgment
∎ The ability to be an independent thinker
∎ Diversity along a variety of dimensions, including the candidates professional and personal experience, background, perspective and viewpoint, as well as the candidates gender, race, and ethnicity |
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Commitment to the Company |
∎ A willingness to commit the time and energy necessary to satisfy the requirements of board and committee membership, including the ability to attend and participate in all or almost all of the board meetings and committee meetings in which they are a member and the annual meeting of stockholders
∎ A willingness to rigorously prepare prior to each meeting and actively participate in the meeting
∎ A willingness to make himself or herself available to management upon request to provide advice and counsel
∎ Possess, or be willing to develop, a broad knowledge of both critical issues affecting the Company and a directors roles and responsibilities
∎ A willingness to comply with Capital Ones Director Stock Ownership Requirements, Corporate Governance Guidelines and Code of Conduct |
Capital Ones Corporate Governance Guidelines provide that a non-management director shall not be eligible for election to the Board upon reaching the age of 72. The Board may waive this requirement if it deems that it is in the best interests of the Company and its stockholders. For details of a waiver of this requirement for Mr. Jenkins, see Election of Directors on page 90.
How We Select Our Director Nominees
The Governance and Nominating Committee considers and makes recommendations to the Board of Directors regarding re-nominations of current directors for election at our Annual Meeting. For incumbent directors, the committee considers the criteria described above under Criteria for Director Candidates, as well as:
∎ | The value derived from each nominees skills, qualifications, experience and ability to impact our long-term strategic objectives; |
∎ | Feedback on performance from fellow Board members and annual director evaluations; |
∎ | Attendance, preparation for, and participation in meetings; |
∎ | Independence and any actual or perceived conflicts of interest; and |
∎ | Willingness to serve for an additional term. |
Although we do not have a specific policy on diversity of the Board, our Corporate Governance Guidelines provide that director candidates should have diversity along a variety of dimensions, including each candidates professional and personal experience, background and perspective. The Governance and Nominating Committee considers the diversity of directors in the context of the Boards overall needs. The Committee evaluates diversity in a broad sense, including the breadth of diverse backgrounds, skills, and experiences that directors may bring to our Board as well as recognizing the benefits of gender, race, ethnic, and other demographic diversity. We believe the composition of our Board reflects diversity in all of these dimensions.
The Governance and Nominating Committee also considers and makes recommendations to the Board of Directors concerning nominees to create or fill open positions within the Board. Director candidates, other than current directors, may be interviewed by the Chair of the Governance and Nominating Committee, other directors, the CEO and/or other members of senior management. In making its recommendation to the Board of Directors, the Committee considers the criteria described above, as well as the results of interviews and any background checks the Committee deems appropriate. In 2016, Capital One continued its engagement with Spencer Stuart, a third-party director search firm, to identify and evaluate potential director candidates.
Stockholders may propose nominees for consideration by the Governance and Nominating Committee by submitting the names and other relevant information as required by Capital Ones Amended and Restated Bylaws (Bylaws) and further described in Capital Ones Corporate Governance Guidelines, to the Corporate Secretary at Capital Ones address set forth in the Notice. Capital Ones Corporate Governance Guidelines require the Corporate Secretary to deliver a copy of the submitted information to the Chair of the Governance and Nominating Committee. The Governance and Nominating Committee will consider potential nominees proposed by stockholders on the same basis as it considers other potential nominees.
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
In addition, an eligible stockholder or group of stockholders may use Capital Ones proxy access bylaws to include stockholder-nominated director candidates in the Companys proxy materials for annual meetings of stockholders. Capital Ones Bylaws permit up to 20 stockholders owning 3% or more of the Companys outstanding common shares of voting stock continuously for at least three years to nominate and include in the Companys proxy materials director candidates constituting up to two (2) individuals or 20% of the Board (whichever is greater) provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the Bylaws.
Director Independence
With the exception of our CEO, who is the Companys founder, the Board has affirmatively determined that all of the other members of our Board are independent under Capital Ones Director Independence Standards, which have been adopted by the Board of Directors as part of Capital Ones Corporate Governance Guidelines. The Board of Directors has reached this conclusion based on a thorough assessment of whether each of its non-management members is independent under these standards. These standards reflect, among other things, the director independence requirements set forth in the listing standards of the NYSE and other applicable legal and regulatory rules, and describe certain relationships that the Board has determined to be immaterial for purposes of determining director independence. The Board of Directors has determined that each of Mr. Gross, Ms. Hackett, Mr. Hay, Mr. Jenkins, Mr. Killalea, Mr. Leroy, Mr. Raskind, Mr. Shattuck, Mr. Warner and Ms. West is independent under these standards.
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Richard D. Fairbank Chair, Chief Executive Officer and President, Capital One Financial Corporation
Director Since: 1994 Age: 66
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Capital One Committees:
∎ None
Capital One Companies:
∎ Capital One Bank (USA), National Association (Chair) ∎ Capital One, National Association (Chair)
Additional Public Directorships (current):
∎ None
Mr. Fairbank is founder, Chair, Chief Executive Officer and President of Capital One Financial Corporation. Mr. Fairbank has been Chair of Capital One since February 1995. Mr. Fairbank was appointed and served as the Fifth Federal Reserve Districts representative on the Federal Advisory Council from January 2010 until December 2012. As a member of the Council, he conferred periodically with the Board of Governors of the Federal Reserve System on business conditions and issues related to the banking industry. Mr. Fairbank also served on MasterCard Internationals Global Board of Directors from February 2004 until May 2006 and, prior to that, as Chairman of MasterCards U.S. Region Board.
Skills and Qualifications:
Mr. Fairbanks experience in leading the business as founder and Chief Executive Officer of Capital One, his responsibilities for the strategic direction and management of Capital Ones day-to-day operations and his former roles with the Federal Advisory Council and MasterCard International bring broad industry and specific institutional knowledge and experience to the Board of Directors. |
Ann Fritz Hackett Partner and Co-Founder, Personal Pathways, LLC Lead Independent Director
Director Since: 2004 Age: 63 |
Capital One Committees:
∎ Compensation Committee ∎ Governance and Nominating Committee (Chair) ∎ Risk Committee
Capital One Companies:
∎ Capital One, National Association
Additional Public Directorships (current):
∎ Fortune Brands Home & Security, Inc.
Ms. Hackett is a partner and co-founder of Personal Pathways, LLC. The companys flagship product is a web-based enterprise collaboration insights platform. Prior to her role at Personal Pathways, Ms. Hackett had been President of Horizon Consulting Group, LLC since she founded the company in 1996. Horizon Consulting Group provides strategic, organizational and human resources advice to clients worldwide. She has worked with boards of directors, chief executive officers and senior executives to identify strategic opportunities and execute solutions during periods of business and financial challenges and transformation. Prior to Horizon Consulting, Ms. Hackett was Vice President and Partner of a leading national strategy consulting firm where she served on the Management Committee and, among other strategy consulting assignments, led Human Resources and developed her expertise in managing cultural change, creating performance management processes and a performance-based culture, nurturing leadership talent and planning for executive succession. Ms. Hackett is also a member of the Tapestry Networks Lead Director Network, a select group of lead directors who collaborate on matters regarding board leadership. She also served as a director of Beam, Inc. (formerly Fortune Brands, Inc.) from December 2007 until April 2014.
Skills and Qualifications:
Ms. Hackett has experience in strategy, technology development, leading change initiatives, talent management and succession planning and in creating performance management processes and performance-based compensation programs. She also has experience in corporate governance and risk matters as a result of her participation with public company boards of directors and related governance committees, non-profit boards and consulting engagements. This combination of skills provides the Board of Directors with valuable insight on these and other matters. |
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Lewis Hay, III Former Chairman, Chief Executive Officer and President, NextEra Energy, Inc.
Director Since: 2003 Age: 61
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Capital One Committees:
∎ Compensation Committee ∎ Governance and Nominating Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One, National Association
Additional Public Directorships (current):
∎ Harris Corporation ∎ Anthem, Inc. (formerly WellPoint, Inc.)
Mr. Hay served in a variety of executive positions at NextEra Energy, Inc. (NextEra) (formerly FPL Group, Inc.), including Chief Executive Officer (2001-2012), Chairman (2002-2012) and President (2001-2006). NextEra is one of the nations leading electricity-related services companies and the largest renewable energy generator in North America. Mr. Hay served as Executive Chairman of NextEra from July 2012 until he retired in December 2013 and as a director of NextEra from June 2001 through December 2013. While at NextEra, he also served as Chief Executive Officer of Florida Power & Light Company from January 2002 to July 2008. He joined NextEra Energy in 1999 as Vice President, Finance and Chief Financial Officer and served as President of NextEra Energy Resources, LLC (formerly FPL Energy, LLC) from March 2000 until December 2001. He currently acts as an Operating Advisor for Clayton, Dubilier & Rice, LLC, a private equity investment firm. Mr. Hay serves on the Board of Business Advisors for the Tepper School of Business at Carnegie Mellon University, and on the Advisory Council of Carnegie Mellon Universitys Scott Institute for Energy Innovation. He is a former chairman of both the Edison Electric Institute, the association of U.S. shareholder-owned electric companies, and the Institute of Nuclear Power Operations. Mr. Hay also served as Chair of the Electricity Subsector Coordinating Council, an organization that coordinated government and electricity industry cyber security initiatives, as well as on President Obamas Presidents Council on Jobs and Competitiveness.
Skills and Qualifications:
Mr. Hay has extensive knowledge of the complex strategic, operational, management, regulatory, financial and governance issues faced by a large public company. His background in leading finance and accounting, treasury, credit, investor relations, mergers and acquisitions and information systems functions, as well as his understanding of enterprise risk management, executive compensation and public company governance, provides the Board of Directors with valuable insight on these and other matters. |
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Benjamin P. Jenkins, III Former Senior Advisor, Managing Director and Vice Chairman for Retail Banking, Morgan Stanley & Co.
Director Since: 2013 Age: 72
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Capital One Committees:
∎ Audit Committee ∎ Compensation Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One, National Association
Additional Public Directorships (current):
∎ None
Mr. Jenkins served as Senior Advisor, Managing Director, and Vice Chairman for Retail Banking at Morgan Stanley & Co., a financial services firm, from January 2009 to January 2011. Prior to that, he had a 38-year career with Wachovia Corporation (now Wells Fargo & Company), a financial services company, where he was Vice Chairman and President of the General Banking Group. He is credited with advancing the profitability of the General Bank through improvements in customer service and the reduction of customer attrition to industry-leading levels. He and his team were instrumental in the integration of the First Union/Wachovia and Wachovia/SouthTrust mergers, and Mr. Jenkins led the successful expansion of Wachovias banking network. He also previously served on the boards of Visa USA and Visa International.
Skills and Qualifications:
Mr. Jenkins experience in corporate banking, banking operations, investment banking, and management of customer relationships brings valuable insight to the Board of Directors in overseeing, among other areas, matters critical to Capital Ones banking business. |
Peter Thomas Killalea Owner and President, Aoinle, LLC
Director Since: 2016 Age: 49
|
Capital One Committees:
∎ Compensation Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One, National Association
Additional Public Directorships (current):
∎ None
Mr. Killalea has been an advisor to private technology-driven companies since November 2014 and is the Owner and President of Aoinle, LLC, a consulting firm. From May 1998 to November 2014, Mr. Killalea served in various leadership roles at Amazon.com, Inc., most recently as its Vice President of Technology for the Kindle Content Ecosystem from 2008 to November 2014. He served as its Vice President of Infrastructure and Distributed Systems from 2003 to 2008 and prior to that as Chief Information Security Officer and Vice President of Security. He led the infrastructure and distributed systems team, which later became a key part of the Amazon Web Services platform. He also led the product development and engineering teams for the Kindle Content Ecosystem, where he advanced the Kindle reading experience by creating innovative features such as X-Ray and Popular Highlights, and built the Amazon Publishing technology platform. Mr. Killalea previously served on the board of Xoom Corporation (acquired by PayPal Inc.) from March 2015 to November 2015.
Skills and Qualifications:
Mr. Killaleas product, technology, and security experience in the technology industry, including his experience advising technology companies in various stages of growth and his various leadership roles, including as Chief Information Security Officer, at Amazon.com, Inc., bring valuable insight to the Board of Directors on these and other matters. |
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Pierre E. Leroy Managing Partner, Aspiture, LLC
Director Since: 2005 Age: 68 |
Capital One Committees:
∎ Audit Committee ∎ Compensation Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One Bank (USA), National Association
Additional Public Directorships (current):
∎ None
Mr. Leroy established an advisory and private equity firm in April 2015, Aspiture, LLC (Aspiture) which invests primarily in digital companies offering unique customer solutions. Mr. Leroy served as Executive Chairman from March 2012 and Chief Executive Officer from July 2012 until June 2013 of Vigilant Solutions, Inc. (formerly Vigilant Video, Inc.), an industry-leading pioneer of innovative intelligence solutions that help law enforcement protect officers, families and communities. Mr. Leroy retired in 2005 from Deere & Company as President of both the Worldwide Construction & Forestry Division and the Global Parts Division. Deere & Company is a world leader in providing advanced products and services for agriculture, forestry, construction, lawn and turf care, landscaping and irrigation, and also provides financial services worldwide and manufactures and markets engines used in heavy equipment. During his professional career with Deere & Company, Mr. Leroy served in a number of positions in Finance, including Treasurer, Vice-President and Treasurer, and Senior Vice-President and Chief Financial Officer. Mr. Leroy also served as a director of United Rentals, Inc. from April 2012 to May 2015, RSC Holdings Inc. and RSC Equipment Rental from May 2008 to April 2012 (when RSC was acquired by United Rentals), and Beam, Inc. (formerly Fortune Brands, Inc.) from September 2003 to February 2012.
Skills and Qualifications:
Mr. Leroys experience in capital markets and asset-liability management, as well as CEO and Executive Chairman of a digital analytic software company and managing partner of an advisory and consulting business in addition to his experience in leading and managing large complex international marketing, engineering and manufacturing organizations and serving on other public company boards, provides the Board of Directors with valuable insight on these and other matters. |
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Peter E. Raskind Owner, JMB Consulting, LLC
Director Since: 2012 Age: 60 |
Capital One Committees:
∎ Audit Committee ∎ Risk Committee (Chair)
Capital One Companies:
∎ Capital One Bank (USA), National Association
Additional Public Directorships (current):
∎ None
Mr. Raskind is the owner of JMB Consulting, LLC, which he established in February 2009 to provide consulting services to financial services firms and investors. In 2011, he served as Interim Chief Executive Officer of the Cleveland Metropolitan School District, and in 2010, he served as Interim Chief Executive Officer of the Cleveland-Cuyahoga County Port Authority. Until its merger with PNC Financial Services Group in December 2008, Mr. Raskind served as Chairman, President and Chief Executive Officer of National City Corporation, one of the largest banks in the United States. Through an extensive banking career, Mr. Raskind has served in a number of leadership roles and held positions of successively greater responsibility in a broad range of consumer and commercial banking disciplines, including cash management services, corporate finance, international banking, corporate trust, retail and small business banking, operations and strategic planning.
Mr. Raskind served as a director of United Community Banks, Inc. from May 2011 to January 2012 and Visa USA and Visa International. He also served on the board of directors of the Consumer Bankers Association, was a member of the Financial Services Roundtable, and served on the executive committee of the National Automated Clearing House Association.
Skills and Qualifications:
Mr. Raskind is experienced in corporate banking, retail banking, wealth management/trust, mortgage, operations, technology, strategy, product management, asset/liability management, risk management and acquisition integration from his extensive career in banking. He provides the Board of Directors with valuable insight on these and other matters. |
Mayo A. Shattuck III Chairman, Exelon Corporation
Director Since: 2003 Age: 62
|
Capital One Committees:
∎ Compensation Committee (Chair) ∎ Governance and Nominating Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One, National Association
Additional Public Directorships (current):
∎ Gap, Inc. ∎ Alarm.com ∎ Exelon Corporation
Mr. Shattuck is Chairman of the Board of Chicago-based Exelon Corporation (Exelon), the nations largest competitive energy provider and commercial nuclear plant operator. From March 2012 through February 2013, he served as Executive Chairman of the Board of Exelon. Prior to joining Exelon, he was Chairman, President and Chief Executive Officer of Constellation Energy Group, a leading supplier of electricity to large commercial and industrial customers, a position he held from 2001 to 2012. Mr. Shattuck was previously at Deutsche Bank, where he served as Chairman of the Board of Deutsche Banc Alex. Brown and, during his tenure, served as Global Head of Investment Banking and Global Head of Private Banking. From 1997 to 1999, Mr. Shattuck served as Vice Chairman of Bankers Trust Corporation, which merged with Deutsche Bank in 1999. From 1991 to 1997, Mr. Shattuck was President and Chief Operating Officer and a director of Alex. Brown & Sons, a major investment bank, which merged with Bankers Trust in 1997.
Mr. Shattuck is also Vice Chairman of Johns Hopkins Medicine, Trustee of Johns Hopkins University and former Chairman of the Institute of Nuclear Power Operators.
Skills and Qualifications:
Mr. Shattucks experience in global corporate finance and lending, corporate strategy, capital markets, risk management, executive compensation and private banking, as well as his experience in leading two large, publicly-held companies and serving on other public company boards, provides the Board of Directors with valuable insight on these and other matters. |
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Bradford H. Warner Former President of Premier and Small Business Banking, Bank of America Corporation
Director Since: 2008 Age: 65 |
Capital One Committees:
∎ Audit Committee (Chair) ∎ Risk Committee
Capital One Companies:
∎ Capital One Bank (USA), National Association
Additional Public Directorships (current):
∎ None
Mr. Warner served in a variety of executive positions at BankBoston, FleetBoston and Bank of America from 1975 until his retirement in 2004. These positions included President of Premier and Small Business Banking, Executive Vice President of Personal Financial Services, and Vice Chairman of Regional Bank.
Throughout his banking career, Mr. Warner served in leadership roles for many of the major business lines and functional disciplines that constitute commercial banking, including leadership of retail and branch banking, consumer lending (credit cards, mortgage and home equity), student lending and small business; various corporate banking functions, including community banking and capital markets businesses, such as underwriting, trading and sales of domestic and international fixed income securities, foreign exchange and derivatives; international banking businesses in Asia, northern Latin America and Mexico; and several investment related businesses, including private banking, asset management and brokerage. He also served on the most senior management policy and governance committees at BankBoston, FleetBoston and Bank of America.
Skills and Qualifications:
Mr. Warners experience in a broad range of commercial, consumer, investment and international banking leadership roles, as well as his experience in corporate banking functions, customer relationships, corporate culture change management, enterprise risk management and technology, brings valuable insight to the Board of Directors in overseeing, among other matters, a broad range of matters critical to Capital Ones banking business. |
Catherine G. West Former Special Advisor, Promontory Financial Group
Director Since: 2013 Age: 57 |
Capital One Committees:
∎ Audit Committee ∎ Risk Committee
Capital One Companies:
∎ Capital One Bank (USA), National Association
Additional Public Directorships (current):
∎ None
Ms. West served as a Special Advisor to Promontory Financial Group, a financial services consulting firm, from May 2013 until her departure in October 2013, and as Managing Director from April 2012 until April 2013. From March 2011 to April 2012, Ms. West was the Associate Director and Chief Operating Officer of the Consumer Financial Protection Bureau (CFPB), a federal agency tasked with regulating U.S. consumer protection with regard to financial services and products, where she led the start-up of the agencys infrastructure. While at the CFPB, Ms. West also played an integral part in implementing a Consumer Response unit designed to solicit views from consumers regarding their experiences with financial institutions and leveraged those views to effect policy change. She was previously the Chief Operating Officer of J.C. Penney from August 2006 to December 2006. From March 2000 to July 2006, Ms. West was an executive officer at Capital One Financial Corporation where she served in roles that included President of the U.S. Card business and Executive Vice President of U.S. Consumer Operations.
Skills and Qualifications:
Ms. West has a multifaceted background in financial services with more than 25 years of experience in financial services operations, regulatory matters, technology platform conversions, process automation and innovation, and strategy development. She has experience in leveraged buyouts, initial public offerings, and mergers and acquisitions, and has a keen understanding of both business strategy and the regulatory perspective. Ms. West provides the Board of Directors with valuable insight on these and other matters. |
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Our Board has carefully considered the critical issue of Board leadership and believes that the leadership structure must be considered in the context of Capital Ones specific circumstances, culture, strategic objectives and challenges. The diverse backgrounds and experiences of our directors provide the Board with broad perspectives from which to determine the leadership structure that is best for Capital One and the long-term interests of Capital Ones stockholders and other stakeholders.
We believe that our existing Board leadership structure, with Mr. Fairbank acting as Chief Executive Officer and Chair of the Board, provides the most effective governance framework and allows our Company to benefit from Mr. Fairbanks talent, knowledge and leadership as the founder of Capital One and allows him to use the in-depth focus and perspective gained in running the Company to effectively and efficiently guide our Board. Capital One appropriately maintains strong independent and effective oversight of our business and affairs through our empowered Lead Independent Director; independent Committee Chairs; independent committees that oversee the Companys operations, risks, performance and business strategy; experienced and committed directors; and frequent executive sessions without management in attendance.
Lead Independent Director
The selection of a strong and empowered Lead Independent Director is a critical element of our corporate governance. Upon the recommendation of the Governance and Nominating Committee, our Lead Independent Director is elected annually by the independent directors. Our Lead Independent Director is currently Ms. Hackett. Under Ms. Hacketts leadership, the Board has developed a culture of collaboration, diligence and mutual respect that allows it to work effectively to provide the necessary oversight and effective challenge to management. The Lead Independent Director performs the following responsibilities:
Board Culture |
∎ Serves as liaison between the Chair of the Board and the independent directors ∎ Facilitates discussion among the independent directors on key issues and concerns outside of Board meetings ∎ Ensures Board discussions demonstrate effective challenge of management ∎ Facilitates teamwork and communication among the independent directors ∎ In the event of a crisis, calls together the independent directors to establish appropriate Board leadership responsibility |
Board Leadership |
∎ Organizes and presides over executive sessions ∎ Sets the agendas for and leads executive sessions ∎ Is responsible for soliciting feedback for and engaging the CEO on executive sessions ∎ Acts as a key advisor to the CEO on a wide variety of Company matters |
Board Performance & Development |
∎ Leads the annual performance assessment of the CEO ∎ Facilitates the Boards engagement with the CEO and CEO succession planning ∎ Leads the Boards annual self-assessment and recommendations for improvement, if any |
Board Meetings |
∎ Has authority to call meetings of the independent directors ∎ Approves meeting agendas for the Board ∎ Approves information sent to the Board ∎ Approves meeting schedules and works with the Chair of the Board and Committee Chairs to assure that there is sufficient time for discussion of all agenda items ∎ Presides at all meetings of the Board at which the Chair of the Board is not present |
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Stockholder Engagement |
∎ If requested by larger stockholders, the Lead Independent Director ensures that he or she is available for consultation and direct communication |
Executive Sessions
Executive sessions of non-management directors of the Board are led by the Lead Independent Director and are an important governance practice because they enable the Board to discuss matters, such as strategy, CEO and senior management performance and compensation, succession planning and board effectiveness without management present. Our non-management directors generally meet in executive session at each quarterly board meeting and all of the independent directors meet in executive session without management at least once annually. In 2016, the non-management directors met four times in executive session. During these executive sessions, the non-management directors or independent directors, as the case may be, have complete access to such members of the Companys senior executive management as they may request, including the Chief Executive Officer, Chief Financial Officer, General Counsel, Chief Risk Officer, Chief Auditor, Chief Credit Review Officer and Chief Compliance Officer. The Lead Independent Director and/or any director may request additional executive sessions of non-management or independent directors at any time.
Directors Are Actively Engaged Outside of Board Meetings
Engagement outside of Board meetings provides our directors with additional insight into our business and our industry, as well as valuable perspective on the performance of our Company, the Board, our CEO and other members of senior management.
∎ | Our individual directors have discussions with each other and with our CEO, members of our senior management team and other key employees, as well as with our federal regulators |
∎ | Our Committee Chairs and Lead Independent Director meet and speak regularly with each other and with members of our management |
Annual Board and Committee Self-Assessments
Our Board annually evaluates the performance of the Board and its committees. The Board believes it is important to assess the Board and the performance of its committees, and to solicit and act upon feedback received. As part of the Boards self-assessment process, directors consider various topics related to Board composition, structure, effectiveness and responsibilities, as well as the overall mix of director skills, experience and backgrounds. While the Board and each of its committees conducts a formal self-assessment annually, the Board considers its performance as well as that of its committees from time to time throughout the year and shares relevant feedback with management.
Initiation of Process |
| The Lead Independent Director develops and circulates a list of potential topics to directors for consideration in advance of the Boards self-assessment discussion. Committee chairs follow a similar process for their respective committees. | ||
Discussion | | The Lead Independent Director meets with the Board to gather views and feedback. Committee Chairs lead their respective committee discussions during executive session. | ||
Follow-Up | | The Lead Independent Director shares a summary of the Board results with management to address any requests or enhancements in practices that may be warranted. Committee Chairs report on their respective self-assessments to the full Board. |
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Topics considered during the Board and committee self-assessments include:
Board and Committee Operations | Board and Committee Performance | |||||
∎ Board and committee membership, including director skills, background, expertise and diversity
∎ Materials and information, including quality and quantity of information received from management
∎ Access to Company executives and employees
∎ Conduct of meetings, including time allocated for, and encouragement of, candid dialogue and effective challenge |
∎ Strategy oversight including short-term and long-term strategic objectives
∎ Oversight of risk management, including risk appetites
∎ Executive talent management and succession planning
∎ Assessment of CEO performance
∎ Setting corporate culture and tone at the top
∎ Effectiveness of outside advisors
∎ Identification of topics that warrant additional attention and discussion
∎ Performance of committee duties under committee charters |
Annual Assessment of the Lead Independent Director
The performance of Capital Ones Lead Independent Director is assessed annually by the Board. The Governance and Nominating Committee designates one independent member of the Board to conduct the assessment each year, which includes feedback provided by each independent director. The facilitator shares the input and feedback received on the performance and effectiveness of the Lead Independent Director with the Governance and Nominating Committee and, as appropriate, the Board, without the Lead Independent Director present. The independent directors of the Board take into account the results of such assessment during its annual appointment of the Lead Independent Director.
Annual Assessment of Director Nominees
On an annual basis, the Chair of the Governance and Nominating Committee conducts an individual director assessment process. This process includes candid, one-on-one discussions between the Committee Chair and each director regarding the individual performance and effectiveness of directors for re-election. With respect to the performance of the Governance and Nominating Committee Chair, another member of the Governance and Nominating Committee conducts such discussions. The Governance and Nominating Committee Chair shares the input and feedback received from such discussions with the Chair of the Board, the Governance and Nominating Committee, and ultimately the Board, as appropriate. During discussions, each director eligible for nomination leaves the meeting during the discussion of his or her candidacy. Following this assessment as well as other considerations such as related party transactions, conflicts of interest, and director independence, the Governance and Nominating Committee recommends to the Board the nomination of one or more directors for re-election by Capital Ones stockholders.
Annual Performance Assessment of the Chief Executive Officer
Under the direction of our Lead Independent Director, the independent directors of the Board annually assess the performance of Mr. Fairbank as Capital Ones CEO and Chair of the Board. The Governance and Nominating Committee is responsible for developing and overseeing the process, facilitated by the Lead Independent Director and involving all directors, for conducting the CEOs annual performance evaluation. This process includes an in-depth discussion of performance by the independent directors in executive session during which directors consider a variety of factors to evaluate Mr. Fairbanks performance. Such factors include, among other things, financial and operating performance, governance and risk management, strategic performance, and winning with our customers and associates as described in Section V Compensation Discussion and Analysis Chief Executive Officer Compensation, as well as feedback raised through Board discussion and self-assessment
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materials provided by Mr. Fairbank to the Board regarding his performance and achievements in connection with various subjective and objective metrics.
The annual CEO performance assessment is completed as part of the end-of-year compensation process. The Compensation Committee manages end-of-year compensation decisions within the context of such assessment, and the Lead Independent Director and Chair of the Compensation Committee jointly share the input and feedback of the CEO performance assessment with Mr. Fairbank in a closed session.
The Boards Role in Succession Planning
Under the Corporate Governance Guidelines, the Board is responsible for ensuring that a succession plan for the CEO exists. The Board of Directors has in place an effective planning process to select successors to the CEO and annually reviews the CEO succession plan. Our Board believes that the directors and the CEO should work together on succession planning and that the entire Board should be involved. Each year, as part of its succession planning process, our CEO provides the Board with recommendations on, and evaluations of, potential CEO successors. The Board reviews the senior executive teams experience, skills, competencies and potential to assess which executives possess or have the ability to develop the attributes that the Board believes are necessary to lead and achieve the Companys goals. Among other steps taken to promote this process, the two levels of executives below the CEO, which include all of the CEOs direct reports, often attend Board meetings and present to the Board, providing the Board with numerous opportunities to interact with our senior management and assess their leadership capabilities.
Our Board also has established steps to address emergency CEO succession planning for an unplanned CEO succession event. Our emergency CEO succession planning is intended to enable our Company to respond to an unexpected CEO transition by continuing our Companys safe and sound operation and minimizing potential disruption or loss of continuity to our Companys operations and strategy. There is also available, on a continuing basis as a result of the process described above, the CEOs recommendation as to a successor should the CEO become unexpectedly unable to serve. The Board also reviews the CEOs successor recommendations on an annual basis.
The Boards Role in Risk Oversight
The Board of Directors believes that effective risk management and control processes are critical to Capital Ones safety and soundness, our ability to predict and manage the challenges that Capital One and the financial services industry face and, ultimately, Capital Ones long-term corporate success.
The enterprise-wide risk management framework defines the Boards appetite for risk taking and enables senior management to understand, manage and report on risk. The risk management framework is implemented enterprise-wide and includes eight risk categories: compliance, credit, legal, liquidity, market, operational, reputational and strategic. Management has developed risk appetite statements with accompanying metrics which are meaningful to the organization and reflect the aggregate level and types of risk Capital One is willing to accept in order to achieve its business objectives, clarifying both risks the Company is actively taking and risks that are purposely avoided.
The Risk Committee is responsible for the oversight of enterprise risk management for the Company, and is responsible for reviewing and recommending to the Board for approval certain risk tolerances taking into account the Companys structure, risk profile, complexity, activities, and size. Within management, enterprise risk management is generally the responsibility of the Chief Risk Officer, who has accountability for proposing risk tolerance and reporting levels related to all eight risk categories. The Chief Risk Officer is also responsible for ensuring that the Company has an overall enterprise risk framework and that it routinely assesses and reports on enterprise level risks. The Chief Risk Officer reports both to the CEO and to the Risk Committee. The Audit Committee also plays an important risk management function, and oversees elements of compliance and legal risk. Each committee of the Board oversees reputation risk matters within the scope of their respective
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responsibilities. Finally the Board as a whole oversees the entire enterprise risk framework for the Company, including the oversight of strategic risk.
Risk Assessment of Compensation Policies and Practices
The Compensation Committee oversees all of our compensation policies and practices, including our incentive compensation policies and practices, to monitor that such policies and practices encourage balanced risk-taking, are compatible with effective controls and risk management and align with our business strategy. In January 2012, the Compensation Committee adopted an Incentive Compensation Governance Policy applicable to all Company employees that governs incentive compensation decisions and provides the framework for oversight of the design of incentive compensation programs, which it reviews and re-approves annually. In the context of setting executive compensation, the Compensation Committee assessed each of the named executive officers against one or more performance objectives specifically designed to evaluate the degree to which the executive balanced risks inherent in his or her role and also implemented additional risk-balancing features for certain equity awards, as described in more detail in the Compensation Discussion and Analysis beginning on page 40.
The Compensation Committee reviews the Companys named executive officer and other senior executive compensation programs as well as any other material incentive compensation programs. During the course of these reviews, the Compensation Committee discusses the Companys most significant risks, including the Companys status with respect to managing those risks and the relationship of those risks to applicable compensation programs. The review includes discussion and analysis of risk-balancing features embedded in these incentive compensation programs and other actions taken by the Company designed to appropriately balance risk and achieve conformance with regulatory guidance. The Compensation Committee also discusses these programs with the Companys Chief Risk Officer, Chief Human Resources Officer and the Compensation Committees independent compensation consultant, as appropriate. Based on these discussions, the Compensation Committee believes that these compensation programs are consistent with safety and soundness and operate in a manner that appropriately balances risk.
The Compensation Committees active oversight, together with the Companys interactions and discussions with its regulators, has further enhanced the Companys risk management and control processes with respect to incentive compensation at the Company and supported our continued compliance with the interagency guidance on sound incentive compensation practices issued by the Federal Reserve Board and other bank regulators in June 2010.
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Our Board has four standing committees: Audit, Risk, Governance and Nominating, and Compensation. Each of our committees:
∎ | Is led by active and empowered Committee Chairs, all of whom are independent |
∎ | Is comprised of all independent members |
∎ | Operates in accordance with a written charter (available on our website at www.capitalone.com under About Us/Investors), which is reviewed annually |
∎ | Assesses its performance annually |
∎ | Has authority to retain independent advisors, as desired |
Audit Committee
Bradford H. Warner Committee Chair
|
Additional Committee Members:
Benjamin P. Jenkins, III, Pierre E. Leroy, Peter E. Raskind, Catherine G. West |
Meetings Held in 2016: 13 | ||
Primary Responsibilities:
∎ Assist our Board with the oversight of the integrity of the Companys financial statements, including matters related to internal controls
∎ Review and discuss with management their assessment of the effectiveness of the Companys disclosure controls and procedures and whether any changes are necessary in light of such assessment
∎ Review and discuss generally the policies and practices that govern the processes by which key risk exposures are identified, assessed, managed and controlled on an enterprise-wide basis
∎ Oversight of the qualifications, independence and performance of the Companys independent auditor
∎ Oversight of the appointment, compensation, retention and work of the Companys independent auditor
∎ Approves the appointment and compensation of the Companys Chief Auditor and oversees the performance of the Chief Auditor and the internal audit function
∎ Oversight of the compliance by the Company with legal and regulatory requirements
∎ Performs the audit committee and fiduciary audit committee functions on behalf of our bank subsidiaries in accordance with federal banking regulations
∎ Review and recommend to the Board (or disinterested members of the Board, as appropriate) for approval (i) the Companys Code of Business Conduct and Ethics, and any material changes thereto; and (ii) any waiver of the Code of Business Conduct and Ethics for directors and certain executive officers
Qualifications:
∎ Each of the members of the Audit Committee is financially literate within the listing standards of the NYSE
∎ No member of the Audit Committee simultaneously serves on the audit committees of more than three public companies, including that of Capital One
∎ The Board has identified both Mr. Raskind and Mr. Warner as audit committee financial experts under the applicable SEC rules based on their experience and qualifications |
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Risk Committee
Peter E. Raskind Committee Chair
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Additional Committee Members:
Patrick W. Gross, Ann Fritz Hackett, |
Meetings Held in 2016: 8 | ||
Primary Responsibilities:
∎ Assist our Board with oversight of the Companys enterprise-wide risk management framework, including policies established by management to identify, assess, measure and manage key risks facing the Company across all of the Companys eight risk categories: compliance, credit, legal, liquidity, market, operational, reputational and strategic risk
∎ Discuss with management the enterprises risk appetite and tolerance and at least annually, recommend to the Board the statement of risk appetite and tolerance to be communicated throughout the Company
∎ Review and approve annually the credit review plans and policies, and any significant changes to such plans, as appropriate
∎ Review and recommend to the Board the Companys liquidity risk tolerance at least annually, taking into account the Companys capital structure, risk profile, complexity, activities and size, and review management reports regarding the Companys liquidity risk profile and liquidity risk tolerance at least quarterly |
Governance and Nominating Committee
Ann Fritz Hackett Committee Chair
|
Additional Committee Members:
Patrick W. Gross, Lewis Hay, III, Mayo A. Shattuck III |
Meetings Held in 2016: 6 | ||
Primary Responsibilities:
∎ Assist our Board by identifying and recommending nominees for election to our Board and review the qualifications of potential Board members
∎ Annually review and recommend committee membership
∎ Lead the Companys corporate governance policies and practices, including recommending to the Board the Corporate Governance Guidelines
∎ Oversight of the Board and CEOs annual evaluation processes and periodic discussions to plan for the CEOs succession
∎ Director succession planning and recruitment of new director candidates
∎ Oversight of managements stockholder engagement program and practices
∎ Evaluate stockholder proposals and other correspondence
∎ Establish and oversee processes for individual director and Board assessments and oversee that Committee Chairs perform committee self-assessments
∎ Keep informed regarding external governance trends, including reviewing benchmarking research conducted by management |
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Compensation Committee
Mayo A. Shattuck III Committee Chair
|
Additional Committee Members:
Patrick W. Gross, Ann Fritz Hackett, Lewis Hay, III, Benjamin P. Jenkins, III, Peter Thomas Killalea, Pierre E. Leroy |
Meetings Held in 2016: 7 | ||
Primary Responsibilities:
∎ Recommend to the Board annually officers for election or re-election or the manner in which such officers will be chosen
∎ Evaluate, approve and recommend to the independent directors the Chief Executive Officers compensation, including any salary, incentive awards, perquisites and termination arrangements, in light of the Committees assessment of his performance and anticipated contributions with respect to the Companys strategy and objectives
∎ Review, approve and recommend the salary levels, incentive awards, perquisites and termination arrangements for executive officers, other than the Chief Executive Officer, to the independent directors and the hiring or promotion of such executive officers to the Board
∎ Review and approve the Companys goals and objectives relevant to compensation, oversee the Companys policies and programs relating to compensation and benefits available to executive officers to ensure that they align with such goals and objectives, and review relevant market data in establishing compensation and benefits programs
∎ Oversee incentive compensation programs for executive officers and others who can expose the Company to material risk to ensure such programs are designed and operated in a manner that achieves balance and is consistent with safety and soundness
∎ Review data and analyses to allow an assessment of whether the design and operation of incentive compensation programs is consistent with the Companys safety and soundness as provided under applicable regulatory guidance
∎ Administer Capital Ones 2004 Stock Incentive Plan, 2002 Associate Stock Purchase Plan and other employee benefit plans
∎ Review periodically and recommend director compensation to the Board
∎ Recommend the inclusion of the Compensation Discussion and Analysis in our annual proxy statement or our Annual Report on Form 10-K
The independent directors of the Board may meet concurrently with the Compensation Committee, as appropriate, to review and approve compensation for the Chief Executive Officer and other executive officers. |
Compensation Committee Interlocks and Insider Participation
No Capital One executive officer served as a member of the board of directors or the compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee, nor has any such relationship existed in the past. No director who served on the Compensation Committee during 2016 is or was formerly an officer or an employee of Capital One.
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Compensation Committee Consultant
The Compensation Committee has the authority to retain and terminate legal counsel and other consultants and to approve such consultants fees and other retention terms. The Compensation Committee has retained the services of Frederic W. Cook & Co., Inc. (FW Cook), an independent executive compensation consulting firm. FW Cook reports to the Chair of the Compensation Committee, and its engagement may be terminated by the Compensation Committee at any time.
The Compensation Committee determines the scope and nature of FW Cooks assignments. In 2016, FW Cook:
∎ | Provided to the Compensation Committee independent competitive market data and advice related to the compensation for the Chief Executive Officer, the other executive officers and the directors, including the development of a group of comparator companies for purposes of competitive analysis; |
∎ | Reviewed for the Compensation Committee management-provided market data and recommendations on the design of compensation programs for senior executives other than the Chief Executive Officer; |
∎ | Reviewed for the Compensation Committee Capital Ones executive compensation levels, performance and the design of incentive programs; |
∎ | Reviewed the compensation program for Capital Ones directors and provided competitive compensation data and director compensation program recommendations to the Compensation Committee for review; and |
∎ | Provided information to the Compensation Committee on executive and director compensation trends and analyses of the implications of such trends for Capital One. |
Consultants from FW Cook generally attend Compensation Committee meetings and executive sessions upon the Compensation Committee Chairs request, including meetings held jointly with the independent directors to review or approve the compensation for the Chief Executive Officer and the other executive officers and to provide an independent perspective regarding such compensation practices.
The services provided by FW Cook are limited in scope as described above. FW Cook does not provide any services to the Company or its management other than the services provided to the Compensation Committee. The Compensation Committee has considered factors relevant to FW Cooks independence from management under SEC rules and has determined that FW Cook is independent from management.
Committee Membership Determinations
On an annual basis, the Governance and Nominating Committee assesses and considers membership for each of the Boards regular committees. This review takes into account, among other factors, committee needs, director experience, committee succession planning and the desire to balance membership continuity with new insights.
The Chair of the Governance and Nominating Committee facilitates discussions with management, committee chairs, the Chair of the Board, and individual directors, as needed and shares that feedback with the Governance and Nominating Committee. The Governance and Nominating Committee makes recommendations for committee membership and Chairs to the full Board.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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27
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Robert M. Alexander Chief Information Officer
Age: 52
|
Mr. Alexander joined Capital One in April 1998. From April 1998 to May 2007, Mr. Alexander had responsibility at various times for a number of Capital Ones lending businesses, including the U.S. consumer credit card and installment loan businesses. Mr. Alexander became Chief Information Officer in May 2007, and in this role he is responsible for overseeing all technology activities for Capital One. | |
Jory A. Berson Chief Human Resources Officer
Age: 46
|
Mr. Berson joined Capital One in July 1992. From July 1992 to June 2009, Mr. Berson held a variety of roles at Capital One, including President, Financial Services and President, U.S. Card. In June 2009, Mr. Berson became Chief Human Resources Officer, and in this role Mr. Berson is responsible for overseeing Capital Ones Human Resources strategy, recruitment efforts and development programs. | |
R. Scott Blackley Chief Financial Officer
Age: 48
|
Mr. Blackley joined Capital One in March 2011. Mr. Blackley became the Companys Chief Financial Officer in May 2016 and has served as the Companys Principal Accounting Officer and Controller since July 2011 and March 2011, respectively. Prior to joining the Company, Mr. Blackley held various executive positions at Fannie Mae, most recently as Senior Vice President and Chief Financial Officer of the Capital Markets Group. Mr. Blackley has more than 20 years of experience in consulting and public accounting, including an appointment to the US Securities and Exchange Commission as a Professional Accounting Fellow and as a Partner with KPMG, LLP. | |
Kevin S. Borgmann Chief Risk Officer
Age: 45
|
Mr. Borgmann joined Capital One in August 2001. Since that time he has served in a variety of roles in Capital Ones Corporate Strategy, Partnership Finance, Upmarket Acquisitions, Credit Card, Auto Finance and Risk departments, including serving as Senior Vice President with the Credit Card Division from March 2008 until September 2010, President of Capital One Auto Finance from September 2010 until October 2012 and Deputy Chief Risk Officer from October 2012 to January 2013. In January 2013, Mr. Borgmann became Chief Risk Officer, and in this role he is responsible for overseeing Capital Ones credit, compliance, operational, market and liquidity, and enterprise risk management functions. | |
Stephen S. Crawford Head of Finance and Corporate Development
Age: 52
|
Mr. Crawford joined Capital One in February 2013 as Chief Financial Officer Designate and served as Capital Ones Chief Financial Officer from May 2013 to May 2016. Mr. Crawford became Head of Finance and Business Development in May 2016. Prior to joining Capital One, Mr. Crawford co-founded Centerview Partners, an investment banking and advisory firm, in 2006. Prior to that, Mr. Crawford served in various leadership roles at Morgan Stanley & Co., a financial services firm, including as the Co-President of the firm during 2005, Executive Vice President and Chief Administrative Officer from 2004 to 2005, Executive Vice President and Chief Financial Officer from 2001 to 2004, and Executive Vice President and Chief Strategic Officer from 2000 to 2001. | |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Noelle K. Eder Chief Card Customer Experience Officer
Age: 47
|
Ms. Eder joined Capital One in September 2014 as Executive Vice President, Card Operations. From September 2014 to November 2016, Ms. Eder was responsible for leading Card operations which included customer experience, digital channels, loss mitigation, brand marketing, and horizontal functions like data analytics. Ms. Eder became Chief Card Customer Experience Officer of Capital One in November 2016, where she is responsible for the customer experience across all channels and operations for the Card business. Prior to joining Capital One, Ms. Eder served in several leadership roles at Intuit for nine years, most recently as Senior Vice President and Chief Customer Care Officer, where she was responsible for Intuits worldwide customer experience strategy. | |
John G. Finneran, Jr. General Counsel and Corporate Secretary
Age: 67
|
Mr. Finneran joined Capital One in September 1994. Since that time, he has served as General Counsel and Corporate Secretary and is responsible for managing Capital Ones legal, governmental affairs, corporate governance, regulatory relations and corporate affairs departments. He also manages Capital Ones internal audit department for administrative purposes. | |
Frank G. LaPrade, III Chief Enterprise Services Officer Chief of Staff to the CEO
Age: 50
|
Mr. LaPrade joined Capital One in January 1996. Since that time he has served in various positions, including as Capital Ones Deputy General Counsel responsible for managing the companys litigation, employment, intellectual property and transactional practice areas. In 2004, Mr. LaPrade became Chief of Staff to the Chief Executive Officer. In 2010, Mr. LaPrade added responsibilities as Chief Enterprise Services Officer. In that capacity, Mr. LaPrade manages Information Technology, Brand Marketing, Corporate Real Estate, Digital Banking and Procurement for the Company. | |
Christopher T. Newkirk President, International and Small Business Card
Age: 46
|
Mr. Newkirk joined Capital One in September 2008. From Sept 2008 to January 2010, Mr. Newkirk led U.S. Card Partnership Analytics, where he was responsible for strategy, and cobrand, private label and portfolio acquisition valuations in our Partnerships business. From February 2010 to June 2013, Mr. Newkirk led U.S. Card Customer Management, where he was responsible for the risk adjusted returns, growth, loyalty and retention of the portfolio. From July 2013 to February 2015, Mr. Newkirk held roles of increasing responsibility in the Companys International Card business, most recently as Executive Vice President, Head of International Card, where he was responsible for all aspects of Capital Ones International Card business, including strategy, credit, marketing, product, customer experience, operations, talent, technology, risk management and financial decisions. In November 2016, Mr. Newkirk became President, International and Small Business Card, where he is responsible for leading Capital Ones consumer credit card business in Canada and the United Kingdom and Capital Ones small business credit card business in the United States. | |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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29
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Michael C. Slocum President, Commercial Banking
Age: 60
|
Mr. Slocum joined Capital One in August 2007. From August 2007 to September 2011, Mr. Slocum was Executive Vice President of Capital Ones Banking Business, leading the companys Commercial Banking business including asset-based lending, leasing and private banking. Mr. Slocum became President, Commercial Banking in September 2011 and in this role he is responsible for leading all aspects of Commercial Banking including Corporate and Commercial Real Estate Banking, Capital Markets, Treasury Services and all related operations. Before joining Capital One, Mr. Slocum served in various leadership roles at Wachovia Bank (now Wells Fargo & Company), a provider of consumer and commercial financial services, including as the Regional Chief Executive Officer for Northeastern US. | |
Michael J. Wassmer President, U.S. Card
Age: 47
|
Mr. Wassmer joined Capital One in July 1994. Since that time, Mr. Wassmer has served in roles of increasing responsibility across the Company, expanding his leadership scope and experience driving strategy and analysis, finance, operations and risk management. From 2013 to November 2016, Mr. Wassmer has served as Executive Vice President of the Companys Domestic Card business (other than Co-Branded Card) where he was responsible for leading all credit, marketing and strategy for the domestic Branded Consumer and Small Business Card businesses. In November 2016, Mr. Wassmer became President, Domestic Card and is currently responsible for leading the Companys consumer credit card business in the United States. In his over 20 years of leadership in the Companys Card business, Mr. Wassmer has been responsible for leading the launch of the Companys flagship consumer and small business products including the Venture, Quicksilver and Spark product lines. | |
Jonathan W. Witter President, Retail and Direct Banking
Age: 47
|
Mr. Witter joined Capital One in December 2010 as an Executive Vice President in Retail Banking. From September 2011 until February 2012, Mr. Witter served as President, Retail and Small Business Banking. In February 2012, he became President, Retail and Direct Banking and in this role, he provides strategic direction and leadership for the Retail and Direct Banking organization and is responsible for more than 14,000 associates, nearly 1,000 branch and office locations, and 2,200 ATMs in California, Connecticut, Delaware, Louisiana, Maryland, Minnesota, New Jersey, New York, Texas, Virginia, Washington and Washington, D.C. Mr. Witter also was a director of ING Bank, fsb. from February 2012 to November 2012. Prior to joining Capital One, Mr. Witter held various positions, including executive vice president and head of general Bank Distribution at Wachovia (now Wells Fargo & Company), managing director and president of Morgan Stanley Private Bank NA, a global financial services firm, and Chief Operating Officer of Morgan Stanleys Retail Banking Group. | |
Sanjiv Yajnik President, Financial Services
Age: 60
|
Mr. Yajnik joined Capital One in July 1998. From July 1998 to June 2009, Mr. Yajnik led several businesses within Capital One, including Capital One Europe, Capital One Canada, and Capital One Small Business Services. Mr. Yajnik became President, Financial Services in June 2009. In this role he is responsible for overseeing Capital Ones Auto Finance and Home Loans businesses. Prior to joining Capital One, Mr. Yajnik held a broad range of positions, including General Manager at Circuit City Stores (USA), Market Manager at PepsiCo (Canada), and Chief Engineer at Mobil Oil (International). |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Capital Ones policies and procedures for the review, approval or ratification of related person transactions are set forth in the charter of the Governance and Nominating Committee, Capital Ones Corporate Governance Guidelines, Capital Ones Code of Conduct and internal written procedures. The charter of the Governance and Nominating Committee requires the committee to review at least on an annual basis any material transactions involving Capital One and any of its directors, executive officers or their immediate family members and, as appropriate, to consider potential conflicts of interest or the appearance of potential conflicts of interest, as well as issues relating to director independence. The Governance and Nominating Committee performs this review each year based on the information provided by each director and executive officer on an annual questionnaire and through a review of Capital Ones internal systems for payments or other transactions that could indicate the presence of a related person transaction. In developing its assessment regarding related person transactions for the Board of Directors, the Governance and Nominating Committee relies upon criteria set forth in Capital Ones Corporate Governance Guidelines and its Code of Conduct to evaluate activities or relationships that may create a conflict of interest, including potential related person transactions. In addition to specific prohibitions, these criteria include the extent to which the proposed relationship would be authorized and permitted (or prohibited) by Capital One policies, as well as the potential perspective of third parties regarding such relationships.
Capital Ones Corporate Governance Guidelines and internal written procedures require that any potential conflict of interest, including related person transactions involving any of Capital Ones directors or executive officers, be reviewed by the General Counsel (in the case of a director) and by either the General Counsel or Chief Human Resources Officer (in the case of an executive officer). If the reviewer believes that such relationship could create a conflict of interest or require disclosure as a related person transaction, a second review is conducted by the disinterested members of the Governance and Nominating Committee (in the case of a director) or by the CEO (in the case of other executive officers).
From time to time in the ordinary course of its business, Capital One issues loans and provides other financial services and products to directors, executive officers and/or nominees for director, or to a directors, executive officers or director nominees immediate family member, including persons sharing the household of such director, executive officer or director nominee (other than a tenant or employee). Such loans and other financial services and products are made in the ordinary course of business; are on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans and financial services and products with persons not related to the Company; and do not involve more than the normal risk of collectability or present other unfavorable features.
Capital One has had no reportable related person transactions since the beginning of 2016.
Capital One values the input and insights of its stockholders and is committed to continued engagement with investors. Our goal is to engage in a manner that is characterized by both transparency and respect, and that helps management and the Board gain useful feedback on a wide variety of topics that are important to investors, including Company performance and operations, strategic direction, corporate governance, executive compensation, risk and operational oversight and Board leadership, operation and composition, among other matters. As has been true over our history as a public company, our senior management, including our CEO and CFO, routinely provide information to and receive feedback from our investors in a wide variety of formats, including in our quarterly SEC filings (which can be found at www.capitalone.com), quarterly earnings conference calls, our Annual Report and proxy statement, regular investor conferences and road-shows, and meetings with individual investors. We have a staff of professionals in our Investor Relations department who are dedicated full time to respond to questions from stockholders about the Company, its performance and other issues of investor interest. To that end, in 2016 we continued direct engagement and discussions with stockholders representing approximately 60% of our outstanding shares in over 300 interactions with investors.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
We have a program to engage proactively with the corporate governance representatives of our larger investors, to ensure that we are receiving feedback focused on important corporate governance matters and issues. Under this program, members of management, including our Investor Relations, Corporate Governance, Executive Compensation and frequently our General Counsel and CFO, meet with key governance contacts at our larger stockholders two times per year. In addition, we contact or respond to other stockholders to engage on specific issues that may arise either before or after our annual meeting. In 2016, discussion topics with our larger investors included Board composition and refreshment, proxy access, other current governance issues, and our executive compensation program. Feedback received from these collaborative and mutually-beneficial discussions is regularly summarized and discussed with our Governance and Nominating Committee, Compensation Committee and full Board. In addition, if during any of these investor meetings, questions or concerns arise that are best addressed through a conversation with one of our directors, management works with the stockholder to arrange for that conversation. Typically, such meetings will be attended by the Lead Independent Director, the Chair of the Compensation Committee and/or the Chair of the Governance and Nominating Committee, depending on the topics the investor wishes to discuss.
In addition, our stockholders have a variety of other channels for expressing their views, including:
Voting | ∎ Our stockholders have the opportunity to vote for the election of all of our directors on an annual basis using a majority voting standard, and, through our annual vote on executive compensation, to regularly express their opinion on our compensation programs | |
Annual Stockholder Meeting | ∎ Our senior management and our directors are expected to, and do, attend the annual meeting of stockholders, where all of our stockholders are invited to attend, ask questions and express their views | |
Written Correspondence | ∎ A stockholder who would be more comfortable or who might find it more convenient to address the Board in writing can address correspondence to the Board through the Corporate Secretary (at the address provided below); the Board receives and carefully reviews any such correspondence that is related to governance, executive compensation, or other Board related matters | |
Special Meetings | ∎ In 2015 our stockholders approved managements proposal to amend our Articles of Incorporation to allow for stockholders who represent a significant, long-term financial stake in our Company to call a special meeting of stockholders; this change gives additional means for investors to communicate with our Board and management and engage in the governance of our Company | |
Proxy Access | ∎ In 2015 the Board amended our bylaws to provide for proxy access, which permits a stockholder or group of up to 20 stockholders who have owned at least 3% of the Companys outstanding common shares of voting stock continuously for at least 3 years to nominate and include in the Companys proxy statement a number of director candidates equal to the greater of 2 or 20% of the total Board |
This wide breadth of stockholder engagement activities give our stockholders a variety of methods for communicating with management and the Board, and ensures that management and our Board understand and consider the issues that matter most to our stockholders.
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION II CORPORATE GOVERNANCE AT CAPITAL ONE |
Contact Us |
Our Directors
Communicate with our directors, including our Lead Independent Director, Committee Chairs or Independent Directors as a Group
Mail correspondence to: Board of Directors / Lead Independent Director c/o Corporate Secretarys Office Capital One Financial Corporation 1680 Capital One Drive McLean, Virginia 22102
|
Contact Us |
Investor Relations
Reach out to our Investor Relations team at any time
Email: Investor.relations@capitalone.com
|
The Corporate Secretary will review all communications sent to the Board, the Lead Independent Director, committee chairs, or individual directors and forwards all substantive communications to the appropriate parties. Communications to the Board of Directors, the independent directors or any individual director that relate to Capital Ones accounting, internal accounting controls or auditing matters are referred to the Chair of the Audit Committee and Capital Ones Chief Auditor. Other communications are referred to the Lead Independent Director, the Chair of the appropriate committee and/or the specified director, as applicable.
Please continue to share your thoughts or concerns with us. We value your input and your investment.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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33
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Section III Security Ownership
Based on Schedule 13D and 13G filings submitted to the SEC, Capital One is aware of the following beneficial owners of more than 5% of Capital Ones outstanding common stock. All percentage calculations are based on the number of shares of common stock issued and outstanding on December 31, 2016, which was 480,218,547.
Name and Address |
Number of Shares of Common Stock Beneficially Owned |
Percent of Class | ||||||
Dodge & Cox (1) 555 California Street, 40th Floor San Francisco, CA 94104 |
45,234,252 | 9.42% | ||||||
Capital World Investors (2) 333 South Hope Street Los Angeles, CA 90071 |
37,559,107 | 7.82% | ||||||
BlackRock, Inc. (3) 55 East 52nd Street New York, NY 10055 |
33,949,154 | 7.07% | ||||||
The Vanguard Group (4) 100 Vanguard Blvd. Malvern, PA 19355 |
30,491,073 | 6.35% | ||||||
FMR LLC (5) 245 Summer Street Boston, MA 02210 |
29,667,528 | 6.18% |
(1) | Based on a Schedule 13G/A (Amendment No. 14) filed on February 14, 2017. As of December 31, 2016, Dodge & Cox reported sole voting power with respect to 42,569,702 shares and sole dispositive power over all shares beneficially owned. |
(2) | Based on a Schedule 13G/A (Amendment No. 2) filed on February 13, 2017. As of December 30, 2016, Capital World Investors reported sole voting power and sole dispositive power over all shares beneficially owned. |
(3) | Based on a Schedule 13G/A (Amendment No. 4) filed on January 23, 2017. As of December 31, 2016, BlackRock, Inc. reported sole voting power with respect to 29,633,046 shares and sole dispositive power over all shares beneficially owned. |
(4) | Based on a Schedule 13G/A (Amendment No. 2) filed on February 10, 2017. As of December 31, 2016, The Vanguard Group reported sole voting power with respect to 777,021 shares, shared voting power with respect to 95,086 shares, sole dispositive power over 29,644,830 shares and shared dispositive power over 846,243 shares. |
(5) | Based on a Schedule 13G/A (Amendment No. 4) filed on February 14, 2017. As of December 30, 2016, FMR LLC reported sole voting power with respect to 2,265,972 shares and sole dispositive power over all shares beneficially owned. |
The following table lists the beneficial ownership of Capital Ones common stock as of February 28, 2017, by our directors, the named executive officers in this proxy statement and all directors and executive officers as a group. All percentage calculations are based on the number of shares of common stock issued and outstanding on February 28, 2017, which was 482,365,855.
Except as otherwise indicated below, each director or executive officer had sole voting and investment power for the shares of common stock in the table.
Name | Amount and Nature of Beneficial Ownership | Stock Settled RSUs (3) |
Total (4) | |||||||||||||||||||||
Common and Restricted Stock (1) |
Stock that 60 days (2) |
Total Beneficial Ownership |
Percent of Class |
|||||||||||||||||||||
Richard D. Fairbank |
2,262,593 | 3,542,139 | 5,804,732 | 1.19% | 74,644 | 5,879,376 | ||||||||||||||||||
R. Scott Blackley |
11,497 | 0 | 11,497 | * | 34,983 | 46,480 | ||||||||||||||||||
Stephen S. Crawford |
86,846 | 105,038 | 191,884 | * | 79,864 | 271,748 | ||||||||||||||||||
John G. Finneran, Jr. |
113,213 | 194,885 | 308,098 | * | 50,428 | 358,526 |
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION III SECURITY OWNERSHIP |
Name | Amount and Nature of Beneficial Ownership | Stock Settled RSUs (3) |
Total (4) | |||||||||||||||||||||
Common and Restricted Stock (1) |
Stock that 60 days (2) |
Total Beneficial Ownership |
Percent of Class |
|||||||||||||||||||||
Frank G. LaPrade, III |
10,687 | 159,945 | 170,632 | * | 49,104 | 219,736 | ||||||||||||||||||
Sanjiv Yajnik |
111,973 | 165,432 | 277,405 | * | 48,716 | 326,121 | ||||||||||||||||||
Ryan M. Schneider |
127,228 | 119,121 | 246,349 | * | 63,948 | 310,297 | ||||||||||||||||||
Patrick W. Gross |
7,539 | 40,300 | 47,839 | * | 0 | 47,839 | ||||||||||||||||||
Ann Fritz Hackett |
20,656 | 71,716 | 92,372 | * | 0 | 92,372 | ||||||||||||||||||
Lewis Hay, III |
2,728 | 81,046 | 83,774 | * | 0 | 83,774 | ||||||||||||||||||
Benjamin P. Jenkins, III |
2,192 | 10,547 | 12,739 | * | 0 | 12,739 | ||||||||||||||||||
Peter Thomas Killalea |
0 | 3,090 | 3,090 | * | 0 | 3,090 | ||||||||||||||||||
Pierre E. Leroy |
0 | 39,300 | 39,300 | * | 0 | 39,300 | ||||||||||||||||||
Peter E. Raskind |
2,000 | 24,556 | 26,556 | * | 0 | 26,556 | ||||||||||||||||||
Mayo A. Shattuck III |
1,589 | 86,622 | 88,211 | * | 0 | 88,211 | ||||||||||||||||||
Bradford H. Warner |
14,640 | 75,053 | 89,693 | * | 0 | 89,693 | ||||||||||||||||||
Catherine G. West |
0 | 10,547 | 10,547 | * | 0 | 10,547 | ||||||||||||||||||
All directors and executive officers as a group (25 persons) |
3,011,971 | 5,449,170 | 8,461,141 | 1.73% | 721,548 | 9,182,689 |
* | Less than 1% of the outstanding shares of common stock. |
(1) | Includes shares of unvested restricted stock that have voting rights but are not transferable until the end of the period of restriction. |
(2) | This amount includes shares underlying stock options that are exercisable within 60 days after February 28, 2017, and restricted stock units for which delivery of the shares of common stock underlying the stock units is deferred until the directors service with the Board of Directors, or for Mr. Fairbank, his employment with the Company, ends. |
(3) | Restricted stock units held by our officers and which are settled in equivalent number of shares of our common stock upon vesting. Represents unvested stock-settled RSUs as of February 28, 2017. |
(4) | The amount includes the aggregate total of the Total Beneficial Ownership column and the Stock Settled RSUs column. |
Some of the shares shown in the preceding table are subject to restrictions or not held directly by the director or executive officer. Below is a table showing the number of shares subject to restrictions or not held directly by the director or executive officer.
Name | Restricted Stock Units For Which Delivery of Stock is Deferred |
Stock Held by, or Tenant in Common With, Family Member, Trust or Partnership | ||||||
Richard D. Fairbank |
241,680 | 0 | ||||||
R. Scott Blackley |
0 | 0 | ||||||
Stephen S. Crawford |
0 | 0 | ||||||
John G. Finneran, Jr. |
0 | 117,411 | ||||||
Frank G. LaPrade, III |
0 | 0 | ||||||
Sanjiv Yajnik |
0 | 0 | ||||||
Ryan M. Schneider |
0 | 0 | ||||||
Patrick W. Gross |
40,300 |
0 | ||||||
Ann Fritz Hackett |
40,300 |
5,006 | ||||||
Lewis Hay, III |
40,300 |
1,806 | ||||||
Benjamin P. Jenkins, III |
10,547 |
0 | ||||||
Peter Thomas Killalea |
3,090 |
0 | ||||||
Pierre E. Leroy |
39,300 |
0 | ||||||
Peter E. Raskind |
14,131 |
0 | ||||||
Mayo A. Shattuck III |
40,300 | 0 | ||||||
Bradford H. Warner |
33,524 | 140 | ||||||
Catherine G. West |
10,547 | 0 |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION III SECURITY OWNERSHIP |
Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act) requires that Capital Ones executive officers and directors, and persons that beneficially own more than 10% of Capital Ones common stock, file certain reports of beneficial ownership of the common stock and changes in such ownership with the SEC and provide copies of these reports to Capital One. As a matter of practice, members of our staff assist our executive officers and directors in preparing initial ownership reports and reporting ownership changes and typically file these reports on their behalf. Based solely on our review of the copies of such forms in our possession and written representations furnished to us, we believe that in 2016 each reporting person complied with these filing requirements, except for Mr. LaPrade, who filed a Form 4 to report a stock option exercise and same-day open market sale of 20,000 shares of Capital One common stock one day late due to an administrative error by the Company.
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2017 PROXY STATEMENT
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Section IV Director Compensation
The Board of Directors approves the compensation for non-management directors based on recommendations made by the Compensation Committee. The Board of Directors has designed the director compensation program to achieve four primary objectives:
∎ | Attract and retain talented directors with the skills and capabilities to perpetuate Capital Ones success; |
∎ | Fairly compensate directors for the work required in a company of Capital Ones size and scope; |
∎ | Recognize the individual roles and responsibilities of the directors; and |
∎ | Align directors interests with the long-term interests of Capital One stockholders. |
Management directors do not receive compensation for their service on the Board of Directors. In 2016, Mr. Fairbank was Capital Ones only management director.
The Compensation Committee annually reviews the compensation program for Capital Ones non-management directors. FW Cook provides competitive compensation data and program recommendations to the Compensation Committee for review. See the discussion under Compensation Committee Compensation Committee Consultant in the Corporate Governance at Capital One section on page 27 for further information on the role and responsibilities of FW Cook. The competitive compensation data includes the compensation (cash, equity and other benefits) of non-management directors within Capital Ones peer comparator group. See the discussion under Market Data in the Compensation Discussion and Analysis section on page 63 for further information on the selection of the peer comparator group. The Compensation Committee considers this information, and FW Cooks recommendations, and finalizes a proposed compensation structure. The proposed structure is then reviewed and approved by the full Board of Directors, typically in April or May of each year.
Based on their review of competitive market data and guidance from FW Cook in the second quarter of 2016, the Compensation Committee determined that the director compensation program described below meets the objectives listed above.
On May 5, 2016, the Board of Directors approved a compensation program for Capital Ones non-management directors for the period from May 5, 2016 until Capital Ones 2017 Annual Meeting that is similar to the program for the preceding year. The compensation program consists of an annual cash retainer of $90,000 for service on the Board of Directors. In addition, directors receive cash retainers for committee service and for service as committee chairs and the Lead Independent Director as detailed under Compensation of Directors beginning on page 38. Each non-management director serving on May 4, 2016 received an annual award of restricted stock units of Capital One common stock (RSUs) on such date, valued at $170,019. Lastly, the Lead Independent Director cash retainer was increased from $30,000 to $50,000 in 2016. This increase was implemented upon consideration of analysis and data provided by FW Cook, and ensures a compensation level commensurate with the market and to appropriately reward the contributions required of this role. Ms. Hackett was the Lead Independent Director in 2016.
Under the Capital One Financial Corporation Non-Employee Directors Deferred Compensation Plan, non-management directors may voluntarily defer all or a portion of their cash compensation and receive deferred income benefits. Participants in the plan can direct their individual deferrals among nineteen investments available through the plan. Directors that elected a deferral receive their deferred income benefits in cash when they cease serving as directors, upon certain other distribution events specified in the plan, or at such earlier time as
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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37
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SECTION IV DIRECTOR COMPENSATION |
authorized by the Compensation Committee. Upon a change of control, Capital One will pay to each director within thirty days of the change of control a lump sum cash payment equal to such directors account balance as of the date of the change of control. In 2016, Mr. Jenkins elected to defer his cash compensation under this plan. A list of the investments available can be found under Capital Ones Voluntary Non-Qualified Deferred Compensation Programs on page 78.
Capital One offered non-management directors the opportunity to direct a contribution of up to $10,000 annually from Capital One to charitable organization(s) of their choice. Each non-management director serving on May 5, 2016 elected to make such a charitable contribution in 2016. In addition, all directors serving on May 5, 2016 were eligible and nine directors elected to participate in a charitable contribution program available to Capital One employees under which Capital One made a contribution of $5,000 to a charitable organization of their choice.
Directors also receive reimbursements for certain board-related expenses including external educational seminars and travel-related costs incurred to attend Board meetings. Such reimbursements are not included as compensation for the directors in the table below.
Capital One requires non-management directors to retain all shares underlying RSUs granted to them by Capital One until their service with the Board of Directors ends, under the terms of their respective grant agreements. The Board of Directors may grant an exception for any case where this requirement would impose a financial hardship on a director. No directors have been granted an exception to this requirement for any outstanding awards of RSUs.
Directors of Capital One received the following compensation in 2016:
Director Name | Fees Earned or Paid in Cash (3) |
Stock Awards |
Option Awards | Change in Pension Value and Nonqualified Deferred Compensation Earnings |
All Other Compensation (4) |
Total | ||||||||||||||||||||||||||||||||
Richard D. Fairbank (1) |
| | | | | | ||||||||||||||||||||||||||||||||
Patrick W. Gross |
$ | 150,000 | $ | 170,019 | | | $ | 15,000 | $ | 335,019 | ||||||||||||||||||||||||||||
Ann Fritz Hackett |
$ | 205,000 | $ | 170,019 | | | $ | 15,000 | $ | 390,019 | ||||||||||||||||||||||||||||
Lewis Hay, III |
$ | 150,000 | $ | 170,019 | | | $ | 10,000 | $ | 330,019 | ||||||||||||||||||||||||||||
Peter T. Killalea (2) |
$ | 90,000 | $ | 212,536 | | | $ | 15,000 | $ | 317,536 | ||||||||||||||||||||||||||||
Benjamin P. Jenkins, III |
$ | 150,000 | $ | 170,019 | | | $ | 15,000 | $ | 335,019 | ||||||||||||||||||||||||||||
Pierre E. Leroy |
$ | 135,000 | $ | 170,019 | | | $ | 15,000 | $ | 320,019 | ||||||||||||||||||||||||||||
Peter E. Raskind |
$ | 150,000 | $ | 170,019 | | | $ | 15,000 | $ | 335,019 | ||||||||||||||||||||||||||||
Mayo A. Shattuck III |
$ | 165,000 | $ | 170,019 | | | $ | 15,000 | $ | 350,019 | ||||||||||||||||||||||||||||
Bradford H. Warner |
$ | 150,000 | $ | 170,019 | | | $ | 15,000 | $ | 335,019 | ||||||||||||||||||||||||||||
Catherine G. West |
$ | 135,000 | $ | 170,019 | | | $ | 15,000 | $ | 320,019 |
(1) | Management directors do not receive compensation for their service on the Board of Directors. In 2016, Mr. Fairbank was Capital Ones only management director. |
(2) | Mr. Killalea was appointed as director by the Board on February 24, 2016, and elected by our stockholders at the 2016 Annual Stockholder Meeting. The Board approved a pro-rated compensation package for Mr. Killalea from February 24, 2016 until our 2016 Annual Meeting, consisting of a $22,500 retainer and a grant of 650 RSUs with a grant date fair value of $42,517, valued at $65.41 per share. The RSUs vest one year from the date of grant and delivery of the underlying shares is deferred until Mr. Killaleas service with the Board of Directors ends. Mr. Killalea did not serve on any Board committees prior to the 2016 Annual Stockholder Meeting. |
(3) | Represents cash payments during 2016, which include half of the payments under the compensation program for the period from May 5, 2016, until Capital Ones 2017 Annual Meeting and half of the payments under the compensation program for the period from April 30, 2015, until Capital Ones 2016 Annual Meeting. |
(4) | Each non-management director serving on May 5, 2016 elected to direct contributions from Capital One in an aggregate amount of up to $15,000 to charitable organization(s) of his or her choice. |
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2017 PROXY STATEMENT
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SECTION IV DIRECTOR COMPENSATION |
Compensation for committee service includes retainers for service as chairperson or as a member of a committee as described under the heading Information About Our Current Board Committee Membership and 2016 Committee Meetings in the Corporate Governance at Capital One section on page 8. Under the most recently approved compensation program, retainers are as follows:
∎ | Lead Independent Director Retainer: $50,000 |
∎ | Chair of the Risk Committee: $45,000 |
∎ | Chair of the Audit Committee, Compensation Committee or Governance and Nominating Committee: $30,000 |
∎ | Member of the Risk Committee (other than the chair): $30,000 |
∎ | Member of the Audit Committee, Compensation Committee or Governance and Nominating Committee (other than the chair): $15,000 |
Each non-management director serving on May 4, 2016, received a grant of 2,440 RSUs with a grant date fair value of $170,019 valued at $69.68 per share. All RSUs were granted under the 2004 Stock Incentive Plan and were valued at the fair market value of a share of Capital One common stock on the date of grant. The RSUs vest one year from the date of grant and delivery of the underlying shares is deferred until the directors service with the Board of Directors ends. In addition, prior to 2013, directors were offered the opportunity to elect to forego their cash retainers for a grant of non-qualified stock options under the 2004 Stock Incentive Plan. In 2013, the Compensation Committee determined not to include stock options as part of the director compensation program. The options expire ten years from the date of grant. Upon termination from Board service (other than by removal for cause), a director will have the remainder of the full option term to exercise the vested stock options.
The following table shows the number of RSUs outstanding, including dividends, and the total number of stock options outstanding for each director as of December 31, 2016:
Director Name | Number of Outstanding Restricted Stock Units |
Number of Outstanding Stock Options | ||||||
Patrick W. Gross |
40,300 | 41,060 | ||||||
Ann Fritz Hackett |
40,300 | 31,416 | ||||||
Lewis Hay, III |
40,300 | 40,746 | ||||||
Peter T. Killalea |
3,090 | 0 | ||||||
Benjamin P. Jenkins, III |
10,547 | 0 | ||||||
Pierre E. Leroy |
39,300 | 4,098 | ||||||
Peter E. Raskind |
14,131 | 10,425 | ||||||
Mayo A. Shattuck III |
40,300 | 49,737 | ||||||
Bradford H. Warner |
33,524 | 41,529 | ||||||
Catherine G. West |
10,547 | 0 |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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Section V Compensation Discussion and Analysis
Key Topics Covered in our Compensation Discussion and Analysis:
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Capital Ones executive compensation program is designed to attract, retain and motivate leaders who have the ability to foster strong business results and promote the long-term success of the Company. The Compensation Committee of the Board of Directors (Committee) is responsible for, among other matters, developing, approving, monitoring and managing the compensation of all of our executive officers, including the named executive officers defined below. Final decisions regarding the compensation of our executive officers, including our Chief Executive Officer, are made by the Compensation Committee and the other independent directors. This Compensation Discussion and Analysis will review the compensation of the CEO, Richard D. Fairbank, and the following executive officers for 2016:
∎ | R. Scott Blackley, Chief Financial Officer (effective May 9, 2016) |
∎ | Stephen S. Crawford, Head of Finance and Corporate Development (effective May 9, 2016); Chief Financial Officer (prior to May 9, 2016) |
∎ | John G. Finneran, Jr., General Counsel and Corporate Secretary |
∎ | Frank G. LaPrade, III, Chief Enterprise Services Officer, Chief of Staff to the CEO |
∎ | Sanjiv Yajnik, President, Financial Services |
∎ | Ryan M. Schneider, President, Card (prior to November 28, 2016) |
Except as otherwise indicated, as used throughout this proxy statement, the named executive officers or NEOs means the six executive officers listed above and the CEO, collectively.
Capital Ones executive compensation program has four primary objectives.
Strongly link rewards with both business and individual performance while appropriately balancing risk
Capital One emphasizes pay-for-performance at all organizational levels. Typically, as an executives level of responsibility increases, so does the proportion of the executives pay that is subject to performance criteria. Therefore, the named executive officers have the highest relative portion of their pay directly linked to Company and individual performance, as compared to other associates. Awards made to the named executive officers in February 2017 for the 2016 performance year were based on Company and individual performance, and on demonstrating specific leadership competencies assessed through a comprehensive performance management process that included an individual assessment specifically designed to evaluate the degree to which the executive balanced risks inherent in his or her role. The Chief Risk Officer compiled the assessments and the Chief Human Resources Officer reviewed the assessments for the NEOs. Separately, the Chief Auditor compiled and reviewed the risk assessment for the Chief Risk Officer. The Committee considered the assessments in making its determinations regarding individual performance and compensation levels.
Ensure that total compensation rewards performance over multiple time horizons
Our compensation programs are structured to encourage our executives to deliver strong results over the short-term while making decisions that create sustained value for our stockholders over the long-term. For 2016, approximately 84% of the CEOs total compensation is equity-based and all at-risk to the performance of the Companys stock price, and 100% of his compensation is deferred for a three-year period. For 2016, approximately 80% of total target compensation for NEOs other than the CEO was provided through equity-based vehicles which were all at-risk to the performance of the Companys stock price and subject to vesting over multiple time horizons. The use of deferred, equity-based compensation vehicles with multi-year vesting terms advances our goal of aligning the ultimate value realized by the named executive officers with the performance of the Companys stock over time because the value of these compensation vehicles increases and decreases based on the performance of the Companys stock price.
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Attract, retain and motivate top executive talent
To attract, retain and motivate exceptional leaders, we believe that compensation opportunities at Capital One must be competitive with the marketplace for talent. The Committee and the independent directors strive to preserve a competitive pay mix and total target compensation values in the executive compensation program, as well as provide competitive total rewards based on our selected peer group.
Align our executives interests with those of our stockholders
The Committee and the independent directors remain committed to designing incentive compensation programs that reward individual and Company performance and that are aligned with the creation of stockholder value over the long-term. Because named executive officer compensation is primarily delivered through deferred, equity-based vehicles that vest over multiple time horizons, the named executive officers have a significant stake in the success of the Company. In addition, we established specific stock ownership policies that the named executive officers must meet and stock retention provisions applicable to certain equity awards.
The Committee is actively engaged throughout the year. The Committee met seven times in 2016, with each meeting concluding with an executive session without management present. While specific topics may vary from meeting to meeting, the following graph describes the typical annual cycle of the Committees activities. For additional detail regarding the Committees processes for compensation decisions, see Criteria and Process for Compensation Decisions beginning on page 62.
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Highlights of Our Compensation Program
The Committee believes that our named executive officer compensation programs balance risk and financial results, reward named executive officers for their achievements, promote our overall compensation objectives and encourage appropriate, but not excessive, risk-taking. The following are some highlights of our compensation program:
What We Do | What We Dont Do | |||||||||||
✓ | We provide primarily long-term, equity-based compensation to our NEOs | û | We do not provide for excise tax gross-up payments | |||||||||
✓ | We provide our CEO with compensation consisting entirely of equity awards and deferred payouts | û | We do not reprice stock options | |||||||||
✓ | We pay our NEOs equity-based awards based on Company and individual performance rather than cash bonuses | û | We do not guarantee incentive awards | |||||||||
✓ | We apply risk balancing so as not to jeopardize the safety and soundness of Capital One | û | We do not provide compensation or awards to our NEOs on terms and conditions that are more favorable than compensation and awards granted to all other executive officers | |||||||||
✓ | We apply performance thresholds to determine the amount of equity delivered at vesting of grants to our NEOs | û | We do not permit our NEOs to engage in short sales, hedging transactions, or speculative trading in derivatives of our securities | |||||||||
✓ | We reduce performance share award values at vesting if the Company does not achieve positive Adjusted ROA | û | We do not permit our NEOs to place their Company securities in a margin account or to pledge their Company securities as collateral for a loan | |||||||||
✓ | We have clawback provisions in our award agreements to ensure accountability | û | Generally we do not utilize employment agreements | |||||||||
✓ | We require a change of control event and a termination to accelerate the vesting of equity awards (double trigger) | û | We do not pay a cash salary to our CEO | |||||||||
✓ | We have an independent compensation consultant advising the Compensation Committee |
In addition, the awards granted to our named executive officers include the following performance and recovery provisions that are designed to further enhance alignment between pay and performance and to balance risks:
Performance- Based Vesting Provisions |
We include performance-based vesting provisions as part of each stock option and stock-settled RSU award to named executive officers and each cash-settled RSU award to the CEO. These provisions will reduce the total value delivered to the executive at vesting if the Company does not meet certain performance thresholds during the three-year vesting period. The total value can be reduced to zero if the performance threshold is not met in any of the three years in the performance period. | |||
Performance Share Reduction |
Each performance share award to the named executive officers provides that the total value delivered at vesting will be reduced if for any year in the three-year performance period the Company does not achieve positive Adjusted ROA (as defined on page 62 under Performance Share Reduction). The total value can be reduced to zero if positive Adjusted ROA is not achieved in any of the three years in the performance period. This reduction can occur regardless of where the Adjusted ROA ranks relative to a comparator group. |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Misconduct Clawback |
Each incentive award to the named executive officers is subject to clawback provisions that allow the Committee to seek recovery of all unvested portions of the awards in the event there has been misconduct resulting in a violation of law or Company policy and the named executive officer committed the misconduct or failed in his or her responsibility to manage or monitor the applicable conduct or risks. | |||
Financial Restatement Clawback |
Each performance share award to the named executive officers includes clawback provisions that allow the Company to recover shares under the award following a financial restatement. |
See Additional Performance Conditions and Recovery Provisions on page 60 for more details.
All of the terms and features described above, including the performance-based vesting and clawback provisions, apply to awards granted to all executive officers and not just the named executive officers.
The Committee believes that exercising discretion is an important element in reaching balanced compensation decisions and supplements other aspects of Capital Ones pay-for-performance philosophy. By applying discretion, the Committee seeks to mitigate the risks associated with a rigid and strictly formulaic compensation program, which could unintentionally create incentives for our executives to focus only on certain performance metrics, encourage imprudent risk taking, and not provide the best results for stockholders. In addition, the use of discretion allows the Committee to respond to changes in economic conditions, our operating environment, and other significant factors that may affect the long-term performance of Capital One or our lines of business. The use of discretion also allows the Committee to adjust compensation based on factors that would not be appropriately reflected by a strictly formulaic approach, such as the discrepancies between absolute and relative performance levels or recognition of individual performance levels. There are certain performance conditions for which the Committee would not exercise discretion, for example where the minimum performance metric is not met in the award of Performance Share Units or if the performance-based vesting requirements applicable to certain other stock-settled awards are not met.
The Committee and the Board of Directors value the input of our stockholders and strive to foster a constructive dialogue with stockholders on matters of executive compensation and corporate governance. At our 2016 Annual Meeting of Stockholders, our stockholders supported our executive compensation program by approving our non-binding advisory vote on executive compensation (2016 Say on Pay). Recognizing that the 2016 Say on Pay vote reflected some level of investor concern for the Companys executive compensation programs, we continued to strengthen our outreach to stockholders to ensure that we maintain strong lines of communication with our stockholders and that the perspectives of our stockholders are shared with the Committee and the Board of Directors. In 2016, management directly engaged with stockholders representing approximately 60% of our outstanding shares in over 300 interactions with investors, as noted above under Corporate Governance at Capital OneStockholder Engagement Program. From these interactions, the Committee and the Board of Directors gained valuable insight into our investors views about the Company, including our executive compensation programs. As a result of the feedback received from investors during 2016, the Committee made the following enhancements to our executive compensation programs and disclosure:
∎ | Increased alignment of CEO compensation and Company performance by increasing the percentage of the CEOs total target compensation that is tied to a year-end evaluation of CEO and Company performance from 30% to 40%, providing a more direct link between the CEOs compensation and the Committees and independent directors assessment of such performance. |
∎ | Increased the rigor of relative Company performance governing payouts applicable to performance share awards, which represent 50% of CEO total target compensation and approximately 12.5% of total target compensation of the other NEOs. See Performance Share Awards on page 52 for more information. |
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
∎ | Provided greater transparency regarding the Committees use of discretion, particularly regarding the year end incentive awards granted to the named executive officers. See Use of Discretion on page 44 for more information. |
∎ | Provided detail regarding the Committees process for assessing and determining executive compensation program structures and pay decisions. See Our Compensation Governance Cycle on page 42 for more information. |
The Committee continues to actively monitor our stockholder engagement with respect to executive compensation matters and has considered stockholder feedback in approving year-end incentive awards for 2016 and structuring and approving the 2017 compensation programs for the named executive officers.
The Committees top priority is to align the interests of the CEO with the interests of our stockholders by directly linking his compensation with the Companys performance and his contributions to that performance over appropriate time horizons. The Committee believes that all of the CEOs compensation should be at-risk based on his and the Companys performance. Each year the Committee approves the form, timing and amount of CEO compensation and makes recommendations to the independent directors for final approval. The Committee considers the CEOs historical performance and seeks to effectively align the CEOs interests with the interests of our stockholders over the appropriate time horizons, support safety and soundness and appropriately balance risk. The Committee and the independent directors have the flexibility to adjust compensation decisions from year to year to take into account the Companys performance and evolving market practices. For example, between performance year 2014 and performance year 2016, the CEOs total performance year compensation has ranged from $19.6 to $16.7 million.
The CEOs compensation for the performance year 2016 was composed of equity awards designed to provide the CEO with an incentive to focus on long-term performance during the year and the opportunity for a year end incentive award based on the Committees evaluation of the Companys performance and the CEOs contributions to that performance throughout the year. The equity awards granted to the CEO in February 2016 consisted of: stock options; performance shares; and stock-settled restricted stock units. The year end incentive award granted to the CEO in February 2017 consisted of deferred cash and cash-settled restricted stock units. All of the CEOs equity awards are subject to a three-year deferred vesting or payout schedule.
The chart below shows these elements of CEO compensation as an approximate percentage of the CEOs total target compensation.
2016 CEO Target Compensation
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
The Committee annually reviews and approves the compensation structure of the CEO and makes recommendations to the independent directors for final approval. In February 2016, the Committee and the independent directors reviewed the compensation structure utilized since 2009 for Mr. Fairbank and determined that for 2016 the compensation program would continue to consist of equity awards granted at the beginning of the year plus an opportunity for an additional year-end incentive award based on the Companys actual performance for 2016. In this manner, the CEOs compensation continues to be completely at-risk based on the Companys and Mr. Fairbanks performance. The Committee and independent directors determined that the compensation program structured in this manner remained appropriate for Mr. Fairbank in 2016 given that the compensation program aligns Mr. Fairbanks compensation with the Companys performance over the appropriate time horizons and supports the Companys executive compensation goals and principles.
The table below summarizes the CEO compensation program that the Committee and the independent directors approved for the 2016 performance year.
Compensation Element |
Timing of Award Determination |
Basis for Award | Vesting Schedule |
Performance and Recovery Provisions | ||||||||||||||
Base Salary | Not applicable | Not applicable | Not applicable | Not applicable | ||||||||||||||
Stock Options | February 2016 | Incentive for Future Company Performance | 3-year cliff vesting; expires in 10 years | ∎ Performance-based vesting provisions ∎ Misconduct clawback | ||||||||||||||
Performance Shares | February 2016 | Incentive for Future Company Performance |
Vest at the end of the 3-year performance period; the number of shares vesting depends on achievement of performance factors | ∎ Performance share reduction ∎ Misconduct clawback ∎ Financial restatement clawbacks | ||||||||||||||
Stock-Settled RSUs | February 2016 | Incentive for Future Company Performance | 3-year cliff vesting; settles in Company stock | ∎ Performance-based vesting provisions ∎ Misconduct clawback | ||||||||||||||
Year-End Incentive Opportunity |
February 2017 | Reward for 2016 CEO and Company Performance | Delivered as combination of cash-settled RSUs and deferred cash bonus; payout after 3 years | ∎ Performance-based vesting provisions (RSUs only) ∎ Misconduct Clawback |
See Additional Performance Conditions and Recovery Provisions on page 60 for more details regarding the performance and recovery provisions applicable to each of the elements of compensation that the Committee approved for the 2016 performance year for the named executive officers.
After considering various factors as described below, without giving particular weight to any specific factor, the Committee and the independent directors determined that a total target compensation amount of $17.5 million was appropriate for Mr. Fairbanks 2016 compensation program.
When determining the structure and total target compensation opportunity for Mr. Fairbanks 2016 compensation program, as well as the value for each component of the award, the Committee and the independent directors considered Mr. Fairbanks and the Companys performance during 2015 relative to certain financial, operating, safety and soundness and strategic performance factors. In addition, the Committee and the independent directors considered the Companys performance in 2015 relative to the peer comparator companies performance in 2015, the structure and amount of compensation awarded to the chief executive officers of the peer comparator companies and the structure and amount of Mr. Fairbanks compensation awards in prior years. The Committee and the independent directors also considered the Companys risk profile and the time horizon over which the deferred, equity-based vehicles will vest, as well as the fact that the ultimate value of Mr. Fairbanks deferred, equity-based awards will depend on the Company and Mr. Fairbanks performance over time.
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
The chart below shows the pay mix of the CEOs actual compensation for the 2016 performance year, including the year-end incentive opportunity which consisted of 60% deferred cash and 40% cash-settled RSUs.
2016 CEO Pay Mix
Stock Option Award
In February 2016, Mr. Fairbank received a grant of 106,973 non-statutory stock options at an exercise price of $63.73 per share (which was the fair market value of the Companys common stock on the date of grant). The benefits to Mr. Fairbank of the stock options are deferred, as the options cannot be exercised until February 15, 2019 and will expire ten years after the date of grant. The option grant had a grant date value of $1,750,003; however, the ultimate value Mr. Fairbank realizes, if any, depends solely on the long-term appreciation in the Companys stock price. Mr. Fairbank can only realize value from the stock options if and to the extent the Companys stock price increases after the date of grant and the market value of the stock exceeds the exercise price at some point after the three-year vesting period when the options are exercised. The stock option award is also subject to performance-based vesting conditions and clawback provisions, each as described in more detail under Additional Performance Conditions and Recovery Provisions beginning on page 60.
Performance Share Award
In February 2016, based on the above determination by the Committee and the independent directors, Mr. Fairbank was granted an award of performance shares under which he may receive from 0% to 150% of a target number of 137,298 shares of the Companys common stock based on the Companys performance over the three-year period from January 1, 2016 through December 31, 2018.
The Companys performance will be assessed on the basis of Adjusted ROA relative to a comparator group consisting of companies in the KBW Bank Index, excluding three non-traditional banks that do not focus on lending to consumers and businesses (KBW Index). The Committee believes that the KBW Index is an appropriate index against which to assess the Companys performance because it reflects institutions of a comparable size and business mix to the Company. In addition, the Committee believes that relative Adjusted ROA is an appropriate metric for the Company and its stockholders because it achieves a balance of incentivizing and rewarding management to pursue business strategies that reward stockholders over the long term, while discouraging excessive risk-taking or balance sheet leverage in pursuit of those goals.
Under the performance share reduction feature of this award, the number of shares issued at settlement will be reduced if the Companys Adjusted ROA for one or more fiscal years completed during the performance period is not positive, no matter how well the Company compares to the peer group. If the Companys Adjusted ROA is not positive in any of the three fiscal years in the performance period, the executive will forfeit the entire award of performance shares. As a result, although Mr. Fairbanks award had a grant date value of $8,750,002, the number of shares that he ultimately receives, if any, will be solely dependent on the Companys performance over the performance period. The performance share award also is subject to certain clawback provisions. See Performance Share Reduction on page 61 and Financial Restatement Clawbacks on page 62 for more information.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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47
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
After the end of the three-year performance period, the Committee will certify the Companys performance and issue the corresponding number of shares of the Companys common stock, if any, in accordance with the table below. The table below shows potential payouts based on specific Company performance results. Payouts will range between the values shown below for performance that falls between the performance results in the table.
Relative Metric: Adjusted ROA | ||||||||||
³75th Percentile |
50th Percentile |
20th Percentile |
< 20th Percentile | |||||||
Number of years with positive Adjusted ROA: |
Three | 150% | 100% | 40% | 0% | |||||
Two | 125% | 83% | 33% | 0% | ||||||
One | 100% | 67% | 27% | 0% | ||||||
None | 0% | 0% | 0% | 0% |
Stock-Settled RSU Award
In February 2016, Mr. Fairbank also received a grant of 27,460 stock-settled RSUs. The stock-settled RSU grant had a grant date value of $1,750,026. The stock-settled RSU award vests in full on February 15, 2019 and is subject to performance-based vesting conditions and clawback provisions, each as described in more detail under Additional Performance Conditions and Recovery Provisions beginning on page 60.
Year-End Incentive Opportunity
A portion of Mr. Fairbanks 2016 compensation consisted of an opportunity for a year-end incentive award based on the Companys performance in 2016. The award had a target value of $5,250,000, but the ultimate value of the award was determined based on the Committees evaluation of the Companys performance during 2016 and Mr. Fairbanks contributions to that performance relative to the factors shown below related to: financial and operating performance, governance and risk management, strategic performance and winning with our customers and associates. These factors were evaluated on a qualitative and quantitative basis without any specific pre-established targets or weights. The Committee believes that these factors appropriately reflect and balance near term performance and long-term success for the Companys customers, associates and stockholders.
In 2016, Capital One delivered solid financial performance, improved operating efficiency, resilient growth, and capital distribution to our shareholders. We had industry-leading growth in our Credit Card business and continued the disciplined growth of our Auto and Commercial Banking businesses. The Company continued to make transformational investments in growth and technology to create value today and over the long term. In addition, management continued to build risk management capabilities and is committed to effective, proactive, and sustainable operation of these capabilities. The Committee believes that the actions taken by the named executive officers throughout the year contributed greatly to the Companys 2016 results and have positioned the Company to deliver on long-term strategic goals and achieve strong, sustainable financial performance over the long term.
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
In February 2017, the Committee considered the Companys performance on both a quantitative and qualitative basis. In particular, the Committee considered:
Performance Factor | 2016 Performance | |||||||
∎ Revenue
∎ Expense management
∎ Earnings and Earnings per share
∎ ROA and ROTCE
∎ Capital management
∎ Total shareholder return |
∎ Revenue of $25.5 billion
∎ Pre-provision earnings of $11.9 billion
∎ Efficiency ratio of 53.2%, or 52.7% net of adjustments,(1) demonstrating prudent expense management
∎ Net Income of $3.8 billion
∎ Earnings per share (EPS) of $6.89 per common share, fully diluted
∎ Return on Assets (ROA) of 1.11%
∎ Return on average common equity of 7.82%; return on average tangible common equity (ROTCE) of 11.93%,(2) above bank average
∎ Returned significant capital to our shareholders by completing $3.7 billion of share repurchases and paying a quarterly common stock dividend of $.40 per share
∎ Industry-leading growth in our Credit Card business with net income of $2.2 billion and loan growth of 10.0%
∎ Strong financial and operating results in the Auto business, with new loan originations of $25.7 billion, and solid loan growth of 6% in the Commercial Banking business
∎ One, three and five-year Total Shareholder Return (TSR) of 23.8%, 20.7% and 122.7%, respectively
| |||||||
∎ Credit performance and underwriting quality
∎ Risk management and compliance
∎ Balance sheet strength
∎ Board and executive governance
|
∎ Strong credit performance including a net charge-off rate of 2.17%, 4.16% for Domestic Card, as management continues to focus on underwriting quality
∎ Higher provision for loan losses primarily driven by the front-loaded credit costs of strong loan growth, particularly in Domestic Card
∎ Continued progress enhancing the soundness and sustainability of the Companys compliance and risk management programs, including sound management of market and liquidity risk
∎ Common equity Tier 1 capital ratio of 10.1%, calculated under the Basel Pillar III Standardized Approach, as of December 31, 2016
∎ Open and active Board governance model, including access to management, embrace of effective challenge, and proactive stockholder outreach
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CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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49
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Performance Factor | 2016 Performance | |||||||
∎ Progress toward achievement of long-term strategy
∎ Execution against corporate imperatives
∎ Disciplined investments in infrastructure, technology and growth initiatives
∎ CEO leadership and performance of executive team
|
∎ Significant progress on building the capabilities of a leading information-based technology company
∎ Balanced investments in market opportunities and long-term capabilities, including talent, infrastructure, and process reinvention
∎ Successful integration of GE Healthcare acquisition, enhancing the capabilities and scale in commercial healthcare finance
| |||||||
∎ Recruitment and development of world class talent
∎ Associate engagement and retention
∎ Customer advocacy
∎ Brand
∎ Corporate reputation and community engagement
∎ Live our values and champion our culture
|
∎ Achieved strong Net Promotor Scores including record-high levels in both Consumer and Small Business Card
∎ Continued focus on attracting top talent and welcomed over 9,500 new associates, including over 500 military recruits, while maintaining high bar for talent and diversity
∎ Recorded strong associate engagement scores and low voluntary attrition rates
∎ Increased focus on enhancing and developing our executive leadership
∎ Accelerated the development and release of brand-defining software applications and features | |||||||
(1) | Efficiency ratio is calculated based on total non-interest expense divided by total net revenue for the period and reflects as-reported results in accordance with U.S. GAAP. The efficiency ratio net of adjustments is a non-GAAP measure that the Committee reviews as part of its assessment of the Companys performance and reflects adjustments to exclude $161 million from builds in the U.K. Payment Protection Insurance customer refund reserve, a $28 million impairment charge associated with certain acquired intangible and software assets and a $24 million gain related to the exchange of our ownership interest in Visa Europe with Visa Inc. See Exhibit 99.2 to the Form 8-K filed with the SEC on January 24, 2017 for supplemental financial data and corresponding reconciliation of this financial metric to U.S. GAAP. |
(2) | ROTCE is a non-GAAP financial measure calculated based on the sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; and (iii) less preferred stock dividends, for the period, divided by average tangible common equity. See MD&A-Table F-Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures on our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for supplemental financial data and corresponding reconciliation of this financial metric to U.S. GAAP. |
The Committee also took into account peer comparator group CEO compensation levels, the tenures of each of the peer companies CEOs, the varying degrees of success those CEOs have had in leading their respective companies, and Mr. Fairbanks strategic role as the founder of Capital One.
After considering all of the above factors, in February 2017 the Committee and the independent directors approved year-end incentive awards for Mr. Fairbank totaling $4,462,580. For a second consecutive year, Mr. Fairbanks year-end incentive awards represent a payout of 85% of the target award value established by the Committee in February 2016. Between performance year 2014 and performance year 2016, Mr. Fairbanks year-end incentive award has ranged from $4.5 million to $7.4 million. In particular, in determining the 2016 year-end incentive awards the Committee rewarded Mr. Fairbanks leadership contributions that accelerated the momentum toward the achievement of the Companys long-term strategic goals and value creation, while recognizing that the rapid loan growth in Domestic Card and strategic investments made to support the Companys growth opportunities and digital transformation affected certain of the Companys financial performance metrics listed above, including EPS. The Committee also recognized that the Companys one and three-year TSR lagged its peers. While growth and investments may dampen short-term returns to shareholders, the Committee and the independent directors believe that the Company is striking the right balance between investing for the future and delivering attractive returns over the short, medium and long term.
The Committee and the independent directors determined to award Mr. Fairbanks year-end incentive award using two vehicles: (i) an award of 20,675 RSUs, which had a total grant date value of approximately $1,785,080,
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
and (ii) a deferred cash bonus in the amount of approximately $2,677,500. Including the year-end incentive opportunity, Mr. Fairbanks total compensation for the 2016 performance year consisted of 84% equity-based awards and 16% deferred cash. The award of RSUs will vest in full on February 15, 2020, will settle in cash based on the Companys average stock price over the 15 trading days preceding the vesting date, and is subject to performance-based vesting provisions. The cash bonus is mandatorily deferred for three years into the Companys Voluntary Non-Qualified Deferred Compensation Plan and will pay out in the first calendar quarter of 2020. Both the award of RSUs and the deferred cash bonus are subject to clawback provisions. The performance-based vesting provisions applicable to the RSUs and the clawback provisions applicable to both awards are described in more detail under Additional Performance Conditions and Recovery Provisions beginning on page 60.
CEO Compensation by Performance Year
Below is a table showing Mr. Fairbanks compensation awards as they are attributable to the performance years indicated. For the years shown in the table, Mr. Fairbanks total target compensation was $17.5 million. Mr. Fairbanks compensation for performance year 2015 was $16,712,536, a decrease of $2,887,492 or 14.7% compared to his compensation for performance year 2014. Mr. Fairbanks compensation for performance year 2016 was $16,712,611, which is substantially similar to his 2015 performance year compensation due to a second consecutive year of Mr. Fairbank receiving 85% of his target value of the year-end incentive opportunity. See Year-End Incentive Opportunity on page 48 for additional information regarding the year-end incentive granted to Mr. Fairbank for performance year 2016.
Performance Year |
Cash Salary |
Deferred Cash Bonus |
Cash-Settled RSUs |
Stock-Settled Awards |
Option Awards | Total | ||||||||||||||||||||
2016 | $0 | $2,677,500 | $1,785,080 | $10,500,028 | $1,750,003 | $16,712,611 | ||||||||||||||||||||
2015 | $0 | $2,677,500 | $1,785,014 | $10,500,022 | $1,750,000 | $16,712,536 | ||||||||||||||||||||
2014 | $0 | $4,410,000 | $2,940,006 | $10,500,022 | $1,750,000 | $19,600,028 |
The table above is presented to show how the Committee views compensation actions and to which year the compensation awards relate. This table differs substantially from the Summary Compensation Table on page 69 required for this proxy statement and is therefore not a substitute for the information required in that table. There are two principal differences between the Summary Compensation Table and the table above:
∎ | The table above reports equity-based awards as compensation for the performance year for which they were awarded, even if the award was granted in one year based on performance for the prior year. As a result, the cash-settled RSU award granted to the CEO in February 2017 for the 2016 performance year, for example, is shown in the table above as 2016 compensation. The Summary Compensation Table reports equity-based awards only in the year in which they were granted. |
∎ | The Summary Compensation Table reports the change in pension value and non-qualified deferred compensation earnings and all other compensation. These amounts are not a result of current year compensation determinations and are not shown above. |
As part of the CEO compensation program, the Committee and the independent directors also approved certain other programs intended to support Mr. Fairbanks productivity and well-being. These include:
∎ | Executive term life insurance with a benefit level of $5 million; |
∎ | The ability to participate in a comprehensive voluntary annual health screening; |
∎ | Maintenance for Mr. Fairbanks home office; |
∎ | The use of a driver who also provides for Mr. Fairbanks personal security; and |
∎ | The monitoring and maintenance of an electronic home security system. |
Additional details on these programs can be found in the Named Executive Officer Compensation section beginning on page 68.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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51
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
The Committee and the independent directors continue to believe that the CEO compensation program aligns Mr. Fairbanks compensation with the Companys performance over the appropriate time horizons and supports the Companys executive compensation goals and principles. In February 2017, the Committee and the independent directors reviewed the compensation structure utilized in 2016 for Mr. Fairbank and determined that for 2017, the CEO compensation program would continue to consist of equity awards granted at the beginning of the year plus an opportunity for an additional year-end incentive award based on CEO and Company performance for 2017. In this manner, the CEOs compensation will continue to be completely at-risk based on the Companys and Mr. Fairbanks performance and all CEO compensation continues to be subject to a three year deferred vesting or payout. The Committee and the independent directors also determined that for Mr. Fairbanks 2017 compensation program, a total target compensation amount of $17.5 million, the same total target compensation for 2016, was appropriate.
In response to feedback received from stockholders, the Committee and the independent directors made changes to the year end incentive and performance share elements of the CEO compensation program. The terms of all other compensation granted to Mr. Fairbank in February 2017 are substantially similar to the terms described earlier under 2016 CEO Compensation Program, including the application of performance-based vesting and clawback provisions.
CEO Year-End Incentive Opportunity
In response to stockholder feedback the Committee and the independent directors modified the structure of the CEO compensation program to eliminate the grant of stock-settled RSUs that were previously granted at the beginning of the performance year and accounted for approximately 10% of the CEOs total target compensation to increase the percentage of the CEOs total target compensation that is granted based on CEO and Company performance as the year-end incentive opportunity from 30% to 40%. This change increases the alignment of CEO compensation and Company performance by directly linking a greater portion of the CEOs compensation to the performance of the CEO and the Company during the performance year which allows the Committee and the independent directors the ability to adjust or eliminate that portion of the CEOs compensation as appropriate to reflect the performance.
The chart below illustrates the elements of the CEOs 2017 compensation program as an approximate percentage of his total target compensation:
2017 CEO Target Compensation
Performance Share Awards
During 2016, we received feedback from our stockholders regarding the rigor of our performance share program. Based on this feedback, the Committee and the independent directors revised the performance metrics applicable to performance shares granted in 2017 to require a more rigorous set of relative Company performance hurdles related to the potential payouts made in connection with the awards. The performance share awards represent 50% of CEO total target compensation and approximately 12.5% of total target compensation of the other NEOs. As with previous years, the compensation paid in connection with the performance shares will be based on the
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Companys performance assessed on the basis of Adjusted ROA relative to the KBW Index, and the number of shares issued at settlement will be reduced if the Companys Adjusted ROA for one or more fiscal years completed during the performance period is not positive, no matter how well the Company performs relative to the peer group. After the end of the three-year performance period, the Committee will certify the Companys performance and issue the corresponding number of shares of the Companys common stock, if any, in accordance with the revised metrics set forth in the table below. The table below shows the revised potential payouts based on specific Company performance results. Payouts will range between the values shown below for performance that falls between the performance results shown in the table. For example, Adjusted ROA performance at the 50th percentile of peers will earn 90% of target payout, rather than 100% as in previous years.
Relative Metric: Adjusted ROA | ||||||||||
³80th Percentile |
55th Percentile |
25th Percentile |
< 25th Percentile | |||||||
Number of years with positive Adjusted ROA: |
Three | 150% | 100% | 40% | 0% | |||||
Two | 125% | 83% | 33% | 0% | ||||||
One | 100% | 67% | 27% | 0% | ||||||
None | 0% | 0% | 0% | 0% |
Beginning with performance share awards granted in 2017, the Companys positive Adjusted ROA must be at least at the 25th percentile of peers, rather than the 20th percentile, for any performance shares to vest. Similarly, target payout will be achieved at the 55th percentile of peers instead of the 50th percentile, and the maximum payout can only be achieved if the Company performs at the 80th percentile of peers, instead of the 75th percentile. The graph below illustrates the revised performance metrics:
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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53
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
2017 CEO Compensation Decisions
Based on the revised CEO compensation program, in February 2017 the Committee and the independent directors granted to Mr. Fairbank the following compensation:
∎ | a performance share award under which he may receive from 0% to 150% of a target number of 101,344 shares of the Companys common stock based on the Companys performance over the three-year period from January 1, 2017, through December 31, 2019; and |
∎ | a grant of 81,486 non-statutory stock options at an exercise price of $86.34 per share (which was the fair market value of the Companys common stock on the grant date). |
The Committee also determined that Mr. Fairbank will have an opportunity to receive an incentive award in late 2017 or early 2018. Any such award will consist of deferred cash, an equity-based award or both and will pay out or vest after a three-year deferral period. The Committee and the independent directors will have absolute discretion to determine whether to make the award, the form of the award and the value of the award relative to the target amount of $7 million, and will base these determinations on the Committees evaluation of the Companys performance in 2017 relative to the same factors described earlier under 2016 CEO Compensation Program Year-End Incentive Opportunity related to financial and operating performance, governance and risk management, strategic performance and winning with our customers and associates. The maximum value of the award, if granted, will not exceed one and a half times the target value. The Company expects that any such award will be subject to performance-based vesting and clawback provisions similar to provisions applicable to the 2016 year-end incentive opportunity.
As with the CEO, the Committee seeks to align the interests of the other named executive officers with the interests of our stockholders by linking compensation to Company performance and the NEOs contribution to that performance over the appropriate time horizons, while supporting safety and soundness and appropriately balancing risk. The Committee takes into account each NEOs historical performance, individual roles and responsibilities and contributions expected from each NEO in the future as well as the recommendations of the CEO, including his assessment of each NEOs performance. In determining 2016 NEO compensation, the Committee also considered the specific factors discussed below under Equity Incentive Awards beginning on page 58. Final decisions regarding NEO compensation are made by the independent directors.
In this section, NEO Compensation, the term NEO refers to the named executive officers other than the CEO.
The NEOs traditionally receive a mix of approximately 20% cash and 80% equity-based compensation, consisting of: cash salary, RSU salary, and cash-settled RSUs, which are determined at the beginning of each performance year; and long-term incentive awards, which are determined following the end of each performance year based on the Committees evaluation of Company and individual performance during the past year. The long-term incentive awards are equity-based and may consist of performance shares, stock-settled RSUs, and stock options. All of these equity-based awards are subject to deferred vesting over a three-year period. The NEOs do not receive cash bonuses.
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
The chart below shows these elements of NEO compensation as an approximate percentage of NEO total target compensation:(1)
(1) | Due to his mid-year appointment to the position of Chief Financial Officer, Mr. Blackleys 2016 compensation varied slightly from the chart above. See below for more information regarding Mr. Blackleys 2016 compensation program. For 2017, Mr. Blackleys compensation is consistent with the other NEOs. |
See Additional Performance Conditions and Recovery Provisions on page 60 for more details regarding the performance and recovery provisions applicable to each element of compensation that the Committee approved for the 2015 performance year for the named executive officers.
The Committee annually reviews and approves the compensation structure for all of our executive officers, including those who are ultimately reported as NEOs, and makes recommendations to the independent directors for final approval. In February, 2016 the Committee and the independent directors approved the 2016 compensation program which is designed to be consistent with the Companys pay-for-performance philosophy and is generally consistent with the 2015 compensation program. The Committee believes that this pay mix balances stockholder interests while effectively rewarding and motivating key talent.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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55
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
The table below summarizes the NEO compensation program that the Committee and the independent directors approved for the 2016 performance year.
Compensation Element (1) |
Timing of Award Determination |
Basis for Award | Vesting Schedule |
Performance and Recovery Provisions | ||||||||||||||
Base Salary Cash |
January 2016 | Overall experience, skills, performance, and knowledge | Paid in cash throughout the performance year | Not applicable | ||||||||||||||
Base Salary RSUs |
January 2016 | Portion of base salary delivered in RSUs | Awarded as RSUs which settle in cash on February 15 following the performance year | Not applicable | ||||||||||||||
Cash Bonus |
Not applicable | Not applicable | Not applicable | Not applicable | ||||||||||||||
Cash-Settled RSUs |
February 2017 | Reward for 2016 Company performance |
3-year ratable vesting | ∎ Misconduct Clawback | ||||||||||||||
Stock Options |
February 2017 | Reward for 2016 Individual Performance and |
3-year ratable vesting; expires in 10 years | ∎ Performance-based vesting provisions
∎ Misconduct clawback | ||||||||||||||
Performance Shares |
Vest at the end of the 3-year performance period; the number of shares vesting depends on achievement of performance factors | ∎ Performance share reduction
∎ Misconduct clawback
∎ Financial restatement clawbacks | ||||||||||||||||
Stock-Settled RSUs |
3-year ratable vesting | ∎ Performance-based vesting provisions
∎ Misconduct clawback |
(1) | Mr. Blackley was appointed to the position of Chief Financial Officer in May 2016. As a result, his 2016 compensation reflects his pay in his prior role as Executive Vice President and Controller of the Company. See below for more information regarding Mr. Blackleys 2016 compensation program. Beginning with performance year 2017, Mr. Blackleys compensation program is consistent with the other NEOs. |
Based on the above framework, the Committee and the independent directors determined the 2016 total target compensation for each NEO by considering the following factors:
∎ | Each NEOs performance relative to the Companys strategic objectives; |
∎ | Capital Ones historical performance; |
∎ | The role and qualifications of each NEO (for example, the NEOs scope of responsibility, experience and tenure and the demonstration of competencies consistent with the Companys values and the ability to deliver strong, sustainable business results); |
∎ | Appropriate internal pay differentials and the desire to foster teamwork and collaboration; |
∎ | Historical pay levels; |
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
∎ | Available role-specific market compensation data from peer comparator companies; |
∎ | Available information on the structure of compensation packages for senior executives at peer comparator companies; |
∎ | Market trends in executive compensation (for example, current rates of pay and the prevalence and types of incentive vehicles); and |
∎ | The overall structure of the compensation program. |
Mr. Blackley was appointed as the Companys Chief Financial Officer effective May 9, 2016; prior to this appointment, he served as Executive Vice President and Controller of the Company. As a result, his compensation for the 2016 performance year reflects a compensation program applicable to Executive Vice Presidents of the Company. Mr. Blackleys 2016 compensation program was substantially similar to the compensation program for the other NEOs, except that: (1) he received a slightly higher percentage of his compensation as salary (23% instead of 20% of total target compensation); (2) he received a slightly lower percentage of his compensation as long-term incentive opportunity (47% instead of 50% of total target compensation); and (3) he did not receive stock options. Beginning with the 2017 performance year, Mr. Blackleys compensation program is consistent with the other NEOs.
Base Salaries
For the 2016 performance year, the Committee chose to defer a significant portion of each NEOs base salary until the end of the year. Rather than award each NEO a base salary entirely in cash, the 2016 base salary for NEOs was delivered in a mix of cash (approximately 20-30% of total target compensation) and RSUs that settled in cash on February 15, 2017 (approximately 15% of total target compensation). In this way, the 2016 compensation program further deferred cash compensation for each NEO and placed it at risk to the performance of the Companys stock price for the entire performance year.
In January 2016, the Committee and the independent directors approved 2016 base salaries for the NEOs, ranging from $1,040,039 to $2,797,016, which consisted of a cash portion ranging from $630,000 to $1,598,000 and a cash-settled RSU portion ranging from $410,039 to $1,199,016. Individual details for each NEO are provided in the table below showing compensation by performance year.
Year-End Incentive Awards
A portion of the NEOs 2016 compensation consisted of an opportunity for a year-end incentive award based on the individual NEO and Company performance in 2016. This award, if granted, may consist of stock options, performance shares, and/or RSUs. In February 2017 the Committee and the independent directors determined to award each NEO various equity-based incentive awards as recognition of Company and individual performance in 2016.
Cash-Settled RSU Awards
In February 2017, the Committee and the independent directors approved awards of cash-settled RSUs for the NEOs ranging from $574,075 to $1,199,004, representing a payout at 100% of the target award values established by the Committee in February 2016 based on actual Company performance in 2016. Individual details for each NEO are provided in the table below showing compensation by performance year. The assessment of Company performance for the NEOs is consistent with the assessment performed in connection with the CEO year-end incentive award. The Committee and the independent directors determined that these awards were appropriate in light of the Companys performance as described under Year-End Incentive Opportunity on page 48 in connection with the determinations by the Committee and the independent directors relating to the CEOs year-end incentive awards.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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57
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Equity Incentive Awards
In February 2017, the Committee and the independent directors awarded various equity incentive awards to the NEOs for the 2016 performance year as recognition for individual NEO performance in 2016 and to drive further performance over the long term. At Capital One, equity incentive awards are linked to performance in two ways:
∎ | The size of the award is based on each NEOs individual performance assessment for the year just completed; and |
∎ | The ultimate value of the award is dependent on Capital Ones performance over time. |
Equity incentive awards are designed to emphasize elements that are of particular importance to Capital One given the Companys unique goals and continually evolving business strategies and objectives. In determining the actual amounts to be awarded to each NEO, the Committee considered each NEOs contribution to the Companys performance for 2016 as well as the individual performance of each NEO. The Committee also received input from the CEO on his assessment of each NEOs individual performance and his recommendations for compensation of the NEOs. The CEO also assessed the degree to which the NEO balanced risks inherent in the NEOs role. These assessments included the use of both quantitative and qualitative risk measures and were compiled by the Chief Risk Officer and reviewed by the Chief Human Resources Officer, and separately the Chief Auditor compiled and reviewed the assessment for the Chief Risk Officer, before being presented to the Committee and the independent directors for their consideration.
The equity incentive awards consisted of stock-settled RSUs, performance share awards and stock options. The terms of the performance share awards are substantially similar to the terms of the performance share awards granted to our CEO, as described earlier under 2016 CEO Compensation ProgramPerformance Share Award and 2016 CEO Compensation Program. The NEO stock options and stock-settled RSUs vest ratably in one-third increments starting on the first anniversary of the grant date and are subject to performance-based vesting and clawback provisions as discussed below under Additional Performance Conditions and Recovery Provisions on page 60. The stock options have an exercise price of $86.34 per share, which was the fair market value of the Companys common stock on the date of grant.
Mr. Blackley, the Companys Chief Financial Officer, was awarded 16,939 stock-settled RSUs and a target amount of 5,647 performance shares with a total grant date value for both awards of $1,950,075. The Committee and the independent directors determined to grant these awards based upon Mr. Blackleys leadership of the Companys financial reporting, disclosure and related controls, as well as a successful transition into his new role as the Companys CFO managing investor relations, tax, accounting, and Global Finance business risk.
Mr. Crawford, the Companys Head of Finance and Corporate Development (effective May 9, 2016) and Chief Financial Officer (prior to May 9, 2016), was awarded 41,317 non-statutory stock options, 23,124 stock-settled RSUs and a target amount of 13,875 performance shares with a total grant date value for all three awards of $4,081,830. The Committee and the independent directors determined to grant these awards based upon Mr. Crawfords successes in integrative thinking and problem solving, driving the Companys financial discipline and process improvement, and strengthening the effectiveness of the Finance leadership team, including the successful transition of Mr. Blackley to the role of CFO.
Mr. Finneran, the Companys General Counsel and Corporate Secretary, was awarded 23,738 non-statutory stock options, 14,762 stock-settled RSUs and a target amount of 8,857 performance shares with a total grant date value for all three awards of $2,549,068. The Committee and the independent directors determined to grant these awards based upon Mr. Finnerans continued guidance and influence across the enterprise, sound judgment, and strategic leadership. In addition, the Committee and the independent directors considered Mr. Finnerans ability to deliver advantageous results across regulatory, contractual, negotiation, investigation, and litigation matters.
Mr. LaPrade, the Companys Chief Enterprise Services Officer and Chief of Staff to the CEO, was awarded 27,955 non-statutory stock options, 15,646 stock-settled RSUs and a target amount of 9,388 performance shares with a total grant date value for all three awards of $2,761,806. The Committee and the independent directors determined to grant these awards based upon the strong performance of the Companys information technology, brand marketing, and digital banking functions in 2016. The Committee and the independent directors also considered Mr. LaPrades dedication to the Companys mission, his empowering, collaborative, and inspirational leadership, and his ability to drive transformational change.
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2017 PROXY STATEMENT
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SECTION V COMPENSATION DISCUSSION AND ANALYSIS |
Mr. Yajnik, the Companys President, Financial Services, was awarded 22,462 non-statutory stock options, 13,969 stock-settled RSUs and a target amount of 8,381 performance shares with a total grant date value for all three awards of $2,412,100. The Committee and the independent directors determined to grant these awards based upon the solid performance of the Auto business in 2016, including continued disciplined growth in originations, as well as his leadership in driving digital innovation, process improvement, and customer satisfaction across operational, staff and technology functions in Financial Services.
Mr. Schneider, the Companys President, Card until November 28, 2016, and Senior Advisor (a non-executive advisory role) thereafter, was awarded 31,560 non-statutory stock options, 17,663 stock-settled RSUs and a target amount of 10,598 performance shares with a total grant date value for all three awards of $3,117,846. The Committee and the independent directors determined to grant these awards in recognition of the strong performance of the Credit Card business in 2016, particularly the year-over-year growth for Domestic Card, as well as Mr. Schneiders leadership in enhancing compliance and risk management programs within the business. The Committee and the independent directors also considered Mr. Schneiders leadership in furthering the Companys digital agenda while enhancing the customer experience and increasing customer satisfaction.
NEO Compensation by Performance Year
The table below shows actual NEO compensation as it is attributable to the performance year indicated.
Name | Performance Year |
Cash Salary | Cash Bonus |
Cash-Settled RSUs (1) |
Stock-Settled Awards (2) |
Option Awards |
Total | |||||||||||||||||||||||
R. Scott Blackley |
2016 | $630,000 | $0 | $984,114 | $1,950,075 | $0 | $3,564,189 | |||||||||||||||||||||||
Stephen S. Crawford |
2016 | $1,598,000 | $0 | $2,398,020 | $3,194,494 | $887,336 | $8,077,850 | |||||||||||||||||||||||
2015 | $1,552,000 | $0 | $2,328,082 | $3,100,847 | $861,334 | $7,842,263 | ||||||||||||||||||||||||
2014 | $1,530,000 | $0 | $2,700,130 | $3,300,039 | $916,676 | $8,446,845 | ||||||||||||||||||||||||
John G. Finneran, Jr. |
2016 | $1,020,000 | $0 | $1,530,074 | $2,039,264 | $509,804 | $5,099,142 | |||||||||||||||||||||||
2015 | $990,000 | $0 | $1,486,032 | $1,979,326 | $494,803 | $4,950,161 | ||||||||||||||||||||||||
2014 | $977,000 | $0 | $1,723,258 | $1,913,729 | $478,405 | $5,092,392 | ||||||||||||||||||||||||
Frank G. LaPrade, III |
2016 | $983,000 | $0 | $1,474,122 | $2,161,436 | $600,370 | $5,218,928 | |||||||||||||||||||||||
Sanjiv Yajnik |
2016 | $966,000 | $0 | $1,448,084 | $1,929,699 | $482,401 | $4,826,184 | |||||||||||||||||||||||
2015 | $937,000 | $0 | $1,406,056 | $1,873,662 | $468,416 | $4,685,134 | ||||||||||||||||||||||||
2014 | $915,000 | $0 | $1,615,303 | $1,794,467 | $448,606 | $4,773,376 | ||||||||||||||||||||||||
Ryan M. Schneider |
2016 | $1,220,000 | $0 | $1,830,066 | $2,440,054 | $677,792 | $6,167,912 | |||||||||||||||||||||||
2015 | $1,146,000 | $0 | $1,720,052 | $2,633,133 | $731,408 | $6,230,593 | ||||||||||||||||||||||||
2014 | $1,119,000 | $0 | $1,975,275 | $2,522,704 | $700,744 | $6,317,723 |
(1) | For 2016, includes cash-settled restricted stock units (restricted stock unit portion of base salary granted in February 2016 and restricted stock units granted in February 2017). |
(2) | For 2016, includes stock-settled restricted stock units and performance share award granted in February 2017. |
This table is presented to show how the Committee views compensation actions and to which year the compensation awards relate, but it differs substantially from the Summary Compensation Table on page 69 required for this proxy statement and is therefore not a substitute for the information required in that table. There are two principal differences between the Summary Compensation Table and the above table:
∎ | The table above reports equity-based awards as compensation for the performance year for which they were awarded, even if the award was granted in one year based on performance for the prior year. As a result, the cash-settled RSU, stock option, stock-settled RSU and performance share awards granted in February 2016 for the 2016 performance year, for example, are shown in the above table as 2015 compensation. The Summary Compensation Table reports equity-based awards only in the year in which they were granted. |
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∎ | The Summary Compensation Table reports the change in pension value and non-qualified deferred compensation earnings and all other compensation. These amounts are not a result of current year compensation determinations and are not shown above. |
The Committee provides certain other programs intended to support the NEOs productivity, well-being and security. These programs provide some level of personal benefit and are not generally available to all employees for 2016, and included the following:
∎ | Executive term life insurance with a benefit level of approximately $5 million; |
∎ | The ability to participate in a comprehensive voluntary annual health screening; |
∎ | An automobile lease or the use of a driver who also provides personal security; and |
∎ | The monitoring and maintenance of an electronic home security system. |
The Committee has determined that the nature and value of these programs are comparable to those offered to similarly situated executives at our peers. Additional details on these programs can be found in the Named Executive Officer Compensation section beginning on page 68.
Each year, the Committee reviews the NEO compensation program in light of Company performance data, peer comparator group performance data, historical pay information, data on specific market practices and trends, stockholder feedback, and other relevant points of information. The plan consists of multiple compensation vehicles that directly link the NEOs compensation with the Companys performance over multiple time horizons, align the NEOs interests with the interests of the Companys stockholders, support safety and soundness and encourage appropriate risk-taking. Based on feedback received from stockholders, the Committee and the independent directors revised the performance metrics applicable to performance shares granted in 2017, to require a more rigorous set of relative Company performance hurdles related to the potential payouts made in connection with the awards. For a detailed description of these changes, see Chief Executive Officer Compensation 2017 CEO Compensation Program. The 2017 NEO compensation program is otherwise substantially similar to the 2016 program.
The awards granted to our named executive officers include the following provisions that are designed to further enhance alignment between pay and performance and balance the risks that our incentive compensation programs might otherwise encourage:
∎ | Performance-based vesting provisions; |
∎ | Performance share reduction; |
∎ | Misconduct clawback provisions; and |
∎ | Financial restatement clawbacks. |
These terms and conditions apply to incentive awards granted to every executive officer and not just to the named executive officers.
Performance-Based Vesting Provisions
The ultimate value that our named executive officers receive from equity-based incentive awards is tied to our stock price performance over the vesting period. The Committee nevertheless determined that these awards should be subject to additional performance conditions so that the value received by the executives is also conditioned upon the Company continuing to meet certain operating performance thresholds. The vesting of
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awards subject to performance-based vesting provisions is conditioned upon the Company meeting specific performance thresholds for each and every fiscal year ending in the three-year vesting period. Any forfeitures will be cumulative over the three-year vesting period. In this manner, regardless of our executives past performance and of our stock price performance, the awards subject to performance-based vesting remain at risk of complete forfeiture over the three-year vesting period.
Performance-based vesting provisions apply to the following awards:
∎ | All named executive officer stock option awards; |
∎ | All named executive officer restricted stock and stock-settled RSUs; and |
∎ | All CEO cash-settled RSUs. |
In setting the threshold operating performance conditions, the Company took into account discussions with federal bank regulators. These performance conditions do not present any upside potential for the named executive officers compensation but instead create an additional at-risk element to the compensation that has been awarded to them. Imposing these additional performance conditions is designed to further reflect our approach of balancing risk and performance over the long-term.
For awards granted since January 2014, vesting is conditioned on the Company achieving positive Core Earnings (as defined below). If Core Earnings are not positive for any fiscal year in the vesting period, the named executive officer will automatically forfeit 50% of one-years worth of vesting (i.e., one-sixth of the total award). In addition, the Committee will determine the extent to which any named executive officer was accountable for the outcome and, based on such determination, the Committee will decide whether any or all of the remaining 50% of one-years worth of vesting will also be forfeited. The Committee may also decide to delay the vesting of the applicable portion of the award not so forfeited. For the NEOs, these determinations will be made each year prior to the scheduled vesting date, based on the Core Earnings for the fiscal year ended prior to such vesting date. For the CEO, these determinations will be made prior to the scheduled vesting date at the end of the three-year vesting period, taking into account Core Earnings for each fiscal year within the period.
Core Earnings focuses on whether profits are being generated by our basic business, as opposed to other factors that may not reflect business fundamentals. The terms of the applicable award agreements define Core Earnings to mean the Companys net income available to common stockholders, excluding, on a tax-adjusted basis, the impact of (i) impairment or amortization of intangible assets, (ii) the build or release of the allowance for loan and lease losses, calculated as the difference between the provision for loan and lease losses and charge-offs, net of recoveries, and (iii) the change in the combined uncollectible finance charge and fee reserve. The Committee believes that Core Earnings is an appropriate performance metric to employ for these performance-based vesting provisions because the metric captures major operational costs and risks to the Companys business, including charge-offs, operating expenses, market and competitive risks and costs to maintain adequate levels of capital and liquidity. Because the metric is based on net income available to common stockholders, it also includes the impact of discontinued operations.
As described above, the performance share awards granted to the named executive officers employ Adjusted ROA as the performance metric, with the Companys performance assessed on the basis of Adjusted ROA relative to a comparator group consisting of companies in the KBW Index. Each of these performance share awards is subject to reduction in the event that the Companys Adjusted ROA for any fiscal year in the three-year performance period is not positive. These reductions will occur regardless of how well the Companys Adjusted ROA compares to its peers in the KBW Index. If the Company does not achieve positive Adjusted ROA for one year in the performance period, the total number of shares issued on the vesting date will be reduced by one-sixth. If the Company does not achieve positive Adjusted ROA for two years in the performance period, the total number of shares issued on the vesting date will be reduced by one-third. If the Company does not achieve positive Adjusted ROA for any of the three years in the performance period, the named executive officers will forfeit the entire award. In this manner, even if we outperform compared to the comparator group, the performance share awards are at risk of complete forfeiture if we do not achieve a threshold level of performance on an absolute basis.
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Adjusted ROA means the ratio, expressed as a percentage, of (a) the Companys net income available to common stockholders, excluding, on a tax-adjusted basis, the impact of impairment or amortization of intangible assets to (b) the Companys average tangible assets for the period. This metric is intended to reflect our earnings capacity by focusing on a component of our net income relative to our tangible assets.
Misconduct Clawback Provisions
Beginning with awards granted in January 2013, every incentive award granted to our executive officers includes a clawback provision designed to provide the Committee the authority to recover previously awarded compensation in the event that the Committee determines (i) there has been misconduct resulting in either a violation of law or of Company policy that has caused significant financial or reputational harm to the Company and (ii) either the executive committed the misconduct or failed in his or her responsibility to manage or monitor the applicable conduct or risks.
These clawback provisions have been designed to apply broadly, to a range of potential manifestations of misconduct at any level of the executives organization. The unvested portions of all applicable incentive awards will be subject to recovery and at risk of complete forfeiture. In each case, the Committee will determine the amount of compensation to recover, allowing the Committee to calibrate each recovery to the facts and circumstances giving rise to the need for such recovery.
In the event the Committee exercises the clawback provisions in the future, the Company intends to disclose the aggregate amount that the Committee has determined to recover, so long as the underlying event has already been publicly disclosed in the Companys filings with the SEC.
Financial Restatement Clawbacks
All performance share awards to our executive officers include a clawback that is triggered in the event that the Company issues a restatement of its financial statements, or announces that it expects to issue a restatement within three years after the vesting of an award. If an executive would have been entitled to fewer shares on the vesting date under the restated financial statements, the executive may be required to return to the Company the excess shares awarded to him or her or, in the event he or she has sold or otherwise transferred the shares, he or she may be required to return the net proceeds from the sale or transfer.
The Committee considers a number of factors in making compensation decisions with respect to the named executive officers. The Committee relies on a range of objective data including Company performance data, peer comparator group performance data, historical pay information, data on specific market practices and trends, stockholder feedback, and other relevant points of information to inform its business judgment. See Our Compensation Governance Cycle on page 42 for details regarding the Committees annual activities.
Use of Outside Consultants for CEO Compensation
The Committee engages FW Cook to assist in the design of the CEO compensation program. FW Cook assists the Committee in a number of ways, including proposing and evaluating a peer comparator group, gathering relevant compensation data from the peer comparator companies, discussing relevant market trends and context and developing recommendations on possible plan designs. See the discussion under Compensation Committee Compensation Committee Consultant in the Corporate Governance at Capital One section on page 27 for additional information about FW Cook.
Use of Outside Consultants for NEO Compensation
The Chief Human Resources Officer and other members of the Companys Human Resources department assist the CEO in developing compensation recommendations to the Committee for the NEOs. The Human Resources department typically uses multiple surveys as sources of market compensation data. FW Cook also provides
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additional market reference points that the Committee and the independent directors use when evaluating NEO compensation. Other outside consultants provide information to the Human Resources department regarding market practices and trends and research reports and provide subject matter expertise on specific concepts and technical issues related to executive compensation. However, these outside consultants do not recommend either the form or amount of compensation that is to be paid to the NEOs. The Human Resources department is responsible for analyzing the information obtained from the outside consultants and presenting it to the CEO. The CEO then considers all of the information provided by the Human Resources department and the Chief Human Resources Officer and makes his compensation recommendations for the NEOs to the Committee and the independent directors.
Management does not have a contractual arrangement with any compensation consultant to determine or recommend compensation programs for the NEOs. A consultant from FW Cook is present at Committee meetings during which CEO and NEO compensation is discussed and provides market data as well as an independent perspective regarding CEO and NEO compensation practices. FW Cook has no other engagement with, and performs no other services for, Capital One besides the services described above.
The Committee reviews data from a group of peer comparator companies within the financial services industry. These organizations are intended to represent the marketplace of companies with whom Capital One competes for business and for executive talent.
FW Cook plays a lead role in evaluating the peer comparator group on an annual basis. Each year, a consultant from FW Cook presents a comprehensive report to the Committee that highlights size, scope and performance information from the peer comparator companies across a variety of metrics. The Committee specifically considers the Companys percentile rank versus peer comparator companies across the following financial metrics:
After reviewing this information, the Committee recommends a final peer comparator group to the independent directors for approval. The peer comparator group is reviewed each year and adjusted, as appropriate, so that the size, scope, performance and business focus of the peer comparator companies reflect Capital Ones competitive environment. For 2016, the peer comparator group included the following companies:
American Express |
Discover Financial Services | Regions Financial | ||||||
Bank of America Corporation |
Fifth Third Bancorp | SunTrust Banks | ||||||
BB&T Corporation |
J.P. Morgan Chase | U.S. Bancorp | ||||||
Citigroup |
PNC Financial Services | Wells Fargo & Company |
The Committee believes that the peer comparator group reflects the competitive environment for the Company, particularly the performance and business focus of the companies in the peer comparator group and the competition for talent, and made this determination after considering, among other things, stockholder feedback as described earlier under Consideration of 2016 Say on Pay Vote. The Committee determined to maintain the same peer comparator group for purposes of designing the 2017 compensation programs, and approved the comparator group in July 2016.
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Typically, compensation data from the peer comparator group is used to inform the Committees determination of the total compensation target values for the named executive officers. As of December 31, 2016, Capital One was positioned at or near the median of the peer comparator group in terms of total assets, loans, deposits, revenues, net income, and market value.
In addition to considering market data from our peer comparator group (when available), the Committee also considers information contained on total compensation tally sheets for the CEO and each NEO. The tally sheets summarize multiple components of current and historical compensation, as well as the potential value of post-termination arrangements. The tally sheets are just one point of information used by the Committee in the process of determining CEO and NEO compensation. They help the Committee understand the historical context that is relevant to current compensation decisions, such as the CEO and each NEOs accumulated equity value. The tally sheets also help the Committee assess the potential downstream consequences of its decisions, such as the potential value to be received by the CEO and each NEO upon separation due to a change of control, retirement or other termination scenarios.
Pension and Non-Qualified Deferred Compensation Plans
Capital One does not have any active pension plans for the NEOs. We offer a voluntary, non-qualified deferred compensation plan that restores participating NEOs, excluding the CEO, to the level of savings they would have achieved if they had not been impacted by IRS limits governing our qualified 401(k) plan. It also allows the NEOs, excluding the CEO to defer additional pre-tax compensation in order to save for retirement.
Capital One annually reviews programs and practices at our peer comparator companies and across the financial services industry. We also review changes in the legal and regulatory environment pertaining to retirement programs. Each of our named executive officers participated in Capital Ones Voluntary Non-Qualified Deferred Compensation Plan (Plan) in 2016. Details of the Plan can be found under Capital Ones Voluntary Non-Qualified Deferred Compensation Programs on page 78.
Capital One typically does not enter into defined term employment agreements with the named executive officers in order to maintain maximum flexibility in establishing separation terms at the appropriate time and considering their current circumstances. The Committee retains full discretion to approve employment agreements on an exception basis and has done so for exceptional circumstances in the past.
Each named executive officer is a party to an agreement providing certain benefits if his employment terminates in connection with a change of control as well as compensation and benefits protections during the two year period following the change of control. The Committee determined that such agreements were appropriate based on their prevalence within the banking and financial services industry and given the dynamic nature of merger and acquisition activity among these institutions.
The change of control agreements define compensation and benefits payable to named executive officers in certain merger and acquisition scenarios, giving them some degree of certainty regarding their individual outcomes in these circumstances. The Committee believes these agreements allow the named executive officers to remain neutral and consider a full range of decisions that are focused on maximizing stockholder value. The change of control agreements are also intended to allow Capital Ones businesses to operate with minimal disruption in the event of a change of control by providing each named executive officer with an incentive to remain in his or her leadership role up to and beyond the transaction date. In addition to compensation and benefits protections during a two-year protection period after a change of control, the named executive officers are entitled to severance-type benefits under the agreements if their employment is actually terminated as a result of (or in anticipation of) certain merger and acquisition scenarios.
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Both eligibility for participation and the structure of payments under these agreements are designed to be aligned with market practice in the banking and financial services industry. Our program is designed so that our stockholders are not faced with disproportionate severance costs that may impair potential merger opportunities. In addition, our change of control agreements for executive officers do not provide for excise tax gross-up payments. The program also supports our ability to attract and retain talented executives by providing them with a competitive level of benefits.
Projections of potential payouts to the named executive officers under these agreements are included in the total compensation tally sheets reviewed by the Committee on an annual basis. Although the potential change of control payouts do not necessarily impact annual decisions on NEO pay, reviewing this information allows the Committee to fully understand the downstream implications of its decisions and the resulting impact to the Company and its stockholders.
Post-Employment Compensation Practices
The CEO has no employment or severance arrangement with the Company other than the change of control agreement as described above. If an NEO, excluding the CEO, separates from Capital One, he or she is entitled to receive the amounts set forth in the Companys Executive Severance Plan, which provides for a payment of up to 30% of the NEOs current target total compensation plus partially subsidized health, dental and vision benefits through COBRA, term life continuation and outplacement services. The Committee may exercise its business judgment in approving additional amounts in light of all relevant circumstances, including the NEOs term of employment, past accomplishments, reasons for separation from the Company, potential risks and the NEOs willingness to restrict his or her future action(s), such as through an agreement not to compete or solicit the Companys customers or employees. Capital One has asked certain NEOs to enter into various agreements that contain restrictive covenants related to confidentiality, non-competition, non-solicitation and ownership of work product. For additional information, see Restrictive Covenants in the Named Executive Officer Compensation section beginning on page 80. Upon retiring from the Company, employees are generally entitled to receive certain retiree medical benefits, including subsidized medical benefits for qualified individuals.
Stock Ownership and Retention Requirements
Consistent with their responsibilities to our stockholders, the executive officers are required to maintain a significant financial stake in the Company. To this end, the CEO and the NEOs must own shares of Capital One stock with a fair market value of at least the following annual cash salary multiples:
Role | Salary Multiple | |||||
CEO |
5X | |||||
Other NEOs and Executive Officers |
3X |
Given that the CEOs compensation program does not include a base salary, his ownership requirement is based on a notional salary established by the Committee and the independent directors, which is currently $1,000,000.
Ownership requirements may be fulfilled using the following shares:
| Shares owned without restriction; |
| Unvested restricted stock; |
| Unvested stock-settled RSUs; |
| Shares acquired through the Associate Stock Purchase Plan; and |
| Shares owned through Capital Ones 401(k) Plan. |
The Committee reviews the guidelines and monitors the named executive officers compliance with them. New executive officers are given two years from the date of promotion to or appointment as an executive officer to
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comply with these requirements. In the event that an executive officer is not in compliance with these requirements, the Committee has the right to take action, including reducing the executive officers compensation. The named executive officers are currently in compliance with this requirement.
In addition, the Company has stock retention requirements for certain equity awards made to the named executive officers. Each executive must hold 50% of the after-tax net shares acquired upon the vesting of performance share awards, restricted stock, and stock-settled RSUs (i) during the executives term of employment with Capital One, or (ii) prior to the first anniversary of the executives separation from Capital One, for one year after the vesting of such award. These stock ownership and retention requirements apply to all of our executive officers.
Prohibition of Hedging and Speculative Trading Activities
All of Capital Ones executive officers and directors are prohibited from engaging in short sales, hedging transactions or speculative trading in derivative securities of Capital One stock and from using their Capital One stock in a margin account or pledging Capital One stock as collateral for a loan.
Capital One strives to maintain equity grant practices that demonstrate high standards of corporate governance. Annual incentive awards are approved by the Committee and the independent directors (or by delegated authority to the Chief Human Resources Officer for certain employees who are not executive officers) at regularly scheduled meetings in the first quarter of each year. The date of grant is the actual date on which the Committee approves the awards. The Committee may grant awards of restricted stock, restricted stock units, stock options or other equity awards outside of the annual incentive cycle. The Committee has delegated authority to the CEO to award restricted stock and to the Chief Human Resources Officer to award stock-settled and cash-settled RSUs (but not options or other equity awards) to employees who are not executive officers, subject to a maximum amount of $2 million for any employee in any one year. These awards are designed to be used for new hires and for special programs designed by management to incentivize and reward current employees of the Company. The Committee reviews all grants made by delegation at least once per year.
With respect to awards of stock options, the exercise price is always the Fair Market Value of the Companys stock on the date of grant. Under the terms of our 2004 Stock Incentive Plan, Fair Market Value is equal to the closing price of the Companys common stock on the date of grant.
The Company does not seek to time equity grants to take advantage of material non-public information and in no event is the grant date set to a date that is prior to the date of approval.
The Committee carefully considers the tax impacts of its compensation programs on the Company, as well as on its executives. To maintain flexibility in compensating executive officers, the Committee does not require all compensation to be paid or awarded in a tax-deductible manner. However, it is the Committees intent to maximize tax deductibility to the extent reasonable, provided the Companys programs remain consistent with the Companys overall executive compensation objectives.
With respect to the named executive officers (other than the Chief Financial Officer), Section 162(m) of the Internal Revenue Code limits the federal tax deduction for compensation paid to the executive to $1 million. Amounts in excess of $1 million are also eligible for the deduction if the compensation qualifies as performance-based. The Companys 2004 Stock Incentive Plan provides for the establishment of specific performance thresholds to be tied to equity-based awards that may allow these awards to qualify as performance-based for the purposes of 162(m).
The following awards were granted in February 2016 for the 2015 performance year to executive officers of the Company, including the named executive officers: performance share awards, RSUs (other than the RSUs representing a portion of base salary) and the deferred cash bonus to the CEO. These grants were made following a determination by the Committee and the independent directors that a performance threshold was met.
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Under this performance threshold, which had been established in January 2015, the CEO and NEOs would receive these awards only if the Company achieved positive Core Earnings ROA from Continuing Operations for the 2015 fiscal year. For purposes of this performance metric, Core Earnings ROA from Continuing Operations means the ratio, expressed as a percentage, of (A) the Companys Core Earnings from Continuing Operations for the 2015 fiscal year to (B) the Companys average total assets for the period. Core Earnings from Continuing Operations means the Companys net income from continuing operations, excluding, on a tax-adjusted basis, the impact of (i) impairment or amortization of intangible assets, (ii) the build or release of the allowance for loan and lease losses, calculated as the difference between the provision for loan and lease losses and charge-offs, net of recoveries, and (iii) the change in the combined uncollectible finance charge and fee reserve. The Companys Core Earnings ROA from Continuing Operations for fiscal year 2015 was positive. Therefore, the Company expects the awards made in February 2016 to be tax-deductible as performance-based compensation.
In February 2016, the Committee and the independent directors again established a performance threshold that the Company had to meet in order for the following awards to be granted for the 2016 performance year to executive officers of the Company, including the named executive officers: performance share awards, RSUs (other than the RSUs representing a portion of base salary) and the deferred cash bonus to the CEO. Under this performance threshold, the CEO and NEOs would receive these awards only if the Company achieved positive Core Earnings ROA from Continuing Operations for the 2016 fiscal year. For purposes of this performance metric, Core Earnings ROA from Continuing Operations means the ratio, expressed as a percentage, of (A) the Companys Core Earnings from Continuing Operations for the 2016 fiscal year to (B) the Companys average total assets for the period. Core Earnings from Continuing Operations has the same meaning as described in the preceding paragraph. The Companys Core Earnings ROA from Continuing Operations for fiscal year 2016 was positive. Therefore, the Company expects the awards made in February 2017 to be tax-deductible as performance-based compensation.
The Company also expects that all stock options awarded in 2016 or for the 2016 performance year to the CEO and NEOs will be deductible as performance-based compensation.
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Section VI Named Executive Officer Compensation
The Summary Compensation Table below provides information about compensation for the fiscal years ended December 31, 2016, 2015 and 2014 for the named executive officers. As discussed in the Compensation Discussion and Analysis section beginning on page 40, our executive compensation program is heavily weighted towards equity-based and at-risk elements of compensation. Under SEC rules, equity-based compensation is reported below in the year in which it is awarded, which may not correlate to the year for which it is paid.
With respect to the compensation reported below for our Chief Executive Officer:
∎ | 84% of the CEOs total compensation is equity-based and at-risk to the performance of the Companys stock price, with 100% of his compensation deferred for a three-year period. |
∎ | Amounts shown in the table below for the CEO for 2016 represent stock options, performance shares, and stock-settled RSUs granted in February 2016 and a deferred cash bonus awarded in February 2017 for 2016 performance. The CEO also was granted cash-settled RSUs in February 2017 for the 2016 performance year, which are not shown in the table below. |
∎ | Amounts shown in the Stock Awards column for 2016 also include cash-settled RSUs granted to the CEO in February 2016 for the 2015 performance year. |
With respect to the compensation reported below for the NEOs other than the CEO:
∎ | Base salary comprised between 35% and 45% of total target compensation. |
∎ | Each NEO other than the CEO received a portion of his or her 2016 base salary in cash that was paid throughout the year and a portion in cash-settled RSUs that were granted in February 2016 and settled in cash in February 2017. These cash-settled RSUs are included in the table below in the Stock Awards column for 2016. |
∎ | Amounts shown for 2016 in the table below also include stock options, performance shares, stock-settled RSUs, and cash-settled RSUs granted in February 2016 for the 2015 performance year. The NEOs other than the CEO also were granted equity awards in February 2017 for the 2016 performance year, which are not shown in the table below. The NEOs were not eligible for cash bonuses for 2016. |
Amounts paid to the CEO and the other NEOs in 2016 for other compensation and benefit programs are listed under the Change in Pension Value and Non-Qualified Deferred Compensation Earnings and All Other Compensation columns. The details of these program amounts are provided in the footnotes.
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The footnotes to the table below provide additional explanation regarding compensation attributable to each performance year. Further information on the timing of awards under the 2016 compensation programs for the CEO and the other NEOs can be found under CEO Compensation Components and NEO Compensation Components in the Compensation Discussion and Analysis section beginning on pages 45 and 54, respectively.
Name and Principal Position |
Year | Salary (6) | Bonus (7) | Stock Awards (8) |
Option Awards (9) |
Change in Pension Value and Non- Qualified Deferred Compensation Earnings (10) |
All Other Compensation (11) |
Total | ||||||||||||||||||||||||
Richard D. Fairbank Chair, CEO and |
2016 | $0 | $2,677,500 | $12,285,042 | $1,750,003 | $3,407 | $205,185 | $16,921,137 | ||||||||||||||||||||||||
2015 | $0 | $2,677,500 | $13,440,028 | $1,750,000 | $3,357 | $144,289 | $18,015,174 | |||||||||||||||||||||||||
2014 | $0 | $4,410,000 | $13,343,815 | $1,750,000 | $3,195 | $129,464 | $19,636,474 | |||||||||||||||||||||||||
R. Scott Blackley Chief Financial Officer (2)(3) |
2016 | $617,769 | $0 | $2,597,024 | $0 | | $132,046 | $3,346,839 | ||||||||||||||||||||||||
Stephen S. Crawford Former CFO, |
2016 | $1,592,692 | $0 | $5,463,891 | $861,334 | | $280,676 | $8,198,593 | ||||||||||||||||||||||||
2015 | $1,549,462 | $0 | $6,039,153 | $916,676 | | $272,031 | $8,777,322 | |||||||||||||||||||||||||
2014 | $1,526,538 | $0 | $5,376,001 | $755,714 | | $282,002 | $7,940,255 | |||||||||||||||||||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary (2) |
2016 | $1,016,538 | $0 | $3,487,369 | $494,803 | $778 | $219,255 | $5,218,743 | ||||||||||||||||||||||||
2015 | $988,500 | $0 | $3,661,947 | $478,405 | $785 | $199,231 | $5,328,868 | |||||||||||||||||||||||||
2014 | $974,692 | $0 | $3,708,724 | $478,413 | $842 | $200,481 | $5,363,152 | |||||||||||||||||||||||||
Frank G. LaPrade, III |
2016 | $974,577 | $0 | $3,329,446 | $530,369 | | $193,202 | $5,027,594 | ||||||||||||||||||||||||
Sanjiv Yajnik |
2016 | $962,654 | $0 | $3,300,705 | $468,416 | | $203,132 | $4,934,907 | ||||||||||||||||||||||||
2015 | $934,462 | $0 | $3,439,765 | $448,606 | | $219,681 | $5,042,514 | |||||||||||||||||||||||||
2014 | $912,923 | $0 | $3,477,040 | $448,616 | | $191,306 | $5,029,885 | |||||||||||||||||||||||||
Ryan M. Schneider |
2016 | $1,211,462 | $0 | $4,408,204 | $731,408 | | $229,563 | $6,580,637 | ||||||||||||||||||||||||
2015 | $1,142,885 | $0 | $4,534,930 | $700,744 | | $227,635 | $6,606,194 | |||||||||||||||||||||||||
2014 | $1,116,462 | $0 | $4,251,285 | $609,345 | | $212,210 | $6,189,302 |
(1) | Mr. Fairbanks compensation for 2016 consisted of stock options, performance shares, stock-settled RSUs, and a year-end incentive opportunity (payable in deferred cash bonus and cash-settled RSUs), in addition to certain perquisites. Mr. Fairbank received a portion of his total compensation for 2016 in February 2016 (stock options, performance shares, and stock-settled RSUs), which is reflected in the table above for 2016. Mr. Fairbank received the remainder of his compensation for 2016 in February 2017 (the year-end incentive opportunity delivered partially in cash-settled RSUs and the remainder in deferred cash bonus). The portion of the year-end incentive opportunity delivered as deferred cash bonus to Mr. Fairbank in February 2017 is included in the table above, while the portion delivered as cash-settled RSUs is not. His compensation for 2015 included cash-settled RSUs granted in February 2016 (a portion of his 2015 year-end incentive opportunity), which are included in the table above for 2016. See CEO Compensation by Performance Year in the Compensation Discussion and Analysis section on page 51 for more information on how the Compensation Committee views compensation actions and to which year the compensation awards relate. |
(2) | For NEOs other than the CEO, compensation for 2016 consisted of cash base salary, stock options (other than Mr. Blackley), performance shares and three grants of RSUs (one representing a portion of base salary which settles in cash), in addition to certain perquisites. The cash-settled RSUs representing base salary are included in the table above for 2016, however the other equity-based awards for 2016 performance were granted in February 2017 and are not included in the table above. The stock options, performance shares, stock-settled RSUs and cash-settled RSUs granted in February 2016 for 2015 performance are included in the table above for 2016. See NEO Compensation by Performance Year in the Compensation Discussion and Analysis section on page 59 for more information on how the Compensation Committee views compensation actions and to which year the compensation awards relate. |
(3) | Mr. Blackley was appointed to the position of Chief Financial Officer in May 2016. As a result, his 2016 compensation reflects the position he held at the beginning of 2016: Executive Vice President and Controller of the Company. See below for more information regarding Mr. Blackleys 2016 compensation. Beginning with performance year 2017, Mr. Blackleys compensation program is consistent with the other non-CEO named executive officers. |
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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(4) | Mr. Crawford served as the Companys Chief Financial Officer from May 2013 until May 2016, when he became Head of Finance and Business Development. |
(5) | In November 2016, Mr. Schneider ceased to be an executive officer of the Company. He served as President, Card, from December 2007 to November 2016. |
(6) | The amounts shown in this column represent the cash portion of base salary for the NEOs. The remaining portion of base salary for 2016 was delivered in cash-settled RSUs, as described under Base Salaries in the Compensation Discussion and Analysis section on page 57, and is included in the Stock Awards column in the table above. |
(7) | The amount shown in this column for 2016 reflects Mr. Fairbanks deferred cash bonus for 2016 performance awarded in February 2017 as described under Year-End Incentive Opportunity in the Compensation Discussion and Analysis section on page 48. |
(8) | The amounts shown in this column for 2016 represent the grant date fair value of performance shares, stock-settled RSUs and cash-settled RSUs granted to the named executive officers in 2016, calculated in accordance with FASB ASC Topic 718. The grant date fair value of performance shares included in this column assumes a payout at the target performance level. For additional information, including performance share awards at maximum performance on a per executive basis, refer to footnote 3 to the Grants of Plan-Based Awards Table below. |
(9) | The amounts shown in this column for 2016 represent the grant date fair value of stock options granted to the named executive officers in 2016, calculated in accordance with FASB ASC Topic 718. For information on the valuation assumptions of these awards, refer to footnote 4 to the Grants of Plan-Based Awards Table below. |
(10) | The amounts shown in this column represent the change in the actuarial present value of the accumulated pension benefits for Messrs. Fairbank and Finneran under the Cash Balance Pension Plan and the Excess Cash Balance Plan. The interest crediting rate for the Cash Balance Pension Plan changes annually based on the average yield of 5-year Treasury Securities for the preceding 12 months. For the Excess Cash Balance Plan, the interest crediting rate changes monthly based on the Wall Street Journal Prime Rate. Earnings under the Voluntary Non-Qualified Deferred Compensation Plan were not above-market and therefore are not reported above. |
(11) | All other compensation consists of the following on a per executive basis: |
Named Executive Officer |
Auto (a) | Travel and Aircraft |
Health Screening |
Driver and Security |
Company Contributions to Defined Contribution Plans (b) |
Insurance (c) | Other (d) | |||||||||||||||||||||
Richard D. Fairbank |
$ | $ | $1,654 | $153,465(e) | $ | $19,320 | $30,746 | |||||||||||||||||||||
R. Scott Blackley |
$22,756 | $ | $ | $ | $100,638 | $3,652 | $5,000 | |||||||||||||||||||||
Stephen S. Crawford |
$15,955 | $ | $ | $ | $251,595 | $7,080 | $6,046 | |||||||||||||||||||||
John G. Finneran, Jr. |
$17,107 | $ | $1,900 | $10,987(f) | $164,895 | $19,320 | $5,046 | |||||||||||||||||||||
Frank G. LaPrade, III |
$19,557 | $ | $ | $6,908(f) | $159,315 | $5,855 | $1,567 | |||||||||||||||||||||
Sanjiv Yajnik |
$25,772 | $ | $3,106 | $265(f) | $156,705 | $11,280 | $6,004 | |||||||||||||||||||||
Ryan M. Schneider |
$20,810 | $ | $3,537 | $265(f) | $194,925 | $4,980 | $5,046 |
(a) | Represents the value attributable to personal use of Company-provided automobile benefits. The cost of automobile benefits is determined on an annual basis and includes, as applicable, annual car lease, automobile service fees, and other related miscellaneous expenses (such as fuel and maintenance). Mr. Fairbank does not participate in the Company-provided automotive benefit. |
(b) | Represents Company contributions under qualified and non-qualified deferred compensation programs and other supplemental executive retirement benefits. |
(c) | Represents life insurance premiums paid on behalf of the executives. |
(d) | Represents contributions made by Capital One to charitable organizations chosen by CEO (up to $30,000) and the other NEOs (up to $5,000), incidental expenses incurred in connection with corporate events. Additionally for Mr. Crawford, the total value includes a cash amount paid to him in connection with entering into an Amended and Restated Non-Competition Agreement with the Company in May 2016. For additional details regarding Mr. Crawfords Amended and Restated Non-Competition Agreement, see Non-Competition Agreements beginning on page 80. |
(e) | Represents costs attributable to personal use of a driver who operates Mr. Fairbanks personal vehicle and also provides for Mr. Fairbanks personal security ($76,529). Amount shown also includes aggregate cost to the Company for home security services ($76,936) for Mr. Fairbank. The percent of personal use of the drivers services is tracked throughout the calendar year and then applied to the full expense amount for personal security. |
(f) | Represents aggregate cost to the Company for home security services provided to executives. |
The Grants of Plan-Based Awards table provides details on equity incentive plan awards granted in 2016 including stock options, performance shares, cash-settled RSUs and stock-settled RSUs.
The columns reporting Estimated Future Payouts Under Equity Incentive Plan Awards, All Other Stock Awards and All Other Option Awards relate to Capital Ones equity-based incentive awards to the named executive officers.
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SECTION VI NAMED EXECUTIVE OFFICER COMPENSATION |
2016 Grants to CEO
For 2016, awards granted to the CEO are comprised of stock options, performance shares, and stock-settled RSUs granted in February 2016 as part of the CEOs 2016 compensation program and cash-settled RSUs granted in February 2016 for 2015 performance.
Stock Options. The stock options become exercisable on February 15, 2019 and expire in ten years from the grant date.
Performance Shares. The performance shares will be issued based on the Companys Adjusted ROA over the three-year period from January 1, 2016 through December 31, 2018, relative to the KBW Bank Sector index, excluding custody banks. The total value delivered at vesting will be reduced if for any of the years in the three-year performance period the Company does not achieve positive Adjusted ROA, regardless of how well the Company compares to its peers in the KBW Bank Sector index over the performance period. See 2016 CEO Compensation Program in the Compensation Discussion and Analysis section beginning on page 46 for more details on the performance share awards. Dividend equivalents are accrued on the performance shares at the same time as dividends are paid out to the Companys other stockholders and are paid out as additional shares only on the performance shares that actually vest based on the results certified by the Compensation Committee.
Cash-Settled Restricted Stock Units. The cash-settled RSUs and stock-settled RSUs vest in full on February 15, 2019. The cash-settled RSUs settle in cash based on the average closing price of the Companys common stock for the 15 trading days preceding the vesting date. Dividend equivalents are accrued on the cash-settled and stock-settled RSUs at the same time as dividends are paid to the Companys other stockholders and are paid at the time of vesting, adjusted for performance-based vesting results.
2016 Grants to NEOs (other than the CEO)
For 2016, the awards granted to NEOs other than the CEO are comprised of stock options, performance shares, cash-settled RSUs, and stock-settled RSUs granted in January 2016 for the 2015 performance year and cash-settled RSUs granted in January 2016 as a portion of 2016 base salary (as described under Base Salaries in the Compensation Discussion and Analysis section on page 57). Due to his mid-year promotion, Mr. Blackley did not receive stock options in 2016.
Stock Options. The stock options become exercisable in three equal annual installments, beginning on February 15 of the year after the date of grant, and expire in ten years from the grant date.
Performance Shares. The terms of the performance shares for the other NEOs are substantially the same as the terms of the CEOs performance shares described above. Dividend equivalents are accrued on the performance shares at the same time as dividends are paid to the Companys other stockholders and are paid out as additional shares only on the performance shares that actually vest based on the results certified by the Compensation Committee.
Stock-Settled Restricted Stock Units. The stock-settled RSUs (excluding Mr. Blackleys promotional award) vest in three equal annual installments beginning on February 15 of the year after the date of grant. Mr. Blackleys promotional award vests in four equal annual installments beginning one year after the date of grant. Dividend equivalents are accrued on the stock-settled RSUs at the same time as dividends are paid to the Companys other stockholders and are paid at the time of vesting, adjusted for performance-based vesting results.
Cash-Settled Restricted Stock Units. The cash-settled RSUs representing a portion of base salary vested in full on January 1, 2017 and settled in cash on February 15, 2017 (Payment Date) based on the average closing price of the Companys common stock for the 15 trading days preceding the payment date. The other cash-settled RSUs vest in three equal annual installments beginning on February 15 of the year after the date of grant and settle in cash based on the average closing price of the Companys common stock for the 15 trading days preceding the vesting date. Dividend equivalents are paid on the cash-settled RSUs at the same rate and at approximately the same time as dividends are paid to the Companys other stockholders.
CAPITAL ONE FINANCIAL CORPORATION
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2017 PROXY STATEMENT
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SECTION VI NAMED EXECUTIVE OFFICER COMPENSATION |
The annual awards of stock-settled RSUs (as well as cash-settled RSUs for the CEO) and stock options reported below are also subject to performance-based vesting provisions that are associated with Core Earnings. As a result, the total number of shares delivered at vesting will be reduced if the Company does not achieve certain performance thresholds during the three-year vesting period. See Additional Performance Conditions and Recovery Provisions in the Compensation Discussion and Analysis section beginning on page 60 for more details on the performance-based vesting provisions.
Name and Principal Position |
Award Type | Date of Grant (1) |
Estimated Future Payouts Under Equity Incentive Plan Awards |
All Other Stock Awards: Number of Shares of Stock or Units |
All Other Option Awards: Number of Securities Underlying Options |
Exercise or ($/Sh) |
Grant Date Fair Value of Stock and Option Awards | |||||||||||||||||||||||||
Target | Maximum | |||||||||||||||||||||||||||||||
Richard D. Fairbank |
Performance Shares (3) | 2/4/2016 | 137,298 | 205,947 | | | | $8,750,002 | ||||||||||||||||||||||||
Stock Options (4) | 2/4/2016 | | | | 106,973 | $63.73 | $1,750,003 | |||||||||||||||||||||||||
Cash-Settled RSUs (5) | 2/4/2016 | | | 28,009 | | | $1,785,014 | |||||||||||||||||||||||||
Stock-Settled RSUs (6) | 2/4/2016 | | | 27,460 | | | $1,750,026 | |||||||||||||||||||||||||
R. Scott Blackley |