$1 Million Salary Is Double Median Amount
By David S. Hilzenrath
Washington Post Staff Writer
Monday, January 14, 2008
Sallie Mae, reeling from a series of setbacks, paid heavily to recruit a new chief financial officer last week.
The Reston-based student loan company agreed to pay John F. "Jack" Remondi an annual salary of $1 million. Remondi also was given a form of stock award that would deliver $2 million for every $1 increase in the company's share price, subject to certain conditions.
Remondi, 45, could earn an annual cash bonus of up to $3 million. His perks include up to two years of housing in Reston and $100,000 a year for personal use of corporate aircraft. If he is fired without cause within a year, he would receive at least $1.5 million in severance pay, according to a company filing with the Securities and Exchange Commission.
Remondi's $1 million salary was higher than any other chief financial officer's in a survey by the research firm SNL Financial of 2006 compensation at banks, thrifts and specialty lending companies with stock market valuations of more than $5 billion. It was more than double the $465,000 median base salary for the 23 CFOs in that group -- and 150 percent more than the $400,000 salary Remondi's predecessor at Sallie Mae received in 2006.
"Given the opportunities and challenges facing the company, it was important to offer a package that attracted the right talent," Sallie Mae spokeswoman Martha Holler said.
The size of the package raised some eyebrows.
"I think he's getting paid too much upfront on salary, and I think his severance is excessive, too," said SNL analyst Will Retzer.
"He must be in the miracle department," said executive compensation consultant Brian Foley. "He seems to be getting the best in every column in the menu."
In the SEC filing, Sallie Mae also reported that it is paying its new chairman, Anthony P. Terracciano, $600,000 annually, plus 500,000 stock options and 200,000 shares of restricted stock that vest over three years. The restricted stock was worth about $3.6 million when granted.
High executive compensation at Sallie Mae over the years has helped make federally subsidized student lenders a target for politicians.
Remondi, a former Sallie Mae executive vice president, rejoins the company from a Boston investment firm. He will have the additional title of vice chairman. Terracciano, 68, has held senior positions at several major banks.
The two were hired last week when Sallie Mae's share price was less than $18 and near its lowest point in the past several years -- $16.67 on Jan. 4. They were brought aboard as the company seeks to recover from several problems: the collapse of a planned buyout by private investors at $60 a share, cuts in federal subsidies to student loan companies and tightening of the credit Sallie Mae relies upon to fund its business.
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.
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