By David S. Hilzenrath
Washington Post Staff Writer
Saturday, March 25, 2006

The chairman and chief executive of Capital One Financial Corp., Richard D. Fairbank, gained almost $250 million from exercising stock options last year, the company reported last week.

Fairbank, 55, has built the McLean company into one of the nation's largest issuers of credit cards. Since 1997 he has chosen to forego all salary and bonus and instead take his pay in stock and options, company spokeswoman Julie Rakes said by e-mail.

In 2004, Fairbank exercised options worth $56.5 million, and in 2001, he reaped a gain of $142.2 million, according to company documents filed with the Securities and Exchange Commission.

Fairbank still held options worth more than $300 million at the end of 2005, the vast majority of which he could have cashed in, according to SEC documents. He also held Capital One shares worth about $200 million.

Fairbank's stock options, detailed in SEC documents filed last week, were reported Friday in the Wall Street Journal.

Options give an individual the right to buy stock at a set price, a valuable perk when the stock price rises.

All but 6,180 of the more than 3.6 million options Fairbank exercised last year were granted in 1995 and were set to expire last year, Rakes said.

David L. Yermack, an associate professor of finance at New York University's Stern School of Business, said it is rare for top executives to hold onto their options for a full 10-year term. "Most people tend to exercise early and take their money off the table," Yermack said, adding that Fairbank's approach appears to have been a vote of confidence in the company's stock. However, why Fairbank was awarded that many options "is a fair question," said Yermack, who studies executive compensation.