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Lockheed, Capital One Tweak CEO Pay

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By Tomoeh Murakami Tse
Washington Post Staff Writer
Wednesday, February 4, 2009

Two Washington area companies, Lockheed Martin and Capital One Financial, have altered their executive compensation plans amid increasing public fury over large Wall Street bonuses.

Defense contractor Lockheed Martin of Bethesda said it is raising chief executive Robert J. Stevens's target bonus and giving special stock awards to five executive vice presidents -- a move criticized by some as insensitive to the dire economic situation faced by Main Street.

At Capital One of McLean, Richard D. Fairbank, chairman and chief executive, won't be collecting a paycheck until the credit card giant reimburses taxpayers for the government bailout money, the company said yesterday.

Lockheed Martin's Stevens requested that he receive no increase in base salary for 2009. But under the amended plan, his target bonus -- subject to certain performance measures -- will increase to 150 percent from 125 percent of base salary; the maximum bonus he can receive is 293 percent of his salary. Stevens got $1.6 million in salary and $3.9 million in bonuses in 2007, according to Lockheed's most recent proxy statement.

"Moving the goal post to further enrich a CEO is probably not the wisest move in this environment," said Daniel Pedrotty, director of the AFL-CIO's office of investment. "It clashes with the spirit of the time."

In response to e-mailed questions, the company said yesterday that its directors determined that the increase was appropriate following a January review of Lockheed's "record performance, consistent excellence in 2008, and program commitments made to our customers."

"Recent survey information for CEO positions revealed that the existing target award percentage for Mr. Stevens was below market," according to the company's filing with the Securities and Exchange Commission last week.

The executives getting special awards of restricted stock, aimed at retaining talent, include Linda Gooden, who heads the information systems and global services unit, and Christopher E. Kubasik, who heads the electronic systems unit. Those two units accounted for the biggest portion of sales last year, which helped Lockheed, the largest defense contractor to the government, report a record $42.73 billion in sales. The executives must stay with the company over the three-year vesting period of the award or forfeit it.

Under the amended compensation plan at Capital One, Fairbank will not be allowed to cash out equity awards until the Treasury Department no longer holds any preferred shares in the company or one year after he retires, whichever comes earlier, according to a regulatory filing yesterday.

That likely means Fairbank won't be getting a paycheck for a while, because his compensation comprises equity grants. Since 1997, Fairbank has not received any salary or cash bonus.

Capital One last November received $3.6 billion from the Treasury Department under the government's $250 billion capital purchase program. In return, Treasury got preferred stock and warrants.

Under the amended compensation agreement, Fairbank could get up to 190,478 shares of common stock over the next three years, based on Capital One's total shareholder return compared to companies in the Standard & Poor's financial index. Based on the company's projections, the award is worth $2 million.

Fairbank also received 970,403 stock options, fully exercisable in 2012 if Treasury no longer has a stake in the company. The company values the award at $4 million. He could also receive restricted stock at the end of the year.

As public furor mounts over the billions awarded to employees of Wall Street firms, members of Congress are considering ways to rein in compensation, especially at financial institutions receiving government funds. With the expected economic downturn, analysts said yesterday they expected more companies to adopt restrictions on pay.


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