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Sallie Mae Pays Price To Hire New CFO
New CFO Jack Remondi worked previously for the student lender.
(David Scull - Bloomberg News)
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Chief executive Albert L. Lord, who had also been serving as chairman, exacerbated the company's problems by leaving questions unanswered in a recent conference call with investors.
Lord was recently awarded a two-year contract with an annual $3 million salary and a stock appreciation award covering 4.5 million shares. But Lord's November award, made when the stock was at $36.87, requires the stock price to rebound significantly before he receives any gain. The grant, which is much like a stock option, could be cashed in at a gain of $4.5 million for each $1 the share price rises above $46, but only if the stock hits targets of $52 and higher.
Remondi's stock award has much lower hurdles. It would reward him for increases in the stock price from a starting point of $17.30 per share and could be redeemed as soon as a year from now, provided that the stock closes at least as high as $20.76 for five consecutive trading days.
"It seems like it should be a fairly easy hurdle for the stock to overcome," said Sameer Gokhale, an analyst at the investment firm Keefe, Bruyette & Woods. "I think they needed to give Jack Remondi an incentive to come on board quickly," he said.
Sallie Mae shares closed Friday at $20.18, up 41 cents.
If Remondi is still with the company in a year, the size of the award would grow by 50 percent, so that it would pay an additional $1 million per dollar of stock increase. The extra award would vest as early as January 2010, provided the stock reached $24.22.
The stock arrangement is "intended to align his interests with shareholders'," the company spokeswoman said.
