2005 Compensation For Top-Earning Executives Grew With Stock Option Awards

Capital One's profit rose 17.2 percent last year, a middle-of-the-pack increase relative to other companies in the compensation survey. The company ranked 70th out of 107 in total return to shareholders over the past five years and 46th last year. Capital One's five-year return was 32.6 percent and its one-year return was 2.7 percent.

The compensation committee of Capital One's board said in an SEC filing that Fairbank's compensation package "is an important component of retaining a successful and highly talented senior executive."

Ranked third in total compensation was Rothblatt, the chairman, chief executive and founder of biotech firm United Therapeutics. Rothblatt's $30.3 million in stock option grants last year included the reissuance of older options on more favorable terms, plus options from 2004 that were delayed so she could take advantage of the reissuance.

An option gives the holder the right to purchase stock at a fixed "exercise" price. The usual objective is to reward the holder if the stock's market price climbs above that level.

With the price of its stock sagging below the exercise price on many previously awarded options, United Therapeutics reduced the exercise price. It was the second time in recent years that United Therapeutics lowered the bar, though Rothblatt was excluded from the earlier repricing.

The compensation committee of the United Therapeutics board "determined that the repricing of Dr. Rothblatt's stock options in 2004 was appropriate to enhance the retention of Dr. Rothblatt and further align her interests with that of our shareholders," company spokesman Andrew Fisher said in an e-mail.

The survey's top 10 executives in total compensation last year included two from Sprint Nextel, the phone company; one from Freddie Mac, the government-chartered mortgage finance company recovering from massive accounting errors and manipulations; and one each from major defense contractors General Dynamics Corp. and Lockheed Martin Corp.

Dale B. Wolf of the HMO company Coventry Health Care Inc., who led the 2004 rankings with $32.3 million in total compensation -- including an especially large option grant that accompanied his elevation to chief executive -- slipped to 12th on the 2005 list with $13.1 million.

Executives of XM Satellite Radio Holdings Inc. took a much steeper tumble. Hugh Panero and Gary Parsons, who ranked third and fourth in 2004 on the strength of large option grants, fell to 249th and 314th respectively on the 2005 list. They received no new options in 2005.

Companies generally described options as a form of incentive pay. In many cases, option recipients already had major incentives to help their companies succeed because they already held substantial stakes in those companies.

Fitzpatrick, who joined Sallie Mae in 1998, ended the year with unexercised options worth $96.3 million, most of which he was free to exercise. Capital One's Fairbank ended the year with $306.3 million in unexercised options, the vast majority of which he could have cashed in.

Some of the Washington area's best known companies, such as the Carlyle Group, an investment firm, and candymaker Mars Inc., are not in the study because they are privately held and do not disclose compensation.