SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Capital One Financial Corporation
(Name of Registrant as Specified In Its Charter)
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NOTICE OF CAPITAL ONE FINANCIAL CORPORATION’S
2014 ANNUAL STOCKHOLDER MEETING
Important Notice Regarding the Availability of Proxy Materials for
The Stockholder Meeting To Be Held On May 1, 2014
The Proxy Statement and Annual Report to Stockholders are available atwww.proxyvote.com
The Annual Stockholder Meeting of Capital One Financial Corporation (“Capital One” or the “Company”) will be held at Capital One’s headquarters, 1680 Capital One Drive, McLean, Virginia 22102, on May 1, 2014, at 10:00 a.m.
Items of Business
As a stockholder you will be asked to:
Record Date
You may vote if you held shares of Capital One common stock as of the close of business on March 6, 2014.
Proxy Voting
Your vote is important. You may vote your shares in person at the Annual Stockholder Meeting, via the Internet, by telephone or by mail. Please refer to the section “How do I vote?” for detailed voting instructions. If you choose to vote in person at the Annual Stockholder Meeting, via the Internet or by telephone, you do not need to mail in a proxy card.
Annual Meeting Admission
Due to space limitations, attendance is limited to stockholders and one guest each. Admission to the meeting is on a first-come, first-served basis. Registration begins at 9:00 a.m. A valid government-issued picture identification and proof of stock ownership as of the record date must be presented in order to attend the meeting. If you hold Capital One stock through a broker, bank, trust or other nominee, you must bring a copy of a statement reflecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder, you must present a legal proxy (described below). Cameras, recording devices and other electronic devices are not permitted.
We look forward to seeing you at the meeting.
On behalf of the Board of Directors,
John G. Finneran, Jr.
Corporate Secretary
Capital One Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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NOTICE OF CAPITAL ONE FINANCIAL CORPORATION’S
2015 ANNUAL STOCKHOLDER MEETING
Important Notice Regarding the Availability of Proxy Materials for
The Stockholder Meeting To Be Held On April 30, 2015
The Proxy Statement and Annual Report to Stockholders are available atwww.proxyvote.com
The Annual Stockholder Meeting of Capital One Financial Corporation (“Capital One” or the “Company”) will be held at Capital One’s headquarters, 1680 Capital One Drive, McLean, Virginia 22102, on April 30, 2015, at 10:00 a.m.
Items of Business
As a stockholder you will be asked to:
1. | Elect ten nominated directors, who are listed in the proxy statement, as directors of Capital One; |
2. | Ratify the Audit Committee’s selection of Ernst & Young LLP as independent auditors of Capital One for 2015; |
3. | Approve, on a non-binding advisory basis, Capital One’s 2014 Named Executive Officer compensation; |
4. | Approve amendments to Capital One’s Restated Certificate of Incorporation to allow stockholders to request special meetings of the stockholders; |
5. | Consider a stockholder proposal regarding special meetings of the stockholders, if properly presented at the meeting; and |
6. | Transact such other business as may properly come before the meeting. |
Record Date
You may vote if you held shares of Capital One common stock as of the close of business on March 5, 2015.
Proxy Voting
Your vote is important. You may vote your shares in person at the Annual Stockholder Meeting, via the Internet, by telephone or by mail. Please refer to the section “How do I vote?” for detailed voting instructions. If you choose to vote in person at the Annual Stockholder Meeting, via the Internet or by telephone, you do not need to mail in a proxy card.
Annual Meeting Admission
Due to space limitations, attendance is limited to stockholders and one guest each. Admission to the meeting is on a first-come, first-served basis. Registration begins at 9:00 a.m. A valid government-issued picture identification and proof of stock ownership as of the record date must be presented in order to attend the meeting. If you hold Capital One stock through a broker, bank, trust or other nominee, you must bring a copy of a statement reflecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder, you must present a legal proxy (described below). Cameras, recording devices and other electronic devices are not permitted.
We look forward to seeing you at the meeting.
On behalf of the Board of Directors,
John G. Finneran, Jr.
Corporate Secretary
Capital One Financial Corporation
1680 Capital One Drive
McLean, VA 22102
March , 201417, 2015
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SECTION XI – RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (ITEM 2 ON PROXY CARD) | 76 |
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Why did I receive a Notice Regarding the Internet Availability of Proxy Materials?
In accordance with rules of the Securities and Exchange Commission (“SEC”), instead of mailing printed copies of our proxy materials, we are furnishing the proxy materials to our stockholders via the Internet. This process will save the Company some of the cost of printing and mailing the proxy materials and will reduce the impact of our annual stockholder meetings on the environment. Accordingly, on or about March , 2014,17, 2015, we mailed to our stockholders a Notice Regarding the Internet Availability of Proxy Materials (the “Notice”). If you received a Notice, you will not receive a printed copy of the proxy materials unless you request one. The Notice provides instructions on how to access the proxy materials for Capital One’s 20142015 Annual Stockholder Meeting (the “Annual Meeting”) via the Internet, how to request a printed set of proxy materials and how to vote your shares.
What is the purpose of the proxy materials?
The Board of Directors of Capital One is providing you these materials in connection with the solicitation by Capital One’s Board of Directors of proxies to be voted at the Annual Meeting. All stockholders who held shares as of the close of business on March 6, 20145, 2015 (the “record date”), are entitled to attend the Annual Meeting and to vote on the items of business outlined in this proxy statement. If you choose not to attend the Annual Meeting, you may vote your shares via the Internet, by telephone or by mail.
How do I access the proxy materials?
The Notice provides instructions regarding how to view our proxy materials for the Annual Meeting online. As explained in greater detail in the Notice, to view the proxy materials and to vote, you will need to visitwww.proxyvote.com and have available your 12-digit16-digit control number(s) contained on your Notice.
How do I request paper copies of the proxy materials?
You may request paper copies of the 20142015 proxy materials by following the instructions listed atwww.proxyvote.com, by telephoning 1-800-579-1639 or by sending an e-mail tosendmaterial@proxyvote.com.
What is the difference between a record holder and a holder of shares in street name?
You are a record holder if you hold shares of Capital One common stock directly in your name through Capital One’s transfer agent, Computershare Trust Company, N.A. (“Computershare”).
If you hold shares of Capital One common stock through a broker, bank, trust or other nominee, then you are a holder of shares in street name. As a result, you must instruct the broker, bank, trust or other nominee about how to vote your shares. Under the rules of the New York Stock Exchange (“NYSE”), if you do not provide such instructions, the firm that holds your shares will have discretionary authority to vote your shares only with respect to “routine” matters, as described below.
Can I attend the Annual Meeting?
If you held shares of Capital One common stock as of the close of business on March 6, 2014,5, 2015, you may attend the Annual Meeting. Because seating is limited, only you and a guest may attend the meeting. Admission to the meeting is on a first-come, first-served basis. Registration begins at 9:00 a.m. You must present a valid government-issued picture identification and proof of Capital One stock ownership as of the record date. If you hold Capital One stock in street name, you must also bring a copy of a brokerage statement reflecting your stock ownership as of the record date. If you plan to attend as the proxy of a stockholder, you must present a legal proxy (described below). Cameras, recording devices and other electronic devices are not permitted.
Am I entitled to vote?
You are entitled to vote if you were the record holder of shares of Capital One common stock as of the close of business on March 6, 2014.5, 2015. All stockholders of record are entitled to one vote per share of common stock held for each matter submitted for a vote at the meeting.
If you hold your shares of Capital One common stock in street name, you may instruct your broker regarding voting your shares using the same methods described below under “How do I vote?”
On March 6, 2014,5, 2015, there were 549,458,166 shares of Capital One’s common stock issued and outstanding.
How do I vote?
By Internet
You may vote via the Internet by going towww.proxyvote.com and following the instructions on the screen. Have your Notice, proxy card (for record holders) or voting instruction form (for holders of shares in street name) available when you access the web page.
By Telephone
You may vote by telephone by calling the toll-free telephone number on the proxy card (1-800-690-6903), which is available 24 hours a day, and following the prerecorded instructions. Have your Notice or proxy card available when you call. If you hold your shares in street name, your broker, bank, trustee or other nominee may provide additional instructions to you regarding voting your shares by telephone.
By Mail
If you received your proxy materials by mail, you may vote by mail by completing the enclosed proxy card, dating and signing it and returning it in the postage-paid envelope provided.provided or returning it to Broadridge Financial Solutions, Inc. (“Broadridge”), Vote Processing, 51 Mercedes Way, Edgewood, NY 11717.
Time for Voting Your Shares By Internet, By Telephone or By Mail
You may vote via the Internet or by telephone up until 11:59 PM Eastern Daylight Time on April 30, 2014.29, 2015. If you vote by mail, your proxy card must be received by April 30, 2014.29, 2015.
In Person
If you are a record holder of shares of Capital One common stock, you may vote in person at the Annual Meeting. A record holder must present a valid government-issued picture identification and, if the shares are held in the name of an entity, evidence of valid authorization from that entity in order to attend the meeting. Stockholders of record also may be represented by another person at the Annual Meeting by executing a legal proxy designating that person as the proxy holder. Each stockholder may appoint only one proxy holder or representative to attend the Annual Meeting on his or her behalf. See “Can I attend the Annual Meeting?” above for more information regarding attending the Annual Meeting.
If you hold your shares of Capital One common stock in street name, you must bring a valid government-issued picture identification and a copy of a statement reflecting your stock ownership as of the record date in order to attend the meeting. You must also obtain a legal proxy from your broker, bank, trust or other nominee and present it to the inspector of elections with your ballot to be able to vote at the Annual Meeting. To request a legal proxy, please follow the instructions atwww.proxyvote.com.
What if I hold my shares in street name and I do not provide my broker, bank, trustee or other nominee
with instructions about how to vote my shares?
You may instruct your broker, bank, trustee or other nominee on how to vote your shares using the methods described above. If you do not vote via the Internet or by telephone and do not return your voting instructions to the firm that holds your shares prior to the Annual Meeting, the firm has discretion to vote your shares only with respect to Item 2 on the proxy card, which is considered a “routine” matter under NYSE rules. The election of
members of the Board of Directors and Items 3, 4 5 and 65 are not considered “routine” matters, and the firm that holds your shares will not have discretionary authority to vote your shares for these Items if you do not provide instructions
using one of the methods described above. Therefore, you are encouraged to return your voting instructions so that your shares are voted for non-routine matters at the Annual Meeting. If you hold shares in several different accounts, you must provide voting instructions for each account in order to authorize all of your shares to be voted.
How do I vote my 401(k) shares?
If you participate in the Capital One Associate Savings Plan, you may vote the number of shares equivalent to your interest in the Capital One Pooled Stock Fund as credited to your account on the record date. You will receive instructions on how to vote your shares via e-mail from Broadridge Financial Solutions, Inc. (“Broadridge”).Broadridge. The trustee of the Associate Savings Plan will vote your shares in accordance with your duly executed instructions if they are received by April 28, 2014.27, 2015. If you do not send instructions, the trustee will not vote the share equivalents credited to your account.
Can I revoke my proxy or change my vote?
Yes, you may revoke any proxy that you previously granted or change your vote by:
Your new vote or revocation must be submitted in accordance with the timeframes above under “Time for Voting Your Shares By Internet, By Telephone or By Mail.”
What constitutes a quorum?
A quorum of stockholders is necessary to transact business at the Annual Meeting. A quorum exists if the holders of a majority of the voting power of Capital One’s outstanding shares entitled to vote generally in the election of directors are present in person or represented by proxy. Abstentions and broker non-votes will be counted in determining if there is a quorum, but neither will be counted as votes cast.
What is a broker non-vote?
As described above, under NYSE rules, if you hold your shares in street name and you do not submit voting instructions to the firm that holds your shares, the firm has discretionary authority to vote your shares only with respect to “routine” matters. For non-routine matters, which include the election of directors and Items 3, 4 5 and 6,5, if you do not submit voting instructions, the firm that holds your shares will not have discretion to vote your shares. This is called a “broker non-vote.”
Who will count the vote?
Votes will be tabulated by Broadridge. The Board of Directors has appointed a representative of American Elections Services, LLC to serve as the Inspector of Elections.
Will a list of stockholders be made available?
Capital One will make a list of stockholders available at the Annual Meeting and, for ten days prior to the meeting, at our offices located at 1680 Capital One Drive in McLean, Virginia. Please contact Capital One’s Corporate Secretary at (703) 720-1000 if you wish to inspect the list of stockholders prior to the Annual Meeting.
How much did the solicitation cost?
Capital One will pay the costs of the solicitation. We have retained Innisfree M&A IncorporatedGeorgeson Inc. to assist us in the solicitation of proxies for an aggregate fee of $15,000,$12,500, plus reasonable out-of-pocket expenses. In addition to Capital One soliciting proxies via the Internet, by telephone and by mail, our directors, officers and employees may solicit proxies on our behalf, without additional compensation.
What is “householding?”
Under SEC rules, a single package of Notices may be sent to any household at which two or more stockholders reside if they appear to be members of the same family unless contrary instructions have been received. Each stockholder continues to receive a separate Notice within the package. This procedure, referred to as householding, reduces the volume of duplicate materials stockholders receive and reduces mailing expenses. Stockholders may revoke their consent to future householding mailings or enroll in householding by contacting Broadridge toll free at 1-800-542-1061 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. Capital One will deliver promptly, upon written or oral request, a separate copy of the proxy materials to any stockholder at a shared address to which a single copy was delivered. Stockholders who wish to receive a separate set of proxy materials now should contact Broadridge at the same phone number or mailing address.
What vote is necessary to approve each item?
All stockholders of record are entitled to one vote per share of common stock held for each nominee for director and for each other matter presented for a vote at the meeting.
Item 1 requests your vote for the election of ten candidates for director. Richard D. Fairbank, Patrick W. Gross, Ann Fritz Hackett, Lewis Hay, III, Benjamin P. Jenkins, III, Pierre E. Leroy, Peter E. Raskind, Mayo A. Shattuck III, Bradford H. Warner and Catherine G. West will each be elected as a director of Capital One if a majority of the votes cast in his or her election is voted in favor of such election. Capital One also maintains a “majority voting” policy, which requires that any director who fails to receive a majority of votes cast in favor of his or her election tender a resignation for the Board’s consideration. Cumulative voting for the election of directors is not permitted. For more information regarding Capital One’s director nomination process see page 15.
Item 2, the ratification of the Audit Committee’s selection of Ernst & Young LLP as independent auditors of the Company for 2015, will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal.
Item 3, the advisory approval of Capital One’s 2014 Named Executive Officer compensation, will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal.
Item 4, amending Capital One’s Restated Certificate of Incorporation to allow stockholders to request special meetings of the stockholders, will be approved if a majority of the shares of common stock outstanding are voted in favor of the proposal;
Item 5, the stockholder proposal regarding special meetings of the stockholders, will be approved if a majority of votes cast on the proposal are voted in favor of the proposal.
As described under “How do I vote?” on page 2, under NYSE rules, if you hold your shares in street name and you do not submit voting instructions to the broker, bank, trust or other nominee that holds your shares, the firm will only have discretionary authority to vote your shares with respect to Item 2. If you do not submit voting instructions, the firm that holds your shares will not have discretion to vote your shares with respect to Items 1, 3, 4 and 5. Abstentions and broker non-votes are not considered “votes cast” and thus do not have an effect on the outcome of the vote as to Items 1, 2, 3 and 5. With respect to Item 4, abstentions and broker non-votes will have the same effect as a vote against the proposal.
What are the Board of Directors’ recommendations?
If you properly submit a proxy without giving specific voting instructions, the individuals named as proxy holders will vote in accordance with the recommendations of the Board of Directors as follows:
FOR the election of Richard D. Fairbank, Patrick W. Gross, Ann Fritz Hackett, Lewis Hay, III, Benjamin P. Jenkins, III, Pierre E. Leroy, Peter E. Raskind, Mayo A. Shattuck III, Bradford H. Warner and Catherine G. West, as directors of Capital One (see page 75);
FOR the ratification of the Audit Committee’s selection of Ernst & Young LLP as independent auditors of the Company for 20142015 (see page 76);
FOR the approval of Capital One’s Third Amended and Restated 2004 Stock Incentive Plan (see page 78);
FOR the advisory approval of Capital One’s 20132014 Named Executive Officer compensation (see page 90)78);
FOR the approval of each of the amendmentsamendment to Capital One’s Restated Certificate of Incorporation to remove supermajority voting standards applicableallow stockholders to certain actionsrequest special meetings of the stockholders (see page 91)79); and
AGAINST the stockholder proposal regarding special meetings of the stockholders (see page 95)83).
Although the proposed amendment to Capital One’s Restated Certificate of Incorporation on page 79 and the stockholder proposal on page 83 concern the same subject matter, the terms and effects of each proposal differ. You should carefully read the descriptions of each proposal, and Capital One’s statement in opposition to the stockholder proposal. Stockholders may vote on both the proposed amendment to Capital One’s Restated Certificate of Incorporation and the stockholder proposal, and approval of the proposed amendment to Capital One’s Restated Certificate of Incorporation is not conditioned on approval or disapproval of the stockholder proposal.
The Board of Directors is not aware of any other matter that will be presented at the Annual Meeting. If any other matter is properly presented at the Annual Meeting, the persons named on the accompanying proxy card will, in the absence of stockholder instructions to the contrary, vote such proxy at their discretion.
What vote is necessary to approve each item?
All stockholders of record are entitled to one vote per share of common stock held for each nominee for director and for each other matter presented for a vote at the meeting.
Item 1 requests your vote for the election of ten candidates for director. Richard D. Fairbank, Patrick W. Gross, Ann Fritz Hackett, Lewis Hay, III, Benjamin P. Jenkins, III, Pierre E. Leroy, Peter E. Raskind, Mayo A. Shattuck III, Bradford H. Warner and Catherine G. West will each be elected as a director of Capital One if a majority of the votes cast in his or her election is voted in favor of such election. Capital One also maintains a “majority voting” policy, which requires that any director who fails to receive a majority of votes cast in favor of his or her election tender a resignation for the Board’s consideration. Cumulative voting for the election of directors is not permitted. For more information regarding Capital One’s director nomination process see page 16.
Item 2, the ratification of the Audit Committee’s selection of Ernst & Young LLP as independent auditors of the Company for 2014, will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal.
Item 3, the approval of Capital One’s Third Amended and Restated 2004 Stock Incentive Plan, will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal.
Item 4, the advisory approval of Capital One’s 2013 Named Executive Officer compensation, will be approved if a majority of the votes cast on the proposal are voted in favor of the proposal.
Items 5(a) through (c), three proposals amending Capital One’s Restated Certificate of Incorporation to remove supermajority voting standards applicable to certain actions, will each be approved if at least 80% of the shares of common stock outstanding vote in favor of the proposal, as described more specifically in each of the three parts of Item 5. For Item 5(c), the vote must also represent at least 80% of the voting power of the thenoutstanding common stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder (as defined in the Restated Certificate of Incorporation), as determined by the Board of Directors pursuant to the Restated Certificate of Incorporation. Approval of any one of the three parts of Item 5 is not conditioned upon approval of the other parts.
Item 6, the stockholder proposal, will be approved if a majority of votes cast on the proposal are voted in favor of the proposal.
As described under “How do I vote?” on page 2, under NYSE rules, if you hold your shares in street name and you do not submit voting instructions to the broker, bank, trust or other nominee that holds your shares, the firm will only have discretionary authority to vote your shares with respect to Item 2. If you do not submit voting instructions, the firm that holds your shares will not have discretion to vote your shares with respect to Items 1, 3, 4, 5 and 6. Abstentions and broker non-votes are not considered “votes cast” and thus do not have an effect on the outcome of the vote as to Items 1, 2, 3, 4 and 6. With respect to Item 5, abstentions and broker non-votes will have the same effect as a vote against the proposal.
Corporate Governance PrinciplesGuidelines and Code of Business Conduct and Ethics
Capital One is dedicated to strong and effective corporate governance principles and practices. The Board of Directors has adopted Corporate Governance PrinciplesGuidelines to formalize the Board’s governance practices and to provide its view of effective governance. Our Corporate Governance PrinciplesGuidelines embody many of our long-standing practices, policies and procedures, which collectively form a corporate governance framework that promotes the long-term interests of our shareholders,stockholders, ensures responsible decision-making and accountability, and fosters a culture that allows our Board and management to pursue Capital One’s strategic objectives. The Board reviews and periodically updates these principles and practices as legal, regulatory, and best practice developments evolve.
The Board has also adopted Capital One’s Code of Business Conduct and Ethics (the “Code of Conduct”), which applies to Capital One directors and associates, including Capital One’s Chief Executive Officer (“CEO”), Chief Financial Officer, Principal Accounting Officer and other persons performing similar functions. The Code of Conduct reflects Capital One’s commitment to honesty, fair dealing and integrity and guides the ethical actions and working relationships of Capital One’s directors, officers and associates with investors, current and potential customers, fellow associates, competitors, governmental entities, the media and other third parties with whom Capital One has contact.
The Board of Directors believes that these policies, principles and practices are vital to the future success and growth of Capital One and create a foundation for the ethical and effective functioning of the Board of Directors, its Committeescommittees and Capital One as a whole. They are also critical to preserving the trust of our stakeholders, including stockholders, associates, customers, suppliers, governmental entities and the general public. Capital One’s Corporate Governance PrinciplesGuidelines and the Code of Conduct, each as amended from time to time, are available free of charge on the Corporate Governance page of Capital One’s Internet site atwww.capitalone.com under “About Us/Investors.” Capital One will disclose on its website any amendment to the Corporate Governance Guidelines or the Code of Conduct, or any waiver under the Code of Conduct granted to any of its directors or executive officers.
Board Structure and Committee Composition
The Board of Directors oversees Capital One’s business and directs its management. The Board of Directors does not involve itself with the day-to-day operations and implementation of Capital One’s business. Instead, the Board of Directors meets periodically with management to review Capital One’s performance, risks and business strategy. Directors also regularly consult with management outside of formal meetings to keep themselves informed about Capital One’s progress.
The Board of Directors met twelvethirteen times during 2013.2014. Each incumbent director attended at least 75% of the aggregate of the meetings of the Board of Directors and the committees occurring during the year while they were members. In accordance with our Corporate Governance PrinciplesGuidelines and New York Stock Exchange Listing requirements, the Board has executive sessions of non-management directors without senior management on a regularly scheduled basis and no less than two times per year. In addition, at least one executive session of only independent directors without senior management is held annually. In 2013,2014, the Board met these requirements and the number of times non-management directors held executive sessions without senior management present exceeded the standard set forth in the Corporate Governance Principles.Guidelines. During these executive sessions, the non-management directors or independent directors, as the case may be, have complete access to such members of the Company’s senior executive management as they may request, including the Chief Financial Officer, General Counsel, Chief Risk Officer, Chief Internal Auditor, Chief Credit Review Officer and Chief Compliance Officer.
Capital One expects all of its directors to attend the Annual Meeting. In 2013, the2014, all ten directors who were continuing service after the Annual Meeting were present at the meeting.
Leadership Structure of the Board of Directors
Our Board has carefully considered the critical issue of Board leadership and believes that the leadership structure must be considered in the context of Capital One’s specific circumstances, culture, strategic objectives and challenges. The diverse backgrounds and experiences of our directors provide the Board with broad perspectives from which to determine the leadership structure that is best for Capital One and the long-term interests of Capital One’s shareholdersstockholders and other stakeholders. Our Corporate Governance PrinciplesGuidelines allow the roles of Chair and CEO to be filled by the same or different individuals, a policy which appropriately provides the Board with the flexibility to determine Capital One’s current leadership structure.
Mr. Fairbank founded Capital One and has served as CEO since shortly before Capital One’s initial public offering in late 1994 and Chair since early 1995. Given Mr. Fairbank’s role in the formation and growth of Capital One, the Board strongly believes that it is in the Company’s best interest to have him serve as the Chair and CEO, particularly given the Board’s recognition and implementation of strong independent leadership on the Board through an active and empowered Lead Independent Director and independent Board committee structure. Importantly, the Corporate Governance PrinciplesGuidelines provide for a Lead Independent Director who supports the Board in assuring effective governance in managing the affairs of the Board and Capital One. The Lead Independent Director is elected annually by the independent directors and is currently Ms. Hackett. The Lead Independent Director performs the following responsibilities:
With respect to executive sessions:
With respect to Board meetings and agendas:
With respect to other responsibilities related to the independent directors:
With respect to performance assessments:
In addition, if requested by major stockholders, the Lead Independent Director ensures that he or she is available for consultation and direct communication.
The Board of Directors has four standing Committees:committees: Audit, Risk, Compensation, and Governance and Nominating. Each of the Audit, Compensation, and Governance and Nominating Committees is composed solely of independent directors, and hasall four standing committees are led by a separate, independent chair. The Risk Committee is led by an independent chair. Detailed information on each Committeecommittee is contained below under “Committees of the Board of Directors.”
We believe that our existing Board leadership structure provides the most effective governance framework that allows our company to benefit from Mr. Fairbank’s knowledge and leadership while appropriately maintaining strong independent and effective oversight of our business and affairs as demonstrated by our empowered Lead
Independent Director, independent key committees that oversee the Company’s operations, risks, performance and business strategy, experienced and committed directors, and frequent executive sessions without management in attendance. This structure demonstrates for our associates, customers, stockholders, investors, regulators and other stakeholders that Capital One’s Board of Directors is committed to engaged, independent leadership and performance of its responsibilities. The Board of Directors believes that combining the Chair and Chief Executive OfficerCEO positions takes advantage of the talent and knowledge of Mr. Fairbank as the founder of Capital One and effectively combines the responsibilities for strategy development and execution with management of day-to-day operations. It also reduces the potential for confusion or duplication of efforts and provides clear leadership for Capital One. The Board of Directors believes that the combination of the Chair and the Chief Executive OfficerCEO roles, together with its strong governance practices, including its supermajority of independent directors and its clearly defined Lead Independent Director responsibilities, provides an appropriate balance among strategy development, operational execution and independent oversight of Capital One.
Board’s Role in Succession Planning
The Board is responsible for ensuring that a succession plan for the Chief Executive OfficerCEO exists. The succession plan is reviewed annually by the Board. Each year, as part of its succession planning process, the Board reviews the senior executive team’s experience, skills, competencies and potential to assess which executives possess or have the ability to develop the attributes that the Board believes necessary to lead and achieve the Company’s goals. Among other steps taken to promote this process, the two levels of executives below the Chief Executive Officer,CEO, which include all of the Chief Executive Officer’sCEO’s direct reports, often attend Board meetings and present to the Board, providing the Board numerous opportunities to interact with our senior management and assess their leadership capabilities. There is also available, on a continuing basis, the Chief Executive Officer’sCEO’s recommendation as to a successor should the Chief Executive OfficerCEO become unexpectedly unable to serve. The Board also reviews the Chief Executive Officer’sCEO’s successor recommendations on an annual basis.
Board’s Role in Risk Oversight
The Board of Directors believes that effective risk management and control processes are critical to Capital One’s safety and soundness, our ability to predict and manage the challenges that Capital One and the financial services industry face and, ultimately, Capital One’s long-term corporate success. Management is responsible for implementing Capital One’s risk assessment and management functions and for reporting to the Board of Directors with respect to the management of risk. The Board of Directors, in turn, both directly and through its committees, is responsible for overseeing management’s risk functions. In an effort to heighten Capital One’s risk management focus, as well as effectively respond to regulatory expectations, management enhanced its enterprise-wide risk management framework in 2013, which included a redesign of our risk appetite statements and metrics. The Board approves the Company’s strategic direction and overall risk appetite. The enterprise-wide risk management framework defines the Board’s appetite for risk taking and enables senior management to understand, manage and report on risk. The risk management framework is implemented enterprise wide and includes all eight risk categories: Strategic, Legal, Market, Liquidity, Operational, Reputation, Compliance and Credit. Management has worked to develop risk appetite statements with accompanying metrics which are meaningful to the organization and reflect the aggregate level and types of risk Capital One is willing to accept in order to achieve its business objectives, clarifying both risks the Company is actively taking and risks that are purposely avoided.
The Risk Committee oversees Capital One’s enterprise-wide risk management framework, including policies and practices established by management to identify, assess, measure and manage key risks facing Capital One across the eight risk categories identified above, as set forth in its charter. In addition, the Risk Committee oversees management’s specific responsibilities with respect to identification and management of, and planning for, Capital One’s market, liquidity, operational and credit risks. The Audit Committee is responsible for risk
oversight with respect to compliance by Capital One with legal and regulatory requirements. In addition, the Audit Committee reviews and discusses generally the policies and practices that govern the processes by which key risk exposures are identified, assessed, managed and controlled on an enterprise-wide basis and meets jointly with the Risk Committee to assess Capital One’s enterprise-wide risk management framework. The Risk Committee oversees that the Chief Risk Officer, and other members of management, as applicable, review with the Compensation Committee the risks that Capital One’s incentive compensation programs, such as its senior executive, corporate incentive and other material incentive compensation programs, may pose as more fully described below under “Risk Assessment of Compensation Policies and Practices.”
The Chief Risk Officer, Chief Financial Officer, Chief Internal Auditor, Chief Credit Review Officer and General Counsel each meet with, or provide reports to, Capital One’s Risk Committee at least once per quarter as well as separately with the Risk Committee throughout the year on a periodic basis without other members of management present. The Risk Committee also meets on a periodic basis with the Chief Compliance Officer without other members of management present. The Chief Risk Officer also meets at least annually with the full Board of Directors to review the Company’s enterprise risk profile. In addition, the Audit Committee meets on a periodic basis with the Chief Compliance Officer and meets at least quarterly with the Chief Financial Officer to discuss Capital One’s financial results and financial forecasts. Throughout the year, strategic presentations and line of business updates to the Board of Directors or its Committeescommittees typically include reports on risk management.
Corporate Audit Services provides independent and objective assurance services and advice and counselguidance regarding risk management and control practices to provide that risk management, internal controls and governance systems are adequate and functioning on a consistent and reliable basis. The Chief Internal Auditor reports organizationally to the Audit Committee of the Board of Directors, which has the authority to hire and compensate the Chief Internal Auditor and to terminate his or her employment. The Chief Credit Review Officer reports organizationally to the Risk Committee of the Board of Directors, which has the authority to hire and compensate the Chief Credit Review Officer and to terminate his or her employment. The Chief Risk Officer reports directly to both the Risk Committee and the CEO.
Risk Assessment of Compensation Policies and Practices
The Compensation Committee actively oversees all of our compensation policies and practices, including our incentive compensation policies and practices, to monitor that such policies and practices encourage balanced risk-taking, are compatible with effective controls and risk management and align with our business strategy. In 2013,2014, the Company continued to participate in the horizontal review of incentive compensation practices that the Federal Reserve Board began in 2010late 2009 with respect to the incentive compensation practices at 25 large banking organizations. The purpose of the review has been to assess the incentive compensation practices at these organizations and their compliance with the interagency guidance on sound incentive compensation practices issued by the Federal Reserve Board and other bank regulators in June 2010. We believe that the Compensation Committee’s active oversight, together with the Company’s interactions and discussions with its regulators, has further enhanced the Company’s risk management and control processes with respect to incentive compensation at the Company. In January 2012, the Compensation Committee adopted an Incentive Compensation Governance Policy applicable to all Company employees that governs incentive compensation decisions and provides the framework for oversight of the design of incentive compensation programs, which it reviews and re-approves annually. In the context of setting executive compensation, the Compensation Committee assessed each of the named executive officers against one or more performance objectives specifically designed to evaluate the degree to which the executive balanced risks inherent in his or her role and also implemented additional risk-balancing features for certain equity awards, as described in more detail in the “Compensation Discussion and Analysis” beginning on page 31.
The Compensation Committee reviews the Company’s named executive officer and other senior executive compensation programs as well as any other material incentive compensation programs. During the course of these reviews, the Compensation Committee discusses the Company’s most significant risks, including the Company’s status with respect to managing those risks and the relationship of those risks to applicable compensation programs. The review includes discussion and analysis of risk-balancing features embedded in these incentive compensation programs and other actions taken by the Company designed to achieve
conformance with regulatory guidance and appropriately balance risk. The Compensation Committee also discusses these programs with the Company’s Chief Risk Officer, Chief Human Resources Officer and the Compensation Committee’s independent compensation consultant, as appropriate. Based on these discussions, the Compensation Committee believes that these compensation programs are consistent with safety and soundness and operate in a manner that appropriately balances risk.
Director Independence
The Board of Directors has assessed whether each of its non-management members is “independent” under Capital One’s Director Independence Standards. These standards, which have been adopted by the Board of Directors as part of Capital One’s Corporate Governance Principles,Guidelines, reflect, among other things, the director independence requirements set forth in the listing standards of the NYSE and other applicable legal and regulatory rules, and describe certain relationships that the Board has determined to be immaterial for purposes of determining director independence. As noted above, Capital One’s Corporate Governance Principles,Guidelines, including the Director Independence Standards, are available on the Corporate Governance page of Capital One’s Internet site atwww.capitalone.com under “About Us/Investors.” The Board of Directors has determined that each of Mr. Gross, Ms. Hackett, Mr. Hay, Mr. Jenkins, Mr. Raskind, Mr. Shattuck, Mr. Warner and Ms. West is independent under these standards. The Board of Directors previously determined that Mr. W. Ronald Dietz, who served on the Board until he passed away on March 21, 2013, was an independent director.
Related Person Transactions
Capital One’s policies and procedures for the review, approval or ratification of related person transactions are set forth in the charter of the Governance and Nominating Committee, Capital One’s Code of Conduct and internal written procedures. The charter of the Governance and Nominating Committee requires the Committee to review on an annual basis any transactions involving Capital One and any of its directors, executive officers or their immediate family members and, as appropriate, to consider potential conflicts of interest or the appearance of potential conflicts of interest, as well as issues relating to director independence. The Governance and Nominating Committee performs this review each year based on the information provided by each director and executive officer on an annual questionnaire and through a review of Capital One’s internal systems for payments or other transactions that could indicate the presence of a related person transaction. In developing its assessment and recommendation regarding related person transactions to the Board of Directors, the Governance and Nominating Committee relies upon criteria set forth in the Code of Conduct to evaluate activities or relationships that may create a conflict of interest, including potential related person transactions. In addition to specific prohibitions, these criteria include the extent to which the proposed relationship would be authorized and permitted (or prohibited) by Capital One policies, as well as the potential perspective of third parties regarding such relationships.
Internal written procedures require that any potential conflict of interest, including related person transactions involving any of Capital One’s directors or executive officers, be reviewed by the General Counsel (in the case of a director) and by either the General Counsel or Chief Human Resources Officer (in the case of an executive officer). If the reviewer believes that such relationship could create a conflict of interest or require disclosure as a related person transaction, a second review is conducted by the disinterested members of the Governance and Nominating Committee (in the case of a director) or by the Chief Executive OfficerCEO (in the case of other executive officers).
From time to time in the ordinary course of its business, Capital One issues loans to directors, executive officers and/or nominees for director, or to a director’s, executive officer’s or director nominee’s immediate family member, including persons sharing the household of such director, executive officer or director nominee (other than a tenant or employee). Such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Company and do not involve more than the normal risk of collectability or present other unfavorable features.
As of June 2013, Mr. Leroy has ceased to serve asis the former Executive Chairman and Chief Executive Officer of a company in which Mr. Leroy holds approximately 17% equity interest (assuming full vesting and conversion of all of his equity interests) based upon information provided by Mr. Leroycontinues to Capital One for 2013.hold a significant financial interest. Such
company, through a majority owned subsidiary, receives payments from other companies that provide and are expected to continue to provide certain services to Capital One, which payments are based on the extent of Capital One’s dealings with such other companies. In 2013,2014, the amount of payments received by such companies that were attributable to Capital One’s business was approximately $1.39$1.19 million. These dealings are continuing in 2014,2015, although Capital One does not have information on the amounts to date that are attributable to its business.
Committees of the Board of Directors
In order to assist it in fulfilling its functions, the Board of Directors conducts business through four Committees:standing committees: the Audit Committee, the Risk Committee, the Compensation Committee and the Governance and Nominating Committee. In May 2013, the Board of Directors re-organized its Committee structure. The Board of Directors restructured its Audit and Risk Committee into two separate Committees, which are the current Audit Committee and Risk Committee, and also disbanded its Finance and Trust Oversight Committee. The responsibilities of the former Finance and Trust Oversight Committee were redistributed to the current Audit Committee, Risk Committee and the Board of Directors, as appropriate. Pursuant to Capital One’s Corporate Governance PrinciplesGuidelines and applicable law, the Audit, Compensation, and Governance and Nominating Committees are comprised solely of independent directors, and the Audit and Compensation Committees are comprised solely of directors who satisfy the NYSE’s heightened independence requirements for audit and compensation committee members, respectively.respectively, and all four standing committees are led by a separate, independent chair. The Chair of each Committeecommittee determines the frequency, length and agenda of meetings for his or her Committeecommittee in accordance with such Committee’scommittee’s charter, in consultation with other members of the Committeecommittee and with appropriate members of management, and establishes an annual calendar of topics for consideration by the Committee.committee. The Chair of each Committee maycommittee also seekseeks comments on key issues from other directors who are not part of the Committeecommittee and reports Committeecommittee activities to the full Board of Directors. In January 2014,2015, each of the Audit, Risk, Compensation, and Governance and Nominating Committees and the Board of Directors approved the respective Committee’scommittee’s charter. Copies of the charter of each Committeecommittee are available free of charge on the Corporate Governance page of Capital One’s Internet site atwww.capitalone.com under “About Us/Investors.” Below is a description of each Committee.committee.
Audit Committee
Description
The Audit Committee assists the Board of Directors with overseeing Capital One’s accounting, financial reporting and internal controls, including the responsibilities set forth below.
Key Responsibilities
The Committee may delegate authority for certain responsibilities to subcommittees or members of management as the Committee deems appropriate and as permitted by law.
Financial Expert
Although other members of the Audit Committee may qualify as “audit committee financial experts” under the Sarbanes-Oxley Act of 2002 and the rules of the SEC and the NYSE promulgated thereunder, the Board of Directors has designated Mr. Raskind and Mr. Warner as its “audit committee financial experts.”
Service
No member of the Audit Committee simultaneously serves on the audit committees of more than three public companies, including that of Capital One. For a part of 2013, Mr. Gross served on the audit committees of three public companies in addition to serving on Capital One’s Audit and Risk Committee. However, Mr. Gross is no longer a member of Capital One’s Audit Committee since the Committee restructuring in May 2013. The Board of Directors has determined, in accordance with NYSE rules, that Mr. Gross’ simultaneous service did not impair his ability to effectively serve on Capital One’s Audit and Risk Committee.
20132014 Meetings
During 2013,2014, the Audit Committee met five times since June 2013.
During 2013, the former Audit and Risk Committee met five times prior to the Committee’s restructuring in May 2013.twelve times.
Risk Committee
Description
The Risk Committee assists the Board of Directors with overseeing Capital One’s risk assessment and management processes, including the responsibilities set forth below.
Key Responsibilities
The Committee may delegate authority for certain responsibilities to subcommittees or members of management as the Committee deems appropriate and as permitted by law. The Audit Committee is responsible for risk oversight with respect to compliance by Capital One with legal and regulatory requirements. In furtherance of its
responsibility for oversight of Capital One’s enterprise-wide risk management framework, the Risk Committee coordinates with the Audit Committee to provide risk oversight with respect to compliance by Capital One with legal and regulatory requirements.
20132014 Meetings
During 2013,2014, the Risk Committee met seven times since June 2013.eleven times.
During 2013, the former Audit and Risk Committee met five times prior to the Committee’s restructuring in May 2013.
Governance and Nominating Committee
Description
The Governance and Nominating Committee assists the Board of Directors with respect to a variety of corporate governance matters and practices, including the responsibilities set forth below.
Key Responsibilities
The Committee may delegate authority for certain responsibilities to subcommittees or members of management as the Committee deems appropriate and as permitted by law.
20132014 Meetings
During 2013,2014, the Governance and Nominating Committee met sixfive times.
Compensation Committee
Description
The Compensation Committee assists the Board of Directors with respect to the compensation programs and benefit plans for the directors, the Chief Executive Officer, the other executive officers and other employees; the annual Committee report and Capital One’s Compensation Discussion and Analysis; the election of officers and the hiring or promotion of senior executives; and such other responsibilities and activities as may be required by law or regulation, including the responsibilities set forth below.
Key Responsibilities
The independent directors of the Board may meet concurrently with the Compensation Committee, as appropriate, to review and approve compensation for the Chief Executive Officer and other executive officers.
The Committee may also delegate authority for certain responsibilities to subcommittees or members of management as the Committee deems appropriate and as permitted by law and applicable plan documents.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Ms. Hackett and Messrs. Shattuck, Gross, Hay and Jenkins. No interlocking relationship exists between any member of Capital One’s Board of Directors or Compensation Committee and any member of the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. No director who served on the Compensation Committee during 20132014 is or was formerly an officer or an employee of Capital One.
Compensation Committee Consultant
The Compensation Committee has the authority to retain and terminate legal counsel and other consultants and to approve such consultants’ fees and other retention terms. The Committee has retained the services of Frederic W. Cook & Co., Inc., an independent executive compensation consulting firm (“F.W. Cook”). F.W. Cook reports to the Chair of the Committee, and its engagement may be terminated by the Committee at any time.
The Committee determines the scope and nature of F.W. Cook’s assignments. In 2013,2014, F.W. Cook:
Consultants from F.W. Cook generally attend Committee meetings and executive sessions upon the Chair of the Committee’s request, including meetings held jointly with the independent directors to review or approve the compensation for the Chief Executive Officer and the other executive officers, to provide an independent perspective regarding such compensation practices.
The services provided by F.W. Cook are limited in scope as described above. F.W. Cook does not provide any services to the Company or its management other than the services provided to the Compensation Committee as described above. The Compensation Committee has considered factors relevant to F.W. Cook’s independence from management under SEC rules and has determined that F.W. Cook is independent from management.
20132014 Meetings
During 2013,2014, the Compensation Committee met six times.
Committee Membership
The table below provides a summary of the Board’s current Committeecommittee structure, membership and related information. As a management director, Richard D. Fairbank is not a member of any Board Committee.committee.
Chair | Member | ||||||||||||||||||||
Audit | Compensation |
|
| Governance and Nominating Committee | |||||||||||||||||
Patrick W. Gross | |||||||||||||||||||||
Ann Fritz Hackett | |||||||||||||||||||||
Lewis Hay, III | |||||||||||||||||||||
Benjamin P. Jenkins, III | |||||||||||||||||||||
Pierre E. Leroy | |||||||||||||||||||||
Peter E. Raskind | |||||||||||||||||||||
Mayo A. Shattuck III | |||||||||||||||||||||
Bradford H. Warner | |||||||||||||||||||||
Catherine G. West |
How to Contact the Board of Directors and the Lead Independent Director
Interested parties may make their concerns known to the Board of Directors or independent directors as a group by contacting the Lead Independent Director, Ms. Ann Fritz Hackett, care of the Corporate Secretary, at the address below:
Lead Independent Director
Board of Directors
c/o Corporate Secretary’s Office
Capital One Financial Corporation
1680 Capital One Drive
McLean, Virginia 22102
Communications may also be sent to individual directors at the same address.
The Corporate Secretary reviews all communications sent to the Board of Directors, Committeescommittees or individual directors and forwards all substantive communications to the appropriate parties. Communications to the Board of Directors, the independent directors or any individual director that relate to Capital One’s accounting, internal
accounting controls or auditing matters are referred to the Chair of the Audit Committee and Capital One’s Chief Internal Auditor. Other communications are referred to the Lead Independent Director, the Chair of the appropriate Committeecommittee and/or the specified director, as applicable.
Director Nomination Process
The Governance and Nominating Committee considers and makes recommendations to the Board of Directors concerning nominees to create or fill open positions within the Board. Stockholders may propose nominees for consideration by the Governance and Nominating Committee by submitting the names and other relevant information as required by Capital One’s Amended and Restated Bylaws (the “Bylaws”) and further described in Capital One’s Corporate Governance Guidelines, to the Corporate Secretary at the address set forth on the Notice
of Annual Stockholder Meeting. Capital One’s Amended and Restated Corporate Governance PrinciplesGuidelines also require that a copy of the information provided to the Corporate Secretary relating to the proposed nominee must be delivered to the Chair of the Governance and Nominating Committee.
Director candidates, other than current directors, may be interviewed by the Chair of the Governance and Nominating Committee, other directors, the Chief Executive OfficerCEO and/or other members of senior management. The Committee considers the criteria described below, as well as the results of interviews and any background checks the Committee deems appropriate, in making its recommendation to the Board of Directors. The Committee also considers current directors for re-nomination in light of the criteria described below and their past and potential contributions to the Board of Directors.
Consideration of Director Nominees
All director candidates, including incumbent directors and those recommended by stockholders, are evaluated using the same criteria. These criteria are as follows:
The Governance and Nominating Committee and the Board of Directors believe that diversity along multiple dimensions, including opinions, skills, perspectives, personal and professional experiences and other differentiating characteristics, is an important element of its nomination recommendations. The Board of Directors considers each nominee in the context of the Board as a whole, with the objective of assembling a Board that can best maintain the success of Capital One’s business. Although the Board of Directors does not have a formal diversity policy, the Governance and Nominating Committee and the Board periodically review the Board’s membership in light of Capital One’s business model and strategic objectives, consider whether the directors possess the requisite skills, experience and perspectives to oversee the Company in achieving those goals, and may seek additional directors from time to time as a result of its considerations.
Capital One’s Corporate Governance PrinciplesGuidelines provide that a director shall not be eligible for election to the Board upon reaching the age of 70.72. The Board may waive this requirement if it deems that it is in the best interests of the Company and its stockholders to issue a waiver.
In 2013,2014, Capital One contracted with a third-party director search firm to identify, evaluate and verify references for potential director candidates and with a third-party to perform various background verification services for director candidates, including those related to federal and state criminal background checks, employment and education verification and credit reporting.
Information about our Directors and Executive Officers
Each director who is nominated for election at the Annual Meeting and each of Capital One’s executive officers is listed below with a brief description of his or her business experience.
Directors
Our Board of Directors, acting through the Governance and Nominating Committee, seeks a board that, as a whole, possesses the mix of experiences, skills, expertise and qualifications appropriate to support the success of the Company and that functions effectively in light of the Company’s current and evolving business circumstances. The Board believes that the collective combination of backgrounds, skills and experiences of its members has produced a Board that is well-equipped to exercise oversight responsibilities for Capital One’s
stockholders and other stakeholders. All of our directors have demonstrated business acumen, the ability to exercise sound judgment, a high degree of engagement, and a commitment of service to Capital One, and the Board of Directors. Our directorsDirectors and the long-term interests of stockholders. The Board also bring to our Board of Directors a wealth of executive leadership experience derived from their service as executives and, in many cases, chief executive officers, of large corporations. We also believebelieves that all of our directors have a reputation for integrity, honesty, professionalism, and adherence to high ethical standards. In addition, members of the Board have specific experiences that, in the aggregate, meet an articulated set of director skills established in 2014 by the Governance and Nominating Committee that align with the Company’s long-term strategy and operational objectives, including:
Individually and as a whole,
Strategy | Experience setting a long-term corporate vision or direction, developing desirable products and customer segments, assessing geographies in which to operate, and competitive positioning | |
Digital/Technology | Leadership and understanding of technology, digital platforms and new media, cybersecurity risk, and data analytics | |
Retail/Commercial Banking | Retail and/or commercial banking industry experience at an executive level | |
Risk Management/Compliance | Significant understanding with respect to the identification, assessment and oversight of risk management programs and practices | |
Senior Executive Management | Experience as a chief executive officer or other senior executive at a public company | |
Public Accounting/Financial Reporting | Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements | |
Financial Services | Leadership experience as an executive or board member in the financial services industry | |
Compensation/Human Resources | Understanding of the issues involved with executive compensation, human resource management, and talent management and development | |
Public Company Board Service | Experience serving as a director on a large public company board |
All of our directors demonstrate the high degree of engagement and possess the necessary skills and qualifications to provide effective oversight of Capital One’s business and management. Our Board includes seven directors whomembers have significant experience in strategy development, risk management and the banking and financial services industry most as former executivesthrough executive leadership positions, consulting engagements, and/or extended service on the Board of financial institutions; fiveDirectors and its committees. Eight of our directors with risk management experience; eighthave significant understanding of technology platforms and systems and their associated risks, six of our directors with commercial or consumer-facing business backgrounds;have held senior executive responsibilities at large banks, and six of our directors who serve or have served as chief executive officers. In addition, all of our directors have public company board experience and broad financial expertise, including experience with financial statements and the financial reporting required of large public companies.
In addition, the Board of Directors is composed of directors with a variety of tenures, ranging from one independent director who has served on the Board from the time Capital One became a public company to two new independent directors added within the past year,in 2013, reflecting a diversity of perspectives that creates an effective balance between directors who have direct experience with Capital One’s operations, history and business cycles and directors withwho bring fresh perspectives. Accordingly, we believe the Board possesses the appropriate combination of skills and qualifications, independence, knowledge of Capital One and its industry, and business acumen that enables it to operate as an engaged and effective Board.
Set forth below is each director’s biographical information and a description of the nature of each director’s experience that the Board of Directors believes supports his or her continuing service as a director.
Richard D. Fairbank, 6364
Chair, Chief Executive Officer and President
Mr. Fairbank is founder, Chair, Chief Executive Officer and President of Capital One Financial Corporation. Mr. Fairbank also serves as Chair of Capital One Bank (USA), National Association and Capital One, National Association.
Mr. Fairbank has been Chair of Capital One since February 1995. Mr. Fairbank was appointed and served as the Fifth Federal Reserve District’s representative on the Federal Advisory Council from January 2010 until December 2012. As a member of the Council, he conferred periodically with the Board of Governors of the Federal Reserve System on business conditions and issues related to the banking industry. Mr. Fairbank also served on MasterCard International’s Global Board of Directors from February 2004 until May 2006 and, prior to that, as Chairman of MasterCard’s U.S. Region Board.
Mr. Fairbank’s experience in leading the business as founder and Chief Executive Officer of Capital One, his responsibilities for the strategic direction and management of Capital One’s day-to-day operations and his former roles with the Federal Advisory Council and MasterCard International bring broad industry and specific institutional knowledge and experience to the Board of Directors.
Patrick W. Gross, 6970
Director
Mr. Gross is Chairman of The Lovell Group, a private business and technology advisory and investment firm he founded in 2002 to work with private venture-funded technology companies on a range of business, management and financial strategies. Prior to his role with Lovell, he was a founder, and served as a principal executive officer from 1970 to 2002, of American Management Systems, Inc. (“AMS”), an information technology, consulting, software development and systems integration firm. During his time at AMS, Mr. Gross built and supervised the AMS financial services business which provided IT-based applications to major banks in the U.S., Canada and Europe.
He has been a director of Capital One Financial Corporation since February 1995 and is also a director of Capital One Bank (USA), National Association. He served on the Audit and Risk Committee from March 1995 until the Committee’s restructuring in May 2013, the Risk Committee since May 2013, the Compensation Committee since April 2005 and the Governance and Nominating Committee since September 2002. He served as Chair of the Governance and Nominating Committee from September 2002 until April 2008.2007, and as presiding director from September 2003 until April 2007.
Mr. Gross is currently a director of the following publicly-held companies: Career Education Corporation, Liquidity Services, Inc., Rosetta Stone, Inc., and Waste Management, Inc. Mr. Gross also served on the board of Taleo Corporation from 2006 to 2012.
Mr. Gross’s experience in applying information technology, advanced data analytics and risk management analytics within global financial services firms, as well as his roles in founding and leading AMS and with other public company boards, assists the Board of Directors in overseeing, among other matters, Capital One’s entrepreneurial innovations, digital initiatives, cyber security and information systems.
Ann Fritz Hackett, 6061
Director
Ms. Hackett has been President of Horizon Consulting Group, LLC since she founded the company in 1996. Horizon Consulting Group provides strategic, organizational and human resources advice to clients worldwide. She has worked with boards of directors, chief executive officers and senior executives to identify strategic opportunities and execute solutions during periods of business and financial challenges.challenges and transformation. Prior to Horizon Consulting, Ms. Hackett was Vice President and Partner of a leading national strategy consulting firm where she served on the Management Committee and, among other strategy consulting assignments, led Human Resources and developed her expertise in managing cultural change, creating performance management processes and a performance-based culture, nurturing leadership talent and planning for executive succession.
Ms. Hackett has been a director of Capital One Financial Corporation since October 27, 2004, and is also a director of Capital One, National Association. She served on the Audit and Risk Committee from October 2004 until the Committee’s restructuring in May 2013, the Risk Committee since May 2013, the Governance and Nominating Committee since October 2004 and on the Compensation Committee since April 2005. Ms. Hackett became the Chair of the Governance and Nominating Committee and the Lead Independent Director in April 2007. She is also a director of Fortune Brands Home & Security, Inc. andShe served on the board of Beam, Inc. (formerly Fortune Brands, Inc.). from December 2007 until April 2014. In 2012, Ms. Hackett joined the Tapestry Networks’ Lead Director Network, a select group of lead directors who collaborate on matters regarding board leadership.
Ms. Hackett has experience in strategy, technology development, leading change initiatives, talent management and succession planning and in creating performance management processes and performance-based compensation. She also has experience in corporate governance and risk matters as a result of her participation with public company boards of directors and related governance committees, non-profit boards and consulting engagements. This combination of skills assists the Board of Directors in its discussions on these and other matters.
Lewis Hay, III, 5859
Director
Mr. Hay currently acts as an Operating Advisor for Clayton, Dubilier & Rice, LLC, a private equity investment firm. Mr. Hay served as Executive Chairman of NextEra Energy, Inc. (formerly FPL Group, Inc.), one of the nation’s leading electricity-related services companies and the largest renewable energy generator in North America from July 2012 until he retired in December 2013. At NextEra Energy, he served as Chief Executive Officer from June 2001 to July 2012, Chairman from January 2002 to July 2012 and President from June 2001 to December 2006. He also served as Chief Executive Officer of Florida Power & Light Company from January 2002 to July 2008. He joined NextEra Energy in 1999 as Vice President, Finance and Chief Financial Officer and served as President of NextEra Energy Resources, LLC (formerly FPL Energy, LLC) from March 2000 until December 2001.
Mr. Hay has been a director of Capital One Financial Corporation since October 31, 2003, and is also a director of Capital One, National Association. He has served on the Compensation Committee since April 2004, the Risk Committee since May 2013, and the Governance and Nominating Committee since April 2007. He also served on the Finance and Trust Oversight Committee, of which he has served as Chair, from April 2005 until the Committee was disbanded in May 2013. He is also a director of Harris Corporation and of Anthem, Inc. (formerly WellPoint, Inc.). Mr. Hay serves on the Board of Business Advisors for the Tepper School of Business at Carnegie Mellon University, and on the Advisory Council of Carnegie Mellon University’s Scott Institute for Energy Innovation. He is a former chairman of both the Edison Electric Institute, the association of U.S. shareholder-owned electric companies, and the Institute of Nuclear Power Operations. Mr. Hay also served as Chair of the Electricity Subsector Coordinating Council, an organization that coordinated government and electricity industry cyber security initiatives, as well as on President Obama’s President’s Council on Jobs and Competitiveness from February 2011 to February 2013.Competitiveness.
Mr. Hay has extensive knowledge of complex strategic, operational, management, regulatory, financial and governance issues faced by a large public company. His background in leading finance and accounting, treasury, credit, investor relations, mergers and acquisitions and information systems functions, as well as his understanding of enterprise risk management, executive compensation and public company governance, provides the Board of Directors with valuable insight on these and other matters.
Benjamin P. Jenkins, III, 6970
Director
Mr. Jenkins served as Senior Advisor, Managing Director, and Vice Chairman for Retail Banking at Morgan Stanley & Co., a financial services firm, from January 2009 to January 2011. Prior to that, he had a 38-year career with Wachovia Corporation (now Wells Fargo & Company), a financial services company, where he was Vice Chairman and President of the General Banking Group. He is credited with advancing the profitability of
the General Bank through improvements in customer service and the reduction of customer attrition to industry-leading levels. He and his team were instrumental in the integration of the First Union/Wachovia and Wachovia/SouthTrust mergers, and Mr. Jenkins led the successful expansion of Wachovia’s banking network. He also previously served on the boards of Visa USA and Visa International.
Mr. Jenkins has been a director of Capital One Financial Corporation since February 2013 and is also a director of Capital One, National Association. He has served on the Audit Committee since May 2013, and the Compensation Committee since May 2013.2013, and the Risk Committee since May 2014.
Mr. Jenkins’ experience in corporate banking, banking operations, investment banking, and management of customer relationships brings valuable insight to the Board of Directors in overseeing, among other areas, matters critical to Capital One’s banking business.
Pierre E. Leroy, 6566
Director
Mr. Leroy served as Executive Chairman from March 2012 and Chief Executive Officer from July 2012 until June 2013 of Vigilant Solutions (formerly Vigilant Video, Inc.), a leading provider of video analytics software and systems. Mr. Leroy retired in 2005 from Deere & Company as President of both the Worldwide Construction & Forestry Division and the Global Parts Division. Deere & Company is a world leader in providing advanced products and services for agriculture, forestry, construction, lawn and turf care, landscaping and irrigation, and also provides financial services worldwide and manufactures and markets engines used in heavy equipment. During his professional career with Deere, Mr. Leroy served in a number of positions in Finance, including Treasurer, Vice-President and Treasurer, and Senior Vice-President and Chief Financial Officer.
Mr. Leroy has been a director of Capital One Financial Corporation since September 1, 2005.2005, and is also a director of Capital One Bank (USA), National Association. Mr. Leroy has served on the Risk Committee since May 2013.
Mr. Leroy has been a director of United Rentals, Inc. since April 2012. He alsopreviously served on the Boardsboards of Directorsdirectors of RSC Holdings Inc. and RSC Equipment Rental from 2008 to April 2012 (when RSC was acquired by United Rentals), Beam, Inc. (formerly Fortune Brands, Inc.) from September 2003 to February 2012 and ACCO Brands from August 2005 to April 2009.
Mr. Leroy’s experience in capital markets and asset-liability management, as well as leading and managing large complex international marketing, engineering and manufacturing organizations and serving on other public company boards, provides the Board of Directors with valuable insight on these and other matters.
Peter E. Raskind, 5758
Director
Mr. Raskind is the owner of JMB Consulting, LLC, which he established in February 2009 to provide consulting services to financial services firms.firms and investors. In 2011, he served as Interim Chief Executive Officer of the Cleveland Metropolitan School District, and in 2010, he served as Interim Chief Executive Officer of the Cleveland-Cuyahoga County Port Authority. Until its merger with PNC Financial Services Group in December 2008, Mr. Raskind served as Chairman, President and Chief Executive Officer of National City Corporation, one of the
largest banks in the United States, where he was appointed as a Director in January 2007 and Chief Executive Officer in July 2007. He also became Chairman of the Board in December 2007.States. Through an extensive banking career, Mr. Raskind joined National City in 2000 as the Manager of the Consumer Finance Division andhas served in a number of executive positions throughout his tenure. Prior to National City, Mr. Raskind had a 21-year career with U.S. Bancorp/First Bank Systemleadership roles and Harris Bank, holdingheld positions of successively greater responsibility in a broad range of consumer and commercial banking disciplines, including cash management services, corporate finance, international banking, corporate trust, retail and small business banking, operations and strategic planning.
Mr. Raskind has been a director of Capital One Financial Corporation since January 31, 2012, and is also a director of Capital One Bank (USA), National Association. He served on the Audit and Risk Committee from January 2013 until the Committee’s restructuring in May 2013, and has served on the Audit Committee since May 2013 and as the Chair of the Risk Committee since May 2013. He qualifies as an “audit committee financial expert” under SEC guidelines and washas been designated an “audit committee financial expert” for Capital One insince 2014.
Mr. Raskind served as a director of Omek Interactive, Inc. from January 2012 to June 2013 and United Community Banks, Inc. from May 2011 to January 2012. Mr. Raskind previously served as a director of Visa USA and Visa International, served on the Boardboard of Directorsdirectors of the Consumer Bankers Association, and was a member of the Financial Services Roundtable.Roundtable, and served on the executive committee of the National Automated Clearing House Association.
Mr. Raskind is experienced in corporate banking, retail banking, wealth management/trust, mortgage, operations, technology, strategy, product management, asset/liability management, risk management and acquisition integration from his extensive career in banking. He provides the Board with valuable insight on these and other matters.
Mayo A. Shattuck III, 5960
Director
Mr. Shattuck is Chairman of the Board of Chicago-based Exelon Corporation, a Fortune 100 company and the nation’s largest competitive energy provider.provider and commercial nuclear plant operator. From March 2012 through February 2013, he served as Executive Chairman of the Board of Exelon. Prior to joining Exelon, he was Chairman, President and Chief Executive Officer of Constellation Energy, a leading supplier of electricity to large commercial and industrial customers, a position he held from 2001 to 2012. Mr. Shattuck was previously at Deutsche Bank, where he served as Chairman of the Board of Deutsche Banc Alex. Brown and, during his tenure, served as Global Head of Investment Banking and Global Head of Private Banking.
From 1997 to 1999, Mr. Shattuck served as Vice Chairman of Bankers Trust Corporation, which merged with Deutsche Bank in 1999. From 1991 to 1997, Mr. Shattuck was President and Chief Operating Officer and a director of Alex. Brown & Sons, a major investment bank, which merged with Bankers Trust in 1997.
Mr. Shattuck has been a director of Capital One Financial Corporation since October 31, 2003, and also serves as a director of Capital One, National Association. He has served on the Compensation Committee since April 2004 and became its Chairman in April 2005. He also served as Chairman of the Finance and Trust Oversight Committee from April 2004 to April 2005 and was a member from December 2003 until the Committee was disbanded in May 2013.2005. Mr. Shattuck has served on the Governance and Nominating Committee since May 2013.2013 and the Risk Committee since May 2014. Mr. Shattuck is also a director of Gap, Inc. and chairsChairman of its Audit and Finance Committee.Committee, Vice Chairman of Johns Hopkins Medicine, and former Chairman of the Institute of Nuclear Power Operators.
Mr. Shattuck’s experience in global corporate finance and lending, corporate strategy, capital markets, risk management and private banking, as well as his experience in leading atwo large, publicly-held companycompanies and serving on other public company boards, provides the Board of Directors with valuable insight on these and other matters.
Bradford H. Warner, 6263
Director
Mr. Warner served in a variety of executive positions at BankBoston, FleetBoston and Bank of America from 1975 until his retirement in 2004. These positions included President of Premier and Small Business Banking, Executive Vice President of Personal Financial Services, and Vice Chairman of the Investment Services and Consumer Business Group.Regional Bank.
Throughout his banking career, Mr. Warner served in leadership roles for many of the major business lines and functional disciplines that constitute commercial banking, including leadership of retail and branch banking, consumer lending (credit cards, mortgage and home equity), student lending and small business; various corporate banking functions, including community banking and capital markets businesses, such as underwriting,
trading and sales of domestic and international fixed income securities, foreign exchange and derivatives; international banking businesses in Asia, northern Latin America and Mexico; and several investment related businesses, including private banking, asset management and brokerage. He also served on the senior most management policy and governance committees at BankBoston, FleetBoston and Bank of America.
Mr. Warner has been a director of Capital One Financial Corporation since April 24, 2008, and also serves as a director of Capital One Bank (USA), National Association. He was a member of the Audit and Risk and Finance and Trust Oversight Committees from April 2008 until the Committees were restructured in May 2013.
Mr. Warner has been a member of the Risk Committee since May 2013 and has served as Chair of the Audit Committee since May 2013. He qualifies as an “audit committee financial expert” under SEC guidelines and washas been designated an “audit committee financial expert” for Capital One in 2014.since 2012.
Mr. Warner’s experience in a broad range of commercial, consumer, investment and international banking leadership roles, as well as his experience in corporate banking functions, customer relationships, and corporate culture change management, enterprise risk management and technology, brings valuable insight to the Board of Directors in overseeing, among other matters, a broad range of matters critical to Capital One’s banking business.
Catherine G. West, 5455
Director
Ms. West joined Promontory Financial Group, a financial services consulting firm, in April 2012 as a Managing Director and then served as a Special Advisor from May 2013 to October 2013, where she focused on internal administrative activities. From March 2011 to April 2012, Ms. West was the Associate Director and Chief Operating Officer of the Consumer Financial Protection Bureau (the “CFPB”), a federal agency tasked with regulating U.S. consumer protection with regard to financial services and products, where she led the start-up of the agency’s infrastructure. While at the CFPB, Ms. West also played an integral part in implementing a Consumer Response unit designed to solicit views from consumers regarding their experiences with financial institutions and leverage those views to effect policy change. She was previously the Chief Operating Officer of J.C. Penney from August 2006 to December 2006. From March 2000 to July 2006, Ms. West was an executive officer at Capital One Financial Corporation where she served in roles that included President of the U.S. Card business and Executive Vice President of U.S. Consumer Operations.
Ms. West has been a director of Capital One Financial Corporation since February 2013 and is also a director of Capital One Bank (USA), National Association. She has served on the Audit Committee since May 2013 and the Risk Committee since May 2013.
Ms. West has a multifaceted background in financial services with more than 25 years of experience in financial services operations, regulatory matters, technology platform conversions, process automation and innovation, and strategy. She has hands-on experience in leveraged buyouts, initial public offerings, and mergers and acquisitions, and has a keen understanding of both business strategy and the regulatory perspective. Ms. West provides the Board with valuable insight on these and other matters.
Executive Officers
Robert M. Alexander, 4950
Chief Information Officer
Mr. Alexander joined Capital One in April 1998. From April 1998 to May 2007, Mr. Alexander had responsibility at various times for a number of Capital One’s lending businesses, including the U.S. consumer credit card and installment loan businesses. Mr. Alexander became Chief Information Officer in May 2007, and in this role he is responsible for overseeing all technology activities for Capital One.
Jory A. Berson, 4344
Chief Human Resources Officer
Mr. Berson joined Capital One in July 1992. From July 1992 to June 2009, Mr. Berson held a variety of roles at Capital One, including President, Financial Services and President, U.S. Card. In June 2009, Mr. Berson became Chief Human Resources Officer, and in this role Mr. Berson is responsible for overseeing Capital One’s Human Resources strategy, recruitment efforts and development programs.
Kevin S. Borgmann, 4243
Chief Risk Officer
Mr. Borgmann joined Capital One in August 2001. Since that time he has served in a variety of roles in Capital One’s Corporate Strategy, Partnership Finance, Upmarket Acquisitions, Credit Card, Auto Finance and Risk departments, including serving as Senior Vice President with the Credit Card Division from March 2008 until
September 2010, President of Capital One Auto Finance from September 2010 until October 2012 and Deputy Chief Risk Officer from October 2012 until January 31, 2013. On January 31, 2013, Mr. Borgmann became Chief Risk Officer, and in this role he is responsible for overseeing Capital One’s credit, compliance, operational, market and liquidity, and enterprise risk management functions.
Stephen S. Crawford, 4950
Chief Financial Officer
Mr. Crawford joined Capital One in February 2013 as Chief Financial Officer Designate and served as Capital One’s Chief Financial Officer beginning May 24, 2013. Prior to joining Capital One, Mr. Crawford co-founded Centerview Partners, an investment banking and advisory firm, in 2006. Prior to that, Mr. Crawford served in various leadership roles at Morgan Stanley & Co., a financial services firm, including as the Co-President of the firm during 2005, Executive Vice President and Chief Administrative Officer from 2004 to 2005, Executive Vice President and Chief Financial Officer from 2001 to 2004, and Executive Vice President and Chief Strategic Officer from 2000 to 2001.
John G. Finneran, Jr., 6465
General Counsel and Corporate Secretary
Mr. Finneran joined Capital One in September 1994. Since that time, he has served as General Counsel and Corporate Secretary and is responsible for managing Capital One’s legal, governmental affairs, corporate governance, regulatory relations and corporate affairs departments. He also manages Capital One’s internal audit department for administrative purposes.
Frank G. LaPrade, III, 4748
Chief Enterprise Services Officer
Chief of Staff to the CEO
Mr. LaPrade joined Capital One in January 1996. Since that time he has served in various positions, including as Capital One’s Deputy General Counsel responsible for managing the company’s litigation, employment, intellectual property and transactional practice areas. In 2004, Mr. LaPrade became Chief of Staff to the Chief Executive Officer. In 2010, Mr. LaPrade added responsibilities as Chief Enterprise Services Officer. In that capacity, Mr. LaPrade manages Information Technology, Brand Marketing, Corporate Development, Corporate Real Estate, Digital Banking and Procurement for the company.
Gary L. Perlin, 62
Former Chief Financial Officer
Mr. Perlin joined Capital One in July 2003 and retired as Capital One’s Chief Financial Officer effective May 24, 2013. Mr. Perlin was responsible for Capital One’s corporate finance, corporate accounting and reporting, planning and financial risk management, treasury and investor relations functions. Mr. Perlin also served as a director of Capital One, National Association and Capital One Bank (USA), National Association. Mr. Perlin served as a senior advisor to the Chief Executive Officer following his retirement through February 1, 2014.
Ryan M. Schneider, 4445
President, Card
Mr. Schneider joined Capital One in December 2001. From December 2001 to December 2007, Mr. Schneider held a variety of positions within Capital One including Executive Vice President, Auto Finance and Executive Vice President, US Card. Mr. Schneider became President, Card in December 2007, and in this role he is responsible for all of Capital One’s consumer and small business credit card lines of business, including those in the United States, the United Kingdom and Canada. Mr. Schneider also serves as a director of Capital One Bank (USA), National Association.
Michael C. Slocum, 5758
President, Commercial Banking
Mr. Slocum joined Capital One in August 2007. From August 2007 to September 2011, Mr. Slocum was Executive Vice President of Capital One’s Banking Business, leading the company’s Commercial Banking business including asset-based lending, leasing and private banking. Mr. Slocum became President, Commercial Banking in September 2011 and in this role he is responsible for leading multiple broad lines of business, including Commercial Real Estate, Middle Market Banking, Commercial & Specialty Finance and Treasury Services. Before joining Capital One, Mr. Slocum served in various leadership roles at Wachovia Bank (now Wells Fargo & Company), a provider of consumer and commercial financial services, including as the Regional Chief Executive Officer for Northeastern US.
Jonathan W. Witter, 4445
President, Retail and Direct Banking
Mr. Witter joined Capital One in December 2010 as an Executive Vice President in Retail Banking. From September 2011 until February 2012, Mr. Witter served as President, Retail and Small Business Banking. In February 2012, he became President, Retail and Direct Banking and in this role, he provides strategic direction and leadership for the Retail and Direct Banking organization and is responsible for more than 14,000 associates, nearly 1,000 branch and office locations, and 2,200 ATMs in California, Connecticut, Delaware, Louisiana, Maryland, Minnesota, New Jersey, New York, Texas, Virginia, Washington and Washington, D.C. In February 2012, Mr. Witter also became a director of ING Bank, fsb. Prior to joining Capital One, Mr. Witter held various positions, including executive vice president and head of general Bank Distribution at Wachovia, managing director and president of Morgan Stanley Private Bank NA, a global financial services firm, and Chief Operating Officer of Morgan Stanley’s Retail Banking Group.
Sanjiv Yajnik, 5758
President, Financial Services
Mr. Yajnik joined Capital One in July 1998. From July 1998 to June 2009, Mr. Yajnik held a number of positions within Capital One’s European credit card business, Canadian credit card business and small business services organization. Mr. Yajnik became President, Financial Services in June 2009, and in this role he is responsible for overseeing Capital One’s auto finance and home loans businesses. Mr. Yajnik also serves as a director of Capital One, National Association. Prior to joining Capital One, Mr. Yajnik held a broad range of positions, including General Manager at Circuit City Stores (USA), Market Manager at PepsiCo (Canada), and Chief Engineer at Mobil Oil (International).
Security Ownership of Certain Beneficial Owners
Based on Schedule 13D and 13G filings submitted to the SEC, Capital One is aware of the following beneficial owners of more than 5% of Capital One’s outstanding common stock. All percentage calculations are based on the number of shares of common stock issued and outstanding on December 31, 2013,2014, which was 572,675,375.553,391,311.
Name and Address | Amount and Nature of Beneficial Ownership | Percent of Class | ||
Dodge & Cox(1) 555 California Street, 40th Fl. San Francisco, CA 94104 | 46,807,942 | 8.17% | ||
BlackRock, Inc.(2) 40 East 52nd Street New York, NY 10022 | 36,170,715 | 6.31% | ||
FMR LLC(3) 245 Summer Street Boston, MA 02210 | 29,940,583 | 5.22% |
Name and Address | Amount and Nature of Beneficial Ownership | Percent of Class | ||
Dodge & Cox(1) 555 California Street, 40th floor San Francisco, CA 94104 | 46,449,361 | 8.39% | ||
BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10022 | 34,667,040 | 6.26% | ||
Capital World Investors(3) 333 South Hope Street Los Angeles, CA 90071 | 31,440,000 | 5.68% | ||
The Vanguard Group(4) 100 Vanguard Blvd. Malvern, PA 19355 | 28,857,629 | 5.21% | ||
FMR LLC(5) 245 Summer Street Boston, MA 02210 | 28,417,689 | 5.14% |
(1) | On a Schedule 13G (Amendment No. |
(2) | On a Schedule 13G (Amendment No. |
(3) | On a Schedule 13G |
(4) | On a Schedule 13G filed on February 9, 2015, The Vanguard Group reported beneficial ownership of 28,857,629 shares of Capital One’s common stock as of December 31, 2014 with sole voting power with respect to |
(5) | On a Schedule 13G (Amendment No. 2) filed on February 13, 2015, FMR LLC reported beneficial ownership of 28,417,689 shares of Capital One’s common stock as of December 31, 2014 with sole voting power with respect to 3,595,430 shares and sole dispositive power over all shares beneficially owned. |
Security Ownership of Directors and Named Executive Officers
The following table lists the beneficial ownership of Capital One’s common stock as of January 31, 2014,2015, by our directors, the named executive officers in this proxy statement and all directors and executive officers as a group. All percentage calculations are based on the number of shares of common stock issued and outstanding on January 31, 2015, which was 551,590,891.
Except as otherwise indicated below, each director or executive officer had sole voting and investment power for the applicable shares of common stock shown in the table.
Amount and Nature of Beneficial Ownership
|
Amount and Nature of Beneficial Ownership
| |||||||||||||||||||||||||
Name
| Common and
| Stock that 60 days (2) | Total Beneficial
| Percent of
| Stock
| Total (4)
| Common and
| Stock that 60 days (2) | Total
| Percent of
| Stock
| Total (4)
| ||||||||||||||
Richard D. Fairbank | 1,862,428 | 5,575,413 | 7,637,841 | 1.32% | 24,662 | 7,662,503 | 1,946,154 | 5,569,422 | 7,515,576 | 1.35% | 47,728 | 7,563,304 | ||||||||||||||
Stephen S. Crawford | 174,000 | 0 | 174,000 | * | 23,962 | 197,962 | 158,056 | 15,681 | 173,737 | * | 51,477 | 225,214 | ||||||||||||||
Gary L. Perlin | 77,242 | 435,366 | 512,608 | * | 0 | 512,608 | ||||||||||||||||||||
Ryan M. Schneider | 154,611 | 240,380 | 394,991 | * | 19,321 | 414,312 | 160,487 | 208,324 | 368,811 | * | 40,355 | 409,166 | ||||||||||||||
John G. Finneran, Jr. | 159,421 | 528,530 | 687,951 | * | 16,855 | 704,806 | 146,236 | 492,113 | 638,349 | * | 32,811 | 671,160 | ||||||||||||||
Jonathan Witter | 77,532 | 34,231 | 111,763 | * | 15,502 | 127,265 | ||||||||||||||||||||
Sanjiv Yajnik | 108,143 | 141,891 | 250,034 | * | 30,767 | 280,801 | ||||||||||||||||||||
Patrick W. Gross | 7,539 | 92,936 | 100,475 | * | 0 | 100,475 | 7,539 | 85,217 | 92,756 | * | 0 | 92,756 | ||||||||||||||
Ann Fritz Hackett | 20,656 | 66,732 | 87,388 | * | 0 | 87,388 | 20,656 | 67,173 | 87,829 | * | 0 | 87,829 | ||||||||||||||
Lewis Hay, III | 2,728 | 90,137 | 92,865 | * | 0 | 92,865 | 2,728 | 92,418 | 95,146 | * | 0 | 95,146 | ||||||||||||||
Benjamin P. Jenkins, III | 2,192 | 3,723 | 5,915 | * | 0 | 5,915 | 2,192 | 6,004 | 8,196 | * | 0 | 8,196 | ||||||||||||||
Pierre E. Leroy | 4,900 | 80,458 | 85,358 | * | 0 | 85,358 | 4,900 | 63,944 | 68,844 | * | 0 | 68,844 | ||||||||||||||
Peter E. Raskind | 2,000 | 17,732 | 19,732 | * | 0 | 19,732 | 2,000 | 20,013 | 22,013 | * | 0 | 22,013 | ||||||||||||||
Mayo A. Shattuck III | 1,589 | 86,813 | 88,402 | * | 0 | 88,402 | ||||||||||||||||||||
Mayo A. Shattuck | 1,589 | 89,094 | 90,683 | * | 0 | 90,683 | ||||||||||||||||||||
Bradford H. Warner | 14,640 | 68,229 | 82,869 | * | 0 | 82,869 | 14,640 | 70,510 | 85,150 | * | 0 | 85,150 | ||||||||||||||
Catherine G. West | 0 | 3,723 | 3,723 | * | 0 | 3,723 | 0 | 6,004 | 6,004 | * | 0 | 6,004 | ||||||||||||||
All directors and executive officers as a group (20 persons) | 2,907,029 | 8,249,779 | 11,356,808 | 1.95% | 182,040 | 11,538,848 | 2,843,026 | 7,794,668 | 10,637,694 | 1.90% | 367,255 | 11,004,949 |
* | Less than 1% of the outstanding shares of common stock. |
(1) | Includes shares of unvested restricted stock that have voting rights but are not transferable until the end of the period of restriction. |
(2) | This amount includes shares underlying stock options that are exercisable within 60 days after January 31, |
(3) | Restricted stock units held by our officers and which are settled in equivalent number of shares of our common stock. |
(4) | The amount includes the aggregate total of the “Total Beneficial Ownership” column and the “Stock Settled RSUs” column. |
Some of the shares shown in the preceding table are either subject to restrictions or not held directly by the director or executive officer. Below is a table showing the number of shares subject to restrictions or not held directly by the director or executive officer.
Name | Restricted Stock Units For Which Delivery of Stock is Deferred | Stock Held by, or Tenant in Common With, Family Member, Trust or Partnership | Restricted Stock Units For Which Delivery of Stock is Deferred | Stock Held by, or Tenant in Common With, Family Member, Trust or Partnership | ||||
Richard D. Fairbank | 241,680 | 0 | 241,680 | 0 | ||||
Stephen S. Crawford | 0 | 0 | 0 | 0 | ||||
Gary L. Perlin | 0 | 0 | ||||||
Ryan M. Schneider | 0 | 0 | 0 | 0 | ||||
John G. Finneran, Jr. | 0 | 48,985 | 0 | 64,904 | ||||
Jonathan Witter | 0 | 0 | ||||||
Sanjiv Yajnik | 0 | 0 | ||||||
Patrick W. Gross | 33,476 | 0 | 35,757 | 0 | ||||
Ann Fritz Hackett | 33,476 | 5,006 | 35,757 | 5,006 | ||||
Lewis Hay, III | 33,476 | 1,806 | 35,757 | 1,806 | ||||
Benjamin P. Jenkins, III | 3,723 | 0 | 6,004 | 0 | ||||
Pierre E. Leroy | 32,476 | 0 | 34,757 | 0 | ||||
Peter E. Raskind | 7,307 | 0 | 9,588 | 0 | ||||
Mayo A. Shattuck III | 33,476 | 0 | 35,757 | 0 | ||||
Bradford H. Warner | 26,700 | 140 | 28,981 | 140 | ||||
Catherine G. West | 3,723 | 0 | 6,004 | 0 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that Capital One’s executive officers and directors, and persons that beneficially own more than 10% of Capital One’s common stock, file certain reports of beneficial ownership of the common stock and changes in such ownership with the SEC and provide copies of these reports to Capital One. As a matter of practice, members of our staff assist our executive officers and directors in preparing initial ownership reports and reporting ownership changes and typically file these reports on their behalf. Based solely on our review of the copies of such forms in our possession and written representations furnished to us, we believe that in 20132014 each of the reporting persons complied with these filing requirements except for one grant of equity compensationthe Company discovered that was omitted from a timely report filed reportin 2008 for Stephen S. Crawford,Robert M. Alexander, the Company’s Chief FinancialInformation Officer, underreported one of his equity award holdings as a result of an administrative error by the Company, which was subsequently corrected by an amended filing and four grants of equity compensation for Peter A. Schnall, the Company’s former Chief Risk Officer, that were not timely reported ason a result of an administrative error by the Company. Each of the amendment and the report was promptlyForm 5 filed after the Company became aware of the error.in 2015.
Director Compensation Objectives
The Board of Directors approves the compensation for non-management directors, based on recommendations made by the Compensation Committee. The Board of Directors has designed the director compensation program to achieve four primary objectives:
Management directors do not receive compensation for their service on the Board of Directors. In 2013,2014, Mr. Fairbank was Capital One’s only management director.
Director Compensation Procedures
The Compensation Committee reviews the compensation program for Capital One’s non-management directors on an annual basis. F.W. Cook provides competitive compensation data and program recommendations to the Compensation Committee for review. Please see the discussion under “Compensation Committee – Compensation Committee Consultant” in the “Corporate Governance at Capital One” section on page 14 for further information on the role and responsibilities of F.W. Cook. The competitive compensation data includes the compensation (cash, equity and other benefits) of non-management directors within Capital One’s peer comparator group. Please see the discussion under “Market Data” in the “Compensation Discussion and Analysis” section on page 46 for further information on the selection of the peer comparator group. The Compensation Committee considers this information, as well as F.W. Cook’s recommendations, and finalizes a proposed compensation structure. The proposed structure is then reviewed and approved by the full Board of Directors, typically in April or May of each year.
Based on their review of competitive market data and guidance from F.W. Cook in the second quarter of 2013,2014, the Compensation Committee determined that the director compensation program described below meets the objectives listed above.
Director Compensation Structure
On May 2, 2013,1, 2014, the Board of Directors approved a compensation program for Capital One’s non-management directors for the period from May 2, 20131, 2014 until Capital One’s 20142015 Annual Meeting that is similar to the program for the preceding year. The compensation program consists of an annual cash retainer of $90,000 (the annual cash retainer was $80,000 for the period from May 8, 2012, until May 2, 2013) as well as cash retainers for committee service detailed in the notes to the table below. Each non-management director serving on May 2, 20131, 2014 also received an annual award of restricted stock units of Capital One common stock (“RSUs”) on such date, valued at $170,002.$170,003. Lastly, the Lead Independent Director received a cash retainer of $25,000. Ms. Hackett was the Lead Independent Director in 2013.2014.
Other Benefits
Under the Capital One Financial Corporation Non-Employee Directors Deferred Compensation Plan, non-management directors may voluntarily defer all or a portion of their cash compensation and receive deferred income benefits. Participants in the plan have the opportunity to direct their individual deferrals among thirteenseventeen different investments available through the plan. Directors that elected a deferral will begin to receive their deferred income benefits in cash when they cease serving as directors, upon certain other distribution events specified in the plan, or at such earlier time as is authorized by the Compensation Committee. Upon a change of control, Capital One will pay to each director within thirty days of the change of control a lump sum cash payment equal to such director’s account balance as of the date of the change of control. In 2013, Mr.2014, Messrs. Jenkins and Hay elected to defer histheir cash compensation under this plan. A list of the different investments available can be found under “Capital One’s Voluntary Non-Qualified Deferred Compensation Programs” on page 63.
Capital One offered non-management directors the opportunity to direct a contribution of up to $10,000 annually from Capital One to a charitable organization of their choice. Each non-management director serving on May 2, 20131, 2014 elected to make such a charitable contribution in 2013.2014.
Directors also receive reimbursements for certain board-related expenses including, among other things, external educational seminars and travel-related costs incurred to attend Board meetings. Such reimbursements are not included as compensation for the directors in the table below.
In 2013, directors did not receive any additional compensation for their service to Capital One beyond what is described above and disclosed in the table below.
Stock Ownership Requirements
Capital One requires non-management directors to retain all shares underlying restricted stock unitsRSUs granted to them by Capital One until their service with the Board of Directors ends, pursuant to the terms of their respective grant agreements. The Board of Directors may grant an exception for any case where this requirement would impose a financial hardship on a director. No directors have been granted an exception to this requirement for any outstanding awards of restricted stock units.RSUs.
Compensation of Directors
Directors of Capital One received the following compensation in 2013:2014:
Name | Fees Earned or Paid in Cash (4) | Stock Awards (5) | Option (6) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation (7) | Total | Fees Earned or Paid in Cash | Stock Awards (3) | Option (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation (5) | Total | ||||||||||||
W. Ronald Dietz (1) | $65,000 | $0 | — | — | — | $65,000 | ||||||||||||||||||
Richard D. Fairbank (2) | — | — | — | — | — | — | ||||||||||||||||||
Richard D. Fairbank (1) | — | — | — | — | — | — | ||||||||||||||||||
Patrick W. Gross | $75,000 | $170,002 | — | — | $10,000 | $255,002 | $150,000 | $170,003 | — | — | $10,000 | $330,003 | ||||||||||||
Ann Fritz Hackett | $177,500 | $170,002 | — | — | $10,000 | $357,502 | $190,000 | $170,003 | — | — | $10,000 | $370,003 | ||||||||||||
Lewis Hay, III | $75,000 | $170,002 | — | — | $10,000 | $255,002 | $150,000 | $170,003 | — | — | $10,000 | $330,003 | ||||||||||||
Benjamin P. Jenkins, III (3) | $80,000 | $212,551 | — | — | $10,000 | $302,551 | ||||||||||||||||||
Benjamin P. Jenkins, III | $135,000 | $170,003 | — | — | $10,000 | $315,003 | ||||||||||||||||||
Pierre E. Leroy | $105,000 | $170,002 | — | — | $10,000 | $285,002 | $120,000 | $170,003 | — | — | $10,000 | $300,003 | ||||||||||||
Peter E. Raskind | $75,000 | $170,002 | — | — | $10,000 | $255,002 | $150,000 | $170,003 | — | — | $10,000 | $330,003 | ||||||||||||
Mayo A. Shattuck III | $67,500 | $170,002 | — | — | $10,000 | $247,502 | $150,000 | $170,003 | — | — | $10,000 | $330,003 | ||||||||||||
Bradford H. Warner | $80,000 | $170,002 | — | — | $10,000 | $260,002 | $150,000 | $170,003 | — | — | $10,000 | $330,003 | ||||||||||||
Catherine G. West (3) | $87,500 | $212,551 | — | — | $10,000 | $310,051 | ||||||||||||||||||
Catherine G. West | $135,000 | $170,003 | — | — | $10,000 | $315,003 |
(1) |
In |
Figures above represent cash payments during |
Compensation for committee service includes retainers for service as chairperson or as a member of a committee as described under the heading “Committee Membership” in the “Corporate Governance at Capital One” section of this proxy statement. Under the most recently approved compensation program, retainers are as follows:
¡ | Lead Independent Director Retainer: $25,000 |
¡ | Chair of the Risk Committee: $45,000 |
¡ | Chair of the Audit Committee, Compensation Committee or Governance and Nominating Committee: $30,000 |
¡ | Member of the Risk Committee (other than the chair): $30,000 |
¡ | Member of the Audit Committee, Compensation Committee or Governance and Nominating Committee (other than the chair): $15,000 |
Each non-management director serving on May |
Director Name | Number of Outstanding Restricted Stock Units | |
| ||
Patrick W. Gross | ||
Ann Fritz Hackett | ||
Lewis Hay, III | ||
Benjamin P. Jenkins, III | ||
Pierre E. Leroy | ||
Peter E. Raskind | ||
Mayo A. Shattuck III | ||
Bradford H. Warner | ||
Catherine G. West |
The following table sets forth the total number of stock options outstanding for each director as of December 31, 2013.2014. The options expire ten years from the date of grant. Upon termination from Board service (other than by removal for cause), a director will have the remainder of the full option term to exercise the vested stock options.
Director Name | Number of Outstanding Stock Options | |
| ||
Patrick W. Gross | ||
Ann Fritz Hackett | ||
Lewis Hay, III | 56,661 | |
Benjamin P. Jenkins, III | 0 | |
Pierre E. Leroy | ||
Peter E. Raskind | 10,425 | |
Mayo A. Shattuck III | 53,337 | |
Bradford H. Warner | 41,529 | |
Catherine G. West | 0 |
Each non-management director serving on May |
Introduction
Capital One’s executive compensation program is designed to attract, retain and motivate leaders who have the ability to foster strong business results and promote the long-term success of the Company. The Compensation Committee of the Board of Directors (the “Committee”) is responsible for, among other matters, developing, approving, monitoring and managing the compensation of all of our executive officers, including the named executive officers defined below. Final decisions regarding the compensation of our executive officers, including our Chief Executive Officer, are made by our independent directors. This Compensation Discussion and Analysis will review the compensation of the CEO, Richard D. Fairbank, and the following executive officers for 2013:2014:
As used throughout this proxy statement, the “NEOs” means the fivefour executive officers listed above, and the “named executive officers” means the CEO and the NEOs, collectively.
20132014 Company Performance
In 2013,2014, Capital One delivered strong financial results.performance and distributed significant capital to our shareholders. We generatedreturned to growth in our Credit Card business and continued to prudently grow our Auto and Commercial Banking businesses. We improved the quality of our franchise and laid a solid foundation to position Capital One as a digital leader. We continued to generate capital on a strong trajectory, putting the Company in position in 2013 to meetmaintaining our assumed target for the fully phased-in Basel III Tier I common capital requirement, years ahead of regulatory deadlines. We increased ourstock dividend in 2013 after completing the 2013 CCAR process2014 and completedpositioning ourselves to complete our announced $2.5 billion share repurchase program. In addition, we successfully completed the integrations of both ING Direct and the U.S. credit card business of HSBC. The Committee believes that the actions takenprogram by the CEO andend of the NEOs throughout 2013 contributed greatly to the Company’sfirst quarter 2015. Key financial results and helped position the Company to deliver stockholder value over the long-term. These accomplishmentsfor 2014 included:
The Committee believes that the actions taken by the named executive officers throughout 2014 contributed greatly to the Company’s results and have positioned the Company well to deliver strong, sustainable financial performance over the long-term.
Important Aspects of Our Executive Compensation Programs
The Committee believes that our named executive officer compensation programs balance risk and financial results, reward named executive officers for their achievements, promote our overall compensation objectives and encourage appropriate, but not excessive, risk-taking. The following are some of the highlights of our compensation program:
The awards granted to our named executive officers include the following provisions that are designed to further enhance alignment between pay and performance and balance risks:
Performance- Based Vesting Provisions
| Since January 2012, we have included performance-based vesting provisions as part of each stock option, restricted stock and stock-settled RSU award to the named executive officers and each cash-settled RSU award to the CEO. These provisions will reduce the total value delivered to the executive at vesting if the Company does not meet certain performance thresholds during the three-year vesting period. The total value can be reduced to zero if the performance metric is not met for all three years in the performance period. | |
Performance Share Reduction
| Each performance share award to the named executive officers since January 2012 provides that the total value delivered at vesting will be reduced if for any year in the three-year performance period the Company does not achieve positive Adjusted ROA. The total value can be reduced to zero if the metric is not met for all three years in the performance period. These terms are in addition to the performance metric relative to a comparator group. | |
Clawback Provisions
| Each incentive award to the named executive officers since January 2013 is subject to clawback provisions that allow the Committee to seek recovery of all unvested portions of the awards in the event there has been misconduct resulting in a violation of law or Company policy and the named executive officer committed the misconduct or failed in his or her responsibility to manage or monitor the applicable conduct or risks. | |
Financial Restatement Clawback | Since January 2011, each performance share award to the named executive officers has included clawback provisions that allow the Company to recover shares under the award following a financial restatement. |
See “Additional Performance Conditions and Recovery Provisions” on page 44 for more details.
Capital One does not distinguish the terms and conditions of compensation and awards between the NEOs and all other executive officers. All of the terms and features described above, including the clawback and performance-based vesting provisions, apply to awards granted to all executive officers and not just the named executive officers.
Our Compensation Objectives
Capital One’s executive compensation program has four primary objectives.
Strongly link rewards with both business and individual performance while appropriately balancing risk
Capital One emphasizes pay-for-performance at all organizational levels. Typically, as an executive’s level of responsibility increases, so does the proportion of the executive’s pay that is subject to performance criteria. Therefore, the named executive officers have the highest relative portion of their pay directly linked to Company and individual performance, as compared to other associates. Awards made in January 20142015 for the 20132014 performance year were based on Company and individual performance, as well as on the demonstration of specific leadership competencies assessed through a comprehensive performance management process that included an individual assessment against one or more performance objectives specifically designed to evaluate
the degree to which the executive balanced risks inherent in his or her role. The Chief Human Resources Officer and the Chief Risk Officer reviewed these assessments, with the Chief Auditor also reviewing the risk assessment for the Chief Risk Officer, and the Committee considered the assessments in making its determinations regarding individual performance and compensation levels.
Ensure that total compensation rewards performance over multiple time horizons
Our compensation programs are structured to encourage our executives to deliver strong results over theshort-term while making decisions that create sustained value for our stockholders over the long-term. For 2013,2014, approximately 85%78% of the CEO’s total compensation is equity-based and at-risk to the performance of the Company’s stock price, with alland 100% of his compensation is deferred for a three-year period. For the NEOs in 2013,2014, approximately 80% of total target compensation was provided through equity-based vehicles which were allat-risk to the performance of the Company’s stock price and subject to vesting over multiple time horizons. The use of deferred, equity-based compensation vehicles with multi-year vesting terms advances our goal of aligning the ultimate value realized by the named executive officers with the performance of the Company’s stock over time because the value of these compensation vehicles increases and decreases based on the performance of the Company’s stock price.
Attract, retain and motivate top executive talent
To attract, retain and motivate exceptional leaders, we believe that compensation opportunities at Capital One must be competitive with the marketplace for talent. The Committee and the independent directors strive to preserve a competitive pay mix and total target compensation values in the executive compensation program, as well as provide competitive total rewards based on our selected peer group.
Align our executives’ interests with those of our stockholders
The Committee and the independent directors remain committed to designing incentive compensation programs that reward individual and corporate performance and that are aligned with the creation of stockholder value over the long-term. Because the majority of named executive officer compensation is delivered through deferred, equity-based vehicles that vest over multiple time horizons, the named executive officers have a significant stake in the success of the Company. In addition, we established specific stock ownership policies that the named executive officers must meet on an annual basis and stock retention provisions applicable to certain equity awards.
Consideration of 20132014 Say on Pay Vote and Stockholder Engagement
The Committee valuesand the Board of Directors value the input of our stockholders and strivesstrive to foster a constructive dialogue with stockholders on matters of executive compensation.compensation and corporate governance. At our 20132014 Annual Meeting of Stockholders, our stockholders supported our executive compensation program by approving our non-binding advisory vote on executive compensation (“20132014 Say on Pay”). However, with a higher percentage of votes cast than at any prior meeting. Though the Committee recognizes thatrecognized the percentage of stockholders supporting our executive compensation program for the 20132014 Say on Pay was lower than in years past.vote reflected strong support for the Company’s executive compensation programs, the Committee remains committed to stockholder engagement. In 2013,2014, we enhancedcontinued to strengthen our direct outreach to stockholders to ensure that we continue to maintain strong lines of communication with our stockholders and that the perspectives of our stockholders are shared with the Committee.Committee and the Board of Directors. To that end, since the 2014 Annual Meeting of Stockholders, we continued direct engagement and discussions with stockholders representing approximately 50% of our
outstanding shares. The Committee continues to actively oversee our stockholder engagement with respect to executive compensation matters and has considered stockholder feedback in approving year-end incentive awards for 2014 and structuring and approving the 20142015 compensation programprograms for the CEO. The Committee and the independent directors continue to believe that ournamed executive compensation programs support the objectives outlined above.officers.
Compensation Components
CEO Compensation
In 2013,2014, as in past years, the Committee granted equity awards to the CEO at the beginning of the year that are designed to provide an incentive to focus on longer term performance. The Committee also established the opportunity for the CEO to receive an additional year-end incentive award based on the Committee’s evaluation of the Company’s performance and the CEO’s contributions over the year. All of the CEO’s awards are subject to a three-year deferred vesting or payout.
The table below summarizes the elements of compensation that the Committee approved for the 20132014 performance year for the CEO.
Compensation Element | Timing of Award Determination | Basis for Award | Approximate % of CEO Total Target Compensation | Vesting Schedule | ||||
Base Salary
| Not applicable
| Not applicable
| 0%
| Not applicable
| ||||
Stock Options | January | Incentive for Future Company Performance
| 3-year cliff vesting; expires in 10 years | |||||
Performance Shares | January | Incentive for Future Company Performance | 50% | Vest at the end of the 3-year performance period; the number of shares vesting depends on achievement of performance factors
| ||||
Stock-Settled RSUs | January 2014 | Incentive for Future Company Performance | 10% | 3-year cliff vesting; settles in Company stock | ||||
Year-End Incentive Opportunity | January | Reward for | Delivered as combination of cash-settled RSUs and deferred cash bonus; payout after 3 years
|
NEO Compensation
The NEOs traditionally receive a mix of cash and equity-based compensation. As noted above, we do not pay cash bonuses to the NEOs for annual performance. Instead, following the end of the year the Committee may grant a variety of equity-based awards based on the Committee’s evaluation of Company and individual performance during the past year. All of these equity-based awards are subject to deferred vesting over a three-year period.
The table below summarizes the elements of compensation that the Committee approved for the 20132014 performance year for the NEOs.
Compensation Element
| Timing of Award
| Basis for Award
| Approximate % of
| Vesting Schedule | ||||||
Base Salary - Cash | January |
Overall experience, skills, performance, and knowledge
| 20% | Paid in cash throughout the performance year | ||||||
Base Salary - RSUs | January |
| 15% |
Awarded as RSUs which settle in cash on
| ||||||
Cash Bonus
| Not applicable |
Not applicable
| 0% | Not applicable | ||||||
Cash-Settled RSUs | January |
Reward for Company Performance
| 15% | 3-year ratable vesting | ||||||
Stock Options |
| January | Reward for
| 50% | 3-year ratable vesting; expires in 10 years | |||||
Performance Shares | Vest at the end of the 3-year performance period; the number of shares vesting depends on
| |||||||||
Stock-Settled RSUs |
3-year ratable vesting
|
Performance and Recovery Provisions
The table below summarizes the performance and recovery provisions applicable to the elements of compensation that the Committee approved for the 20132014 performance year for the named executive officers. See “Additional Performance Conditions and Recovery Provisions” on page 44 for more details.
Compensation Element | Performance and Recovery Provisions | |
| •Clawback provisions
| |
Stock Options | •Performance-based vesting provisions •Clawback provisions
| |
Performance Shares | •Performance share reduction •Clawback provisions •Financial restatement clawbacks
| |
Stock-Settled RSUs | •Performance-based vesting provisions •Clawback provisions
| |
CEO Year-End Incentive Opportunity | •Performance-based vesting provisions (RSUs) •Clawback provisions
|
Chief Executive Officer Compensation
Goals and Principles
The Committee’s top priority is to align the interests of the CEO with the interests of our stockholders by directly linking his awards with the Company’s performance and his contributions to that performance over appropriate
time horizons. The Committee believes that the CEO’s compensation should be at-risk based on his and the Company’s performance. Each year the Committee approves the form, timing and amount of CEO compensation and makes recommendations to the independent directors for final approval. The Committee takes into account the CEO’s historical performance and how to most effectively align the CEO’s interests with the interests of our stockholders over the appropriate time horizons, support safety and soundness and appropriately balance risk. The Committee and the independent directors have the flexibility to adjust compensation decisions from year to year to take into account the Company’s performance and evolving market practices.
20132014 CEO Compensation Decisions
In January 2013,2014, the Committee and the independent directors reviewed the compensation structure utilized since 2009 for Mr. Fairbank and determined that for 20132014 the compensation program would continue to consist of equity awards granted at the beginning of the year plus an opportunity for an additional year-end incentive award based on the Company’s actual performance for 2013.2014. In this manner, the CEO’s compensation continues to be completely at-risk based on the Company’s and Mr. Fairbank’s performance. The Committee and independent directors determined that the compensation program structured in this manner remained appropriate for Mr. Fairbank in 20132014 given that the compensation program aligns Mr. Fairbank’s compensation with the Company’s performance over the appropriate time horizons and supports the Company’s executive compensation goals and principles. The Committee and the independent directors determined, however, to change the mix of the vehicles for the 2014 CEO compensation program, reducing the proportion of total target compensation represented by stock options, increasing the year-end incentive opportunity to 30% of the CEO’s total target compensation program and introducing a stock-settled RSU award. In addition, the Committee and the independent directors determined to reduce the maximum value of Mr. Fairbank’s year-end incentive opportunity to one and a half times the target value from two times the target value for prior year-end incentive opportunities. The Committee and the independent directors made these decisions after taking into account the perspectives of stockholders, proxy advisory firms, the Federal Reserve and other federal banking regulators. After considering various factors as described below, without giving particular weight to any specific factor, the Committee and the independent directors determined that a total target compensation amount of $17.5 million was appropriate for Mr. Fairbank’s 20132014 compensation program.
When determining the structure and total target compensation amount for Mr. Fairbank’s 20132014 compensation program, as well as the value for each component of the award, the Committee considered Mr. Fairbank’s and the Company’s performance during 20122013 relative to the financial, operating, safety and soundness and strategic performance factors described below under “Year-End Incentive Opportunity.” In addition, the Committee and the independent directors considered the Company’s performance in 20122013 relative to the peer comparator companies’ performance in 2012,2013, the structure and amount of compensation awarded to the chief executive
officers of the peer comparator companies and the structure and amount of Mr. Fairbank’s compensation awards in prior years. The Committee and the independent directors also considered the Company’s risk profile and the time horizon over which the deferred, equity-based vehicles will vest, as well as the fact that the ultimate value of Mr. Fairbank’s deferred, equity-based awards will depend on the Company and Mr. Fairbank’s performance over time.
Performance Share Award
In January 2013,2014, based on the above determination by the Committee and the independent directors, Mr. Fairbank was granted an award of performance shares under which he may receive from 0% to 150% of a target number of 155,363123,309 shares of the Company’s common stock based on the Company’s performance over the three-year period from January 1, 20132014 through December 31, 2015.2016. The Company’s performance will be assessed on the basis of Adjusted ROA relative to a comparator group consisting of companies in the KBW Bank Sector index,Index, excluding custody banks (the “KBW index”Index”). The Committee believes that the KBW indexIndex is an appropriate index against which to assess the Company’s performance because its members are principally lending businesses similar to the Company. Moreover, under the performance share reduction feature of this award, the number of shares issued at settlement will be reduced if the Company’s Adjusted ROA for one or more fiscal years completed during the performance period is not positive, no matter how well it compares to the peer group. If the Company’s Adjusted ROA is not positive for all three fiscal years in the performance period,
Mr. Fairbank will forfeit the entire award of performance shares. Thus, although the award had a grant date value of $8,750,044,$8,750,007, the number of shares that Mr. Fairbank ultimately receives, if any, will be solely dependent on the Company’s performance over the performance period. The performance share award also is subject to certain clawback provisions. See “Performance Share Reduction” and “Financial Restatement Clawbacks” on pagespage 45 and 46 for more information.
After the end of the three-year performance period, the Committee will certify the Company’s performance and issue the corresponding number of shares of the Company’s common stock, if any, in accordance with the table below.
Relative Metric: Adjusted ROA | ||||||||
³ 75th Percentile | 50th Percentile | < 20th Percentile | ||||||
Number of years with | Three | 150% | 100% | 0% | ||||
Two | 125% | 83% | 0% | |||||
One | 100% | 67% | 0% | |||||
None | 0% | 0% | 0% |
Relative Metric: Adjusted ROA | ||||||||
³ 75th Percentile | 50th Percentile | < 20th Percentile | ||||||
Number of years with ROA: | Three | 150% | 100% | 0% | ||||
Two | 125% | 83% | 0% | |||||
One | 100% | 67% | 0% | |||||
None | 0% | 0% | 0% |
The table above shows potential payouts based on specific Company performance results. Payouts will range between the values shown above for performance that falls between the performance results shown in the table.
Stock Option Award
In January 2013,2014, Mr. Fairbank also received a grant of 325,985 nonstatutory108,944 non-statutory stock options at an exercise price of $56.32$70.96 per share (which was the fair market value of the Company’s common stock on the date of grant). The benefits to Mr. Fairbank of the stock options are deferred, as the options cannot be exercised until three years after the date of grantFebruary 15, 2017 and will expire ten years after the date of grant. The option grant had a fixed grant date value of $4,375,012;$1,750,000; however, the ultimate value Mr. Fairbank realizes, if any, is solely dependent on the long-term appreciation in the Company’s stock price. Mr. Fairbank can only realize value from the stock options if and to the extent the Company’s stock price increases after the date of grant and the market value of the stock exceeds the exercise price at some point after the three-year vesting period when the options are exercised. The stock option award is also subject to performance-based vesting conditions and clawback provisions, each as described in more detail under “Additional Performance Conditions and Recovery Provisions” beginning on page 44.
Stock-Settled RSU Award
In January 2014, Mr. Fairbank also received a grant of 24,662 stock-settled RSUs. The stock-settled RSU grant had a fixed grant date value of $1,750,016. The stock-settled RSU award vests in full on February 15, 2017 and is subject to performance-based vesting conditions and clawback provisions, each as described in more detail under “Additional Performance Conditions and Recovery Provisions” beginning on page 44.
Year-End Incentive Opportunity
A portion of Mr. Fairbank’s 20132014 compensation award consisted of an opportunity for a year-end incentive award based on the Company’s actual performance in 2013.2014. The award had a target value of $4,375,000,$5,250,000, but the ultimate value of the award was determined based on the Committee’s evaluation of the Company’s performance during 20132014 and Mr. Fairbank’s contributions to that performance relative to the financial, operating, safety and soundness and strategic factors shown below (which were evaluated on a qualitative basis without any specific pre-established targets).
Financial Performance | Operating Performance | Safety and Soundness | Strategic Performance | |||
• Operating earnings | • Revenue generation | • Capital adequacy | • CEO leadership and performance | |||
• Earnings per share | • Expense management | • Risk management and | of executive team | |||
• Return on tangible capital | • Operating effectiveness | compliance | • Capital management | |||
• Customer satisfaction | • Credit loss management | • Progress toward achievement | ||||
• Underwriting quality | of long-term strategy | |||||
• Balance sheet management |
• Execution against corporate | |||||
imperatives | ||||||
• Recruitment and development of world class talent | ||||||
• Disciplined investment in infrastructure | ||||||
• Corporate reputation and community engagement | ||||||
• Preservation of corporate culture and values |
In January 2014,2015, the Committee considered the Company’s performance on both a quantitative and qualitative basis, including the results described under “2013“2014 Company Performance” on page 31. In particular, the Committee considered:
The Committee considered these factors in light of the challenges still facing management in order to position Capital One to generate future loan growth and deliver superior and sustainable returns, including the Company’s ongoing work to manage costs as well as to meet heightenedrising regulatory expectations across the financial services industry. The Committee also considered the Company’s one-year TSR recognizingof 9.5% and noted that it was just behindranked at the median for the peer comparator group in 2013.2014. The Committee also considered the Company’s three- and five-year TSR of 102.0% and 124.9%, respectively.
The Committee also took into account peer comparator group CEO compensation levels, although the comparability of such information was limited due to evolving market conditions, the different tenures of each of the peer companies’ CEOs as compared to Mr. Fairbank’s tenure as the CEO of Capital One, and the varying degrees of success those CEOs have had in leading their respective companies.
After considering all of the above factors together, in January 20142015 the Committee and the independent directors approved awards for Mr. Fairbank totaling $5,687,543.$7,350,006. The Committee and the independent directors determined to award that amount using two vehicles: (i) an award of 40,07639,221 restricted stock units (which(“RSUs”), which had a total grant date value of $2,843,793)$2,940,006, and (ii) a deferred cash bonus in the amount of $2,843,750.$4,410,000. The award of restricted stock unitsRSUs will vest in full in three years,on February 15, 2018, will settle in cash based on the Company’s average stock price over the fifteen trading days preceding the vesting date, and is subject to performance-based vesting provisions. The cash bonus is mandatorily deferred for three years into the Company’s Voluntary Non-Qualified Deferred Compensation Plan and will pay out in the first calendar quarter of 2017.2018. Both the award of restricted stock unitsRSUs and the deferred cash bonus are subject to clawback provisions. The performance-based vesting provisions applicable to the restricted stock unitsRSUs and the clawback provisions applicable to both awards are described in more detail under “Additional Performance Conditions and Recovery Provisions” beginning on page 44.
CEO Compensation by Performance Year
Below is a table showing Mr. Fairbank’s compensation awards as they are attributable to the performance years indicated.
Performance Year | Cash Salary | Deferred Cash Bonus | Cash-Settled RSUs | Stock-Settled Awards | Option Awards | Total | Cash Salary | Deferred Cash Bonus | Cash-Settled RSUs | Stock-Settled Awards | Option Awards | Total | ||||||||||||
2014 | $0 | $4,410,000 | $2,940,006 | $10,500,022 | $1,750,000 | $19,600,028 | ||||||||||||||||||
2013 | $0 | $2,843,750 | $2,843,793 | $8,750,044 | $4,375,012 | $18,812,599 | $0 | $2,843,750 | $2,843,793 | $8,750,044 | $4,375,012 | $18,812,599 | ||||||||||||
2012 | $0 | $2,187,500 | $2,187,525 | $8,750,008 | $4,375,009 | $17,500,042 | $0 | $2,187,500 | $2,187,525 | $8,750,008 | $4,375,009 | $17,500,042 | ||||||||||||
2011 | $0 | $0 | $7,200,044 | $4,000,046 | $8,003,906 | $19,203,996 |
The table above is presented to show how the Committee views compensation actions and to which year the compensation awards relate. This table differs substantially from the Summary Compensation Table on page 53 required for purposes of this proxy statement and is therefore not a substitute for the information required in that table. There are two principal differences between the Summary Compensation Table and the table above:
Additional Pay Elements
As part of the CEO compensation program, the Committee and the independent directors also approved certain other programs intended to support Mr. Fairbank’s productivity and well-being. These include:
Additional details on these programs can be found in the “Named Executive Officer Compensation” section beginning on page 52. There are no other perquisites provided to Mr. Fairbank by the Company that constitute additional compensation.
20142015 CEO Compensation Decisions
In January 2014,2015, the Committee and the independent directors reviewed the compensation structure utilized in 20132014 for Mr. Fairbank and determined that the structure for 2014 the 2015 CEO compensation program would continue to consistbe the same, consisting of equity awards granted at the beginning of the year plus an opportunity for an additional year-end incentive award based on the Company’s actual performance for 2014.2015. In this manner, the CEO’s compensation will continue to be completely at-risk based on the Company’s and Mr. Fairbank’s performance. The Committee and the independent directors continue to believe that the compensation program aligns Mr. Fairbank’s compensation with the Company’s performance over the appropriate time horizons and supports the Company’s executive compensation goals and principles. The Committee and the independent directors determined that for Mr. Fairbank’s 20142015 compensation program a total target compensation amount of $17.5 million, was appropriate.
However, after careful consideration of a number of different factors, the Committee and the independent directors determined to change the mix of the vehicles for the 2014 CEO compensation program. For the 2014 CEO compensation program, the Committee and the independent members determined to reduce the proportion ofsame total target compensation represented by stock options. To account for the reduction of the stock option component of the CEO’s total target compensation, the year-end incentive opportunity has been increased from 25% of the CEO’s total target compensation program to 30% and the Committee and the independent directors introduced a stock-settled RSU award representing 10% of the CEO’s 2014, total target compensation. In addition, the Committee and the independent directors determined to reduce the maximum value of Mr. Fairbank’s year-end incentive opportunity to one and a half times the target value.was appropriate.
The Committee and the independent directors made these decisions after taking into account the perspectives of stockholders, proxy advisory firms, the Federal Reserve and other federal banking regulators. In deciding to leave Mr. Fairbank’s total target compensation unchanged since 2012, change the mix of the compensation components and reduce the maximum value of the year-end incentive opportunity, the Committee and the independent directors considered the 2013 Say on Pay Vote and stockholder feedback as described above under “Consideration of 2013 Say on Pay Vote and Stockholder Engagement” on page 33 as well as guidance from federal banking regulators. The Committee and the independent directors believe that reducing the upside opportunity provided by stock options and the maximum upside for the year-end incentive opportunity, while increasing the proportion of Mr. Fairbank’s total target compensation that will be determined at the end of 2014 and increasing the proportion of his total target compensation that will settle in shares of Capital One stock, further aligns the interests of the CEO and the interests of our stockholders, enhances the link between his awards and the Company’s performance and strengthens the risk-balancing features of the CEO compensation program.
The table below summarizes the elements of compensation that the Committee and the independent directors approved for the 2014 CEO compensation program.
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Based on this framework, in January 20142015 the Committee and the independent directors granted to Mr. Fairbank a performance share award under which he may receive from 0% to 150% of a target number of 123,309116,729 shares of the Company’s common stock based on the Company’s performance over the three-year period from January 1, 20142015, through December 31, 2016.2017. Mr. Fairbank also received a grant of 108,944 nonstatutory115,812 non-statutory stock options at an exercise price of $70.96$74.96 per share (which was the fair market value of the Company’s common stock on the grant date) and a grant of 24,66223,346 stock-settled RSUs. The Committee also determined that Mr. Fairbank will have an opportunity to receive an award in late 20142015 or early 2015.2016. Any such award will consist of deferred cash, an equity-based award or both and will pay out or vest after a three-year deferral period. The Committee and the independent directors will have absolute discretion to determine whether to make the award, the form of the award and the value of the award relative to the target amount of $5,250,000, and will base these determinations on the Committee’s evaluation of the Company’s performance in 20142015 relative to the same financial, operating, safety and soundness and strategic factors described aboveearlier under “2013“2014 CEO Compensation Decisions – Year-End Incentive Opportunity.” The maximum value of the award, if granted, will not exceed one and a half times the target value. The Company expects that any such award will be subject to aperformance-based vesting and clawback provisionprovisions similar to the clawback provisionprovisions applicable to the 2014 stock option award and described below.year-end incentive opportunity.
The terms of the performance share, and stock option and stock-settled RSU awards granted to Mr. Fairbank in January 20142015 are substantially similar to the terms described aboveearlier under “2013“2014 CEO Compensation Decisions” except thatDecisions,” including the stock option award is subject to revised performance-based vesting provisions. The stock-settled RSU grant is also subject toapplication of performance-based vesting and clawback provisions. See “Additional Performance Conditions and Recovery Provisions” on page 44 for more details.
NEO Compensation
Goals and Principles
As with the CEO, the Committee seeks to align the interests of the NEOs with the interests of our stockholders by directly linking compensation to performance over the appropriate time horizons while supporting safety and soundness and appropriately balancing risk. The Committee annually reviews and approves the compensation structure for all of our executive officers, including those who are ultimately reported as NEOs, and makes recommendations to the independent directors for final approval. The Committee takes into account each NEO’s historical performance, individual roles and responsibilities and contributions expected from each NEO in the future as well as the recommendations of the CEO, including his assessment of each NEO’s performance. In determining 20132014 NEO compensation, the Committee also considered the specific factors discussed below. Final decisions regarding NEO compensation are made by the independent directors.
20132014 NEO Compensation Decisions
The 20132014 NEO compensation program approved by the Committee and the independent directors was designed to be consistent with the Company’s pay-for-performance philosophy and is generally consistent with the 2012 2013
compensation program. Base salary remains a smaller portion of total target compensation than equity based vehicles, and cash bonuses are not included in the 20132014 NEO compensation program. The Committee believes that this pay mix serves to balance stockholder interests while effectively rewarding and motivating key talent.
Based on the above framework, the Committee and the independent directors then determined the 20132014 total target compensation for each NEO by considering the following factors:
Base Salaries
For the 20132014 performance year, the Committee chose to defer a significant portion of each NEO’s base salary until the end of the year. Rather than award each NEO a base salary entirely in cash, the 20132014 base salary for NEOs was delivered in a mix of cash (approximately 20% of total target compensation) and restricted stock unitsRSUs that settled in cash on DecemberFebruary 15, 20132015 (approximately 15% of total target compensation). In this way, the 20132014 compensation program further deferred cash compensation for each NEO and placed it at risk to the performance of the Company’s stock price for the entire performance year.
In January 2013,2014, the Committee and the independent directors approved 20132014 base salaries for the NEOs, including the portion of base salary delivered as restricted stock units,RSUs, ranging from $1,504,014$1,588,056 to $2,347,131.$2,655,071. Individual details for each NEO are provided in the table below showing compensation by performance year.
Year-End Incentive Awards
In addition to base salary, in January 20142015 the Committee determined to award each NEO various equity-based incentive awards as a reward for Company and individual performance in 2013.2014.
Cash-Settled Restricted Stock UnitRSU Awards
In January 2014,2015, the Committee and the independent directors approved awards of restricted stock unitscash-settled RSUs for the NEOs ranging from $990,034$942,247 to $1,530,323,$1,575,060, representing a payout at 150%140% of the target award values established by the Committee in January 2013.2014. Individual details for each NEO are provided in the table below showing compensation by performance year. The Committee and the independent directors determined that these awards were appropriate in light of the Company’s performance as described under “Year-End Incentive Opportunity” on page 3738 in connection with the determinations by the Committee and the independent directors relating to the CEO’s year-end incentive awards.
Equity Incentive Awards
In January 2014,2015, the Committee and the independent directors awarded various equity incentive awards to the NEOs for the 20132014 performance year. At Capital One, equity incentive awards are linked to performance in two ways:
Equity incentive awards are designed to emphasize elements that are of particular importance to Capital One given the Company’s unique goals and continually evolving business strategies and objectives. In determining the actual amounts to be awarded to each NEO, the Committee considered each NEO’s contribution to the Company’s performance for 20132014 as well as the individual performance of each NEO. The Committee also received input from the CEO on his assessment of each NEO’s individual performance and his recommendations for compensation of the NEOs. The CEO also assessed each NEO’s performance against one or more specific objectives designed to evaluate the degree to which the NEO balanced risks inherent in the NEO’s role. These assessments included the use of both quantitative and qualitative risk measures and were reviewed by the Chief Human Resources Officer and the Chief Risk Officer before being presented to the Committee and the independent directors for their consideration.
The equity incentive awards consisted of stock-settled RSUs, performance share awards and stock options. The terms of the performance share awards are substantially similar to the terms of the performance share awards
granted to our CEO, as described aboveearlier under “2014“2015 CEO Compensation Decisions.” The NEO stock options and stock-settled RSUs vest ratably in one-third increments starting on the first anniversary of the grant date and are subject to performance-based vesting and clawback provisions as discussed below under “Additional Performance Conditions and Recovery Provisions” on page 44. The stock options have an exercise price of $56.32$74.96 per share, which was the fair market value of the Company’s common stock on the date of grant.
Mr. Crawford, the Company’s Chief Financial Officer, was awarded 47,046 nonstatutory60,664 non-statutory stock options, 23,96227,515 stock-settled RSUs and a target amount of 14,37816,509 performance shares with a total grant date value for all three awards of $3,476,320.$4,216,715. The Committee and the independent directors determined to grant these awards based upon Mr. Crawford’s leadership in managing the Company’s balance sheet in 2013,2014, particularly the Company’s capital generation and its successful completion of the share repurchase program.distribution. The Committee and the independent directors also considered Mr. Crawford’s continued leadership in driving enhanced risk managementwell-managed processes within the Company’s finance operations as well asand across the enterprise and his positioning of Capital One for 2013Basel-related and beyond,other regulatory initiatives, as well as his contributions providing enhancedstrategic market advice and enhancing transparency and clear communication to the market.investors.
Mr. Perlin, the Company’s Former Chief Financial Officer,Schneider, President, Card, was awarded 41,555 nonstatutory46,374 non-statutory stock options, 23,51721,034 stock-settled RSUs and a target amount of 14,11112,620 performance shares with a total grant date value for all three awards of $3,337,593. The Committee determined to grant these awards based upon Mr. Perlin’s tenure as Chief Financial Officer through the first quarter of 2013 and his leadership over the course of the past several years in managing the Company’s balance sheet and finance operations through two significant acquisitions and dramatically changing regulatory requirements. The Committee also recognized Mr. Perlin’s guidance and advice to senior management throughout 2013, particularly in supporting a smooth transition of the Chief Financial Officer role to Mr. Crawford.
Mr. Schneider, President, Card, was awarded 37,934 nonstatutory stock options, 19,321 stock-settled RSUs and a target amount of 11,593 performance shares with a total grant date value for all three awards of $2,803,002.$3,223,447. The Committee and the independent directors determined to grant these awards based upon the strong performance of the Credit Card business in 2013, including2014, particularly the year-over-year growth driving increased net income for Domestic Card with strong creditreturn on assets while maintaining focus on resiliency, as well as his leadership positioning the Domestic Card business for future strong performance and managing the successful delivery of several new card products and brand enhancements to market.partnership business. The Committee and the independent directors also considered the well-managed integration of the U.S. credit card business of HSBC and Mr. Schneider’s leadership enhancingimplementing the Company’s digital agenda while continuing to enhance the compliance and risk management programs within the Credit Card business.
Mr. Finneran, General Counsel and Corporate Secretary, was awarded 29,783 nonstatutory31,660 non-statutory stock options, 16,85515,956 stock-settled RSUs and a target amount of 10,1139,574 performance shares with a total grant date value for all three awards of $2,392,062.$2,392,134. The Committee and the independent directors determined to grant these awards based upon Mr. Finneran’s management of the Company’s relationsengagement with its banka broad range of regulators and other stakeholders in an environment of heightened regulatory scrutiny and examination. In addition, the Committee and the independent directors considered Mr. Finneran’shis leadership enhancing the Corporation’s governance and management frameworksframework in 2013 and supporting2014, his success in managing the Company’s enterprise-wide enhancements to its compliancelitigation portfolio and risk management programs.his implementation of well-managed processes across his organization.
Mr. Witter,Yajnik, the Company’s President, Retail and Direct Banking,Financial Services, was awarded 30,436 nonstatutory29,688 non-statutory stock options, 15,50214,962 stock-settled RSUs and a target amount of 9,3028,977 performance shares with a total grant date value for all three awards of $2,248,995.$2,243,074. The Committee and the independent directors determined to grant these awards based upon Mr. Witter’s successful managementthe strong performance of the integration and rebranding of ING DirectAuto business in 2014, including growth in originations, as well as his continued successleadership managing credit risk in recruitingAuto and retaining superior talent in the retail banking business.Home Loans. The Committee and the independent directors also considered Mr. Witter’sYajnik’s success in managing operating costs in the businessimplementing a comprehensive process improvement program and his success in building the retail banking brand and delivering on its digital strategies.enhanced technological solutions across both businesses.
NEO Compensation by Performance Year
The table below shows actual NEO compensation as it is attributable to the performance year indicated.
Name | Performance Year | Cash Salary | Cash Bonus | Cash-Settled RSUs1 | Stock-Settled Awards2 | Option Awards |
Total | Performance Year | Cash Salary | Cash Bonus | Cash-Settled RSUs (1) | Stock-Settled Awards (2) | Option Awards | Total | ||||||||||||||
Stephen S. Crawford | 2013 | $1,326,923 | $0 | $2,550,531 | $2,720,606 | $755,714 | $7,353,774 | 2014 | td,530,000 | $0 | td,700,130 | $3,300,039 | $916,676 | $8,446,845 | ||||||||||||||
2013 | $1,335,000 | $0 | $2,503,196 | $2,670,083 | $667,510 | $7,175,789 | ||||||||||||||||||||||
Gary L. Perlin | 2012 | $1,335,000 | $0 | $2,102,678 | $2,670,019 | $741,679 | $6,849,376 | |||||||||||||||||||||
2011 | $1,000,000 | $0 | $3,398,557 | $2,670,062 | $741,667 | $7,810,286 | ||||||||||||||||||||||
Stephen S. Crawford | 2013 | td,326,923 | $0 | td,550,531 | td,720,606 | $755,714 | $7,353,774 | |||||||||||||||||||||
2013 | $1,097,000 | $0 | $2,057,566 | $2,193,657 | $609,345 | $5,957,568 | 2014 | $1,119,000 | $0 | $1,975,275 | $2,522,704 | $700,744 | $6,317,723 | |||||||||||||||
Ryan M. Schneider | 2012 | $1,065,000 | $0 | $1,677,443 | $1,704,018 | $473,342 | $4,919,803 | 2013 | $1,097,000 | $0 | $2,057,566 | $2,193,657 | $609,345 | $5,957,568 | ||||||||||||||
2011 | $968,000 | $0 | $2,162,808 | $2,129,617 | $591,559 | $5,851,984 | 2012 | $1,065,000 | $0 | $1,677,443 | $1,704,018 | $473,342 | $4,919,803 | |||||||||||||||
John G. Finneran, Jr. | 2013 | $957,000 | $0 | td,795,055 | td,913,649 | $478,413 | $5,144,117 | |||||||||||||||||||||
2014 | $977,000 | $0 | td,723,258 | td,913,729 | $478,405 | $5,092,392 | ||||||||||||||||||||||
John G. Finneran, Jr. | 2012 | $929,000 | $0 | td,463,232 | td,858,053 | $464,511 | $4,714,796 | 2013 | $957,000 | $0 | td,795,055 | td,913,649 | $478,413 | $5,144,117 | ||||||||||||||
2012 | $929,000 | $0 | td,463,232 | td,858,053 | $464,511 | $4,714,796 | ||||||||||||||||||||||
Jonathan W. Witter | 2013 | $880,000 | $0 | $1,650,048 | $1,760,092 | $488,903 | $4,779,043 | |||||||||||||||||||||
Sanjiv Yajnik | 2014 | $915,000 | $0 | $1,615,303 | $1,794,467 | $448,606 | $4,773,376 |
(1) | For |
(2) | For |
This table is presented to show how the Committee views compensation actions and to which year the compensation awards relate, but it differs substantially from the Summary Compensation Table on page 53 required for purposes of this proxy statement and is therefore not a substitute for the information required in that table. There are two principal differences between the Summary Compensation Table and the above table:
Additional Pay Elements
The Committee provides certain other programs intended to support the NEOs’ productivity, well-being and security. These programs provide some level of personal benefit and are not generally available to all associates. For 2013,2014, these included the following:
The Committee has determined that the nature and value of these programs are comparable to those offered to similarly situated executives at our peers. Additional details on these programs can be found in the “Named Executive Officer Compensation” section beginning on page 52.
20142015 NEO Compensation Decisions
For 2014,2015, the Committee and the independent directors approved an NEO compensation program that is substantially similar to the 20132015 program. The plan consists of multiple compensation vehicles that directly link the NEOs’ compensation with the Company’s performance over multiple time horizons, align the NEOs’ interests with the interests of the Company’s stockholders, support safety and soundness and encourage appropriate risk-taking.
Additional Performance Conditions and Recovery Provisions
The awards granted to our named executive officers include the following provisions that are designed to further enhance alignment between pay and performance and balance the risks that our incentive compensation programs might otherwise encourage:
These terms and conditions apply to incentive awards granted to every executive officer and not just to the named executive officers.
Performance-Based Vesting Provisions
The ultimate value that our named executive officers receive from equity-based incentive awards is tied to our stock price performance over the vesting period. The Committee nevertheless determined that these awards should be subject to additional performance conditions so that the value received by the executives is also conditioned upon the Company continuing to meet certain operating performance thresholds. The vesting of awards subject to performance-based vesting provisions is conditioned upon the Company meeting specific performance thresholds for each and every fiscal year ending in the three-year vesting period. Any forfeitures will be cumulative over the three-year vesting period. In this manner, regardless of our executives’ past performance and of our stock price performance, the awards subject to performance-based vesting remain at risk of complete forfeiture over the three-year vesting period.
Since January 2012, performance-based vesting provisions have applied to the following awards:
In setting the threshold operating performance conditions, the Company took into account discussions with federal bank regulators. These performance conditions do not present any upside potential for the named executive officers’ compensation but instead create an additional at-risk element to the compensation that has been awarded to them. Imposing these additional performance conditions is designed to further reflect our approach of balancing risk and performance over the long-term.
For awards granted in January 2014 and 2015, vesting is conditioned on the Company achieving positive Core Earnings. If Core Earnings are not positive for any fiscal year in the vesting period, the named executive officer will automatically forfeit 50% of one-year’sone-years’ worth of vesting (i.e., one-sixth of the total award). In addition, the Committee will determine the extent to which any named executive officer was accountable for the outcome and, based on such determination, the Committee will decide whether any or all of the remaining 50% of one-year’sone-years’ worth of vesting will also be forfeited. The Committee may also decide to delay the vesting of the applicable portion of the award not so forfeited. For the NEOs, these determinations will be made each year prior to the scheduled vesting date, based on the Core Earnings for the fiscal year ended prior to such vesting date. For the CEO, these determinations will be made prior to the scheduled vesting date at the end of the three-year vesting period, taking into account Core Earnings for each fiscal year within the period.
For awards granted in January 2013, vesting is conditioned on the Company achieving positive Core Earnings and a Base ROA better than or equal to negative one percent (-1%) for each year during the vesting period. For any year during the vesting period in which the Base ROA threshold is not met, the executive will forfeit one full year’s worth of vesting (i.e., one-third of the total award). Even if the Base ROA threshold is met, the named executive officer will forfeit 50% of one-year’s worth of vesting if Core Earnings is not positive for the applicable year.
Core Earnings focuses on whether profits are being generated by our basic business, as opposed to other factors that may not reflect business fundamentals. The terms of the applicable award agreements define “Core Earnings” to mean the Company’s net income available to common stockholders, excluding, on a tax-adjusted
basis, the impact of (i) impairment or amortization of intangible assets, (ii) the build or release of the allowance for loan and lease losses, calculated as the difference between the provision for loan and lease losses and charge-offs, net of recoveries, and (iii) the change in the combined uncollectible finance charge and fee reserve. For the January 2013 awards, Core Earnings also excluded the credit portion of other than temporary impairment of the securities portfolio. The Committee believes that Core Earnings is an appropriate performance metric to employ for these performance-based vesting provisions because the metric captures major operational costs and risks to the Company’s
business, including charge-offs, operating expenses, market and competitive risks and costs to maintain adequate levels of capital and liquidity. Because the metric is based on net income available to common stockholders, it also includes the impact of discontinued operations.
“Base ROA” is defined in the applicable award agreements as the ratio, expressed as a percentage, of (i) the Company’s net income available to common stockholders, excluding, on a tax-adjusted basis, the impact of any impairment of intangible assets, to (ii) the Company’s average total assets for the period.
Performance Share Reduction
As described above, the performance share awards granted to the named executive officers since January 2012 employ Adjusted ROA as the performance metric, with the Company’s performance assessed on the basis of Adjusted ROA relative to a comparator group consisting of companies in the KBW index.Index. Each of these performance share awards is subject to reduction in the event that the Company’s Adjusted ROA for any fiscal year in the three-year performance period is not positive. These reductions will occur regardless of how well the Company’s Adjusted ROA compares to its peers in the KBW index.Index. If the Company does not achieve positive Adjusted ROA for one year in the performance period, the total number of shares issued on the vesting date will be reduced by one-sixth. If the Company does not achieve positive Adjusted ROA for two years in the performance period, the total number of shares issued on the vesting date will be reduced by one-third. If the Company does not achieve positive Adjusted ROA for any of the three years in the performance period, the named executive officers will forfeit the entire award. In this manner, even if we outperform compared to the comparator group, the performance share awards are at risk of complete forfeiture if we do not achieve a threshold level of performance on an absolute basis.
“Adjusted ROA” means the ratio, expressed as a percentage, of (a) the Company’s net income available to common stockholders, excluding, on a tax-adjusted basis, the impact of impairment or amortization of intangible assets to (b) the Company’s average tangible assets for the period. This metric is intended to reflect our earnings capacity by focusing on a component of our net income relative to our tangible assets. For the January 20132014 awards, the credit portion of other than temporary impairment of the securities portfolio is also excluded, on a tax-adjusted basis, from the Company’s net income available to common stockholders for purposes of determining Adjusted ROA.
Clawback Provisions
Capital One has included clawback provisions in certain equity awards since 2011. Beginning with awards granted in January 2013, every incentive award granted to our executive officers, including our named executive officers, includes a clawback provision designed to provide the Committee the opportunity to recover compensation previously awarded in the event the clawback is triggered. Under these clawback provisions, the Committee will determine the amount of compensation to recover in the event that the Committee determines (i) there has been misconduct resulting in either a violation of law or of Company policy that in either case causes significant financial or reputational harm to the Company and (ii) either the executive committed the misconduct or failed in his or her responsibility to manage or monitor the applicable conduct or risks. The portions of all applicable incentive awards that are unvested at the time the Committee makes a determination to exercise the clawback provisions will be subject to recovery and at risk of complete forfeiture.
In the event the Committee exercises the clawback provisions in the future, the Company intends to disclose the aggregate amount that the Committee has determined to recover, so long as the underlying event has already been publicly disclosed in the Company’s filings with the SEC. This disclosure would appear in the proxy following any such determination by the Committee and would provide the aggregate amount of recovery for each event if there is more than one applicable event.
Financial Restatement Clawbacks
All performance share awards to our executive officers beginning in January 2011 include a clawback that is triggered in the event of a financial restatement by the Company within three years of the vesting of the award if the executive would have been entitled to fewer shares on the vesting date as a result of the restatement. This restatement clawback is designed to recoup the shares awarded to the executive or, in the event the executive has sold or otherwise transferred the shares, the net proceeds from that sale or transfer.
Criteria and Process for Compensation Decisions
The Committee considers a number of factors in making compensation decisions with respect to the named executive officers. The Committee relies on a range of objective data including Company performance data, peer comparator group performance data, historical pay information, data on specific market practices and trends and other relevant points of information to inform its business judgment.
Use of Outside Consultants for CEO Compensation
The Committee engages F.W. Cook to assist in the design of the CEO compensation program. F.W. Cook assists the Committee in a number of ways, including proposing and evaluating a peer comparator group, gathering relevant compensation data from the peer comparator companies, discussing relevant market trends and context and developing recommendations on possible plan designs. Please see the discussion under “Compensation Committee – Compensation Committee Consultant” in the “Corporate Governance at Capital One” section beginning on page 14 for additional information about F.W. Cook.
Use of Outside Consultants for NEO Compensation
The Chief Human Resources Officer and other members of the Company’s Human Resources department assist the CEO in developing compensation recommendations to the Committee for the NEOs. The Human Resources department typically uses multiple surveys as sources of market compensation data. F.W. Cook also provides additional market reference points that the Committee and the independent directors use when evaluating NEO compensation. Other outside consultants provide information to the Human Resources department regarding market practices and trends and research reports and provide subject matter expertise on specific concepts and technical issues related to executive compensation. However, these outside consultants do not recommend either the form or amount of compensation that is to be paid to the NEOs. The Human Resources department is responsible for analyzing the information obtained from the outside consultants and presenting it to the CEO. The CEO then considers all of the information provided by the Human Resources department and the Chief Human Resources Officer and makes his compensation recommendations for the NEOs to the Committee and the independent directors.
Management does not have a contractual arrangement with any compensation consultant to determine or recommend compensation programs for the NEOs. A consultant from F.W. Cook is present at Committee meetings during which CEO and NEO compensation is discussed and provides market data as well as an outsider’s perspective regarding CEO and NEO compensation practices. F.W. Cook has no other engagement with, and performs no other services for, Capital One besides the services described above.
Market Data
The Committee reviews pertinent data from a group of peer comparator companies within the financial services industry. These organizations are intended to represent the marketplace of companies with whom Capital One competes for business and for executive talent.
F.W. Cook plays a lead role in evaluating the peer comparator group on an annual basis. Each year, a consultant from F.W. Cook presents a comprehensive report to the Committee that highlights size, scope and performance information from the peer comparator companies across a variety of metrics. The Committee specifically considers the Company’s percentile rank versus peer comparator companies across the following financial metrics:
After reviewing this information, the Committee recommends a final peer comparator group to the independent directors for approval. The peer comparator group is adjusted each year, as appropriate, so that the size, scope, performance and business focus of the peer comparator companies reflect Capital One’s competitive environment. After the peer comparator group was significantly adjusted in 2009 due to considerable consolidation within the peer comparator group caused by the turmoil in the financial sector, the same peer group has been used for competitive analysis when the Committee approved the 2010 2011, 2012 and 2013through 2014 compensation programs and target award values. The Committee determined to maintain the same peer comparator group for purposes of designing the 2014 compensation programs, and approved the following peer comparator group in July 2013:
American Express | Fifth Third Bancorp | Regions Financial | ||
Bank of America Corporation | J.P. Morgan Chase | SunTrust Banks | ||
BB&T Corporation | KeyCorp | U.S. Bancorp | ||
Citigroup | PNC Financial Services | Wells Fargo & Company |
Typically, compensation data from the peer comparator group is used to inform the Committee’s determination of the total compensation target values for the named executive officers. As of December 31, 2013, the Company ranked second and ninth among the peer comparator group in three-year and one-year total stockholder return, respectively, and fourth in return on tangible common equity.2014, Capital One was positioned at or near the median of the peer comparator group in terms of total assets, revenues, net income, market value and ratio of price to tangible book value.
For purposes of designing the 2015 compensation programs, however, the Committee determined to adjust the peer comparator group by removing KeyCorp and including Discover Financial Services. The Committee believes that the revised peer comparator group better reflects the competitive environment for the Company, particularly the performance and business focus of the companies in the peer comparator group and the competition for talent, and made this determination after considering, among other things, stockholder feedback as described earlier under “Consideration of 2014 Say on Pay Vote.”
Tally Sheets
In addition to considering market data from our peer comparator group (when available), the Committee also considers information contained on total compensation tally sheets for the CEO and each NEO. The tally sheets summarize multiple components of current and historical compensation, as well as the potential value of post-termination arrangements. The tally sheets are just one point of information used by the Committee in the process of determining CEO and NEO compensation. They help the Committee understand the historical context that is relevant to current compensation decisions, such as the CEO and each NEO’s accumulated equity value. The tally sheets also help the Committee assess the potential downstream consequences of its decisions, such as the potential value to be received by the CEO and each NEO upon separation due to a change of control, retirement or other termination scenarios.
Other Compensation Arrangements
Pension and Non-Qualified Deferred Compensation Plans
Capital One does not currently have any active pension plans for the CEO or the NEOs. We offer a voluntary, non-qualified deferred compensation plan that restores participating NEOs to the level of savings they would have achieved if they had not been impacted by IRS limits governing our qualified 401(k) plan. It also allows the NEOs to defer additional pre-tax compensation in order to save for retirement.
Capital One annually reviews programs and practices at our peer comparator companies and across the financial services industry. We also review changes in the legal and regulatory environment pertaining to retirement
programs. Each of our named executive officers participated in Capital One’s Voluntary Non-Qualified Deferred Compensation Plan (the “Plan”) in 2013.2014. Details of the Plan can be found under “Capital One’s Voluntary Non-Qualified Deferred Compensation Programs” on page 62.63.
Employment Agreements
Capital One typically does not enter into defined term employment agreements with the named executive officers in order to maintain maximum flexibility in establishing separation terms at the appropriate time and considering then current circumstances. The Committee retains full discretion to approve employment agreements on an exception basis and has done so for exceptional circumstances in the past.
Change of Control Agreements
Each named executive officer is a party to an agreement providing certain benefits if their employment terminates in connection with a change of control. The Committee determined that such agreements were appropriate based on their prevalence within the banking and financial services industry and given the dynamic nature of merger and acquisition activity among these institutions.
The change of control agreements define compensation and benefits payable to named executive officers in certain merger and acquisition scenarios, giving them some degree of certainty regarding their individual outcomes in these circumstances. The Committee believes these agreements allow the named executive officers to remain neutral and consider a full range of decisions that are focused on maximizing stockholder value. The change of control agreements are also intended to allow Capital One’s businesses to operate with minimal disruption in the event of a change of control by providing each named executive officer with an incentive to remain in his leadership roles up to and beyond the transaction date. The named executive officers are only entitled to benefits under the agreements if their employment is actually terminated as a result of (or in anticipation of) certain merger and acquisition scenarios.
Both eligibility for participation and the structure of payments under these agreements are designed to be aligned with market practice in the banking and financial services industry. This is designed so that our stockholders are not faced with disproportionate severance costs that may impair potential merger opportunities. It also supports our ability to attract and retain talented executives by providing them with a competitive level of benefit.
Projections of potential payouts to the named executive officers under these agreements are included in the total compensation tally sheets reviewed by the Committee on an annual basis. Although the potential change of control payouts do not necessarily impact annual decisions on CEO and NEO pay, reviewing this information allows the Committee to fully understand the downstream implications of its decisions and the resulting impact to the Company and its stockholders.
Our change of control agreements for the named executive officers no longer provide for excise tax “gross-up” payments. On March 1, 2011, Capital One delivered notice to all executive officers that their change of control agreements, which included excise tax gross-up provisions, would not be renewed. The Committee and the independent directors also approved a new form of change of control agreement to be used after March 1, 2011 for new hires, promotions and renewals which does not provide for an excise tax gross-up. Accordingly, all named executive officer change of control agreements providing for a potential excise tax gross-up after a change of control have expired and been replaced with the new form of agreement that does not provide for an excise tax gross-up.
Post-Employment Compensation Practices
The CEO has no employment or severance arrangement with the Company other than the change of control agreement as described above. If an NEO separates from Capital One, he or she is entitled to receive the amounts set forth in the Company’s Executive Severance Plan, which provides for a payment of up to 30% of the NEO’s current target total compensation plus partially subsidized health, dental and vision benefits through COBRA and outplacement services. The Committee may exercise its business judgment in approving additional amounts in light of all relevant circumstances, including the NEO’s term of employment, past accomplishments, reasons for separation from the Company, potential risks and the NEO’s willingness to restrict his or her future action(s),
such as through an agreement not to compete or solicit the Company’s customers or employees. Capital One has asked certain NEOs to enter into various agreements that contain restrictive covenants related to confidentiality, non-competition, non-solicitation and ownership of work product. For additional information, please see “Restrictive Covenants” in the “Named Executive Officer Compensation” section beginning on page 52.65. Each of the NEOs also has a change of control agreement as described above. Upon retiring from the Company, certain employees who became retirement eligible on or before December 31, 2012 are generally entitled to receive certain retiree medical benefits.
Other Aspects of Executive Compensation
Stock Ownership and Retention Requirements
Consistent with their responsibilities to our stockholders, the executive officers are required to maintain a significant financial stake in the Company. To this end, the CEO and the NEOs must own shares of Capital One stock with a fair market value of at least the following annual cash salary multiples:
Role | Salary Multiple | |
CEO | 5X | |
Other NEOs and Executive Officers | 3X |
Given that the CEO’s compensation program does not include a base salary, his ownership requirement is based on a notional salary established by the Committee and the independent directors, which is currently $1,000,000.
Ownership requirements may be fulfilled using the following shares:
The Committee annually reviews the guidelines and monitors the named executive officers’ compliance with them. New executive officers are given two years from the date of promotion to or appointment as an executive officer to comply with these requirements. In the event that an executive officer is not in compliance with these requirements, the Committee has the right to take action, including reducing the executive officer’s compensation. The named executive officers are currently in compliance with this requirement.
In addition, beginning in January 2011, the Company implemented stock retention requirements for certain equity awards made to the named executive officers. For equity awards granted in January 2014,2015, throughout each executive’s term of employment with Capital One, and for all shares that are acquired during the one-year period following termination of employment, each executive must hold 50% of the after-tax net shares acquired under performance share and stock-settled restricted stock unitRSU awards for one year. These stock ownership and retention requirements apply to all of our executive officers.
Prohibition of Hedging and Speculative Trading Activities
All of Capital One’s executive officers are prohibited from engaging in short sales, hedging transactions or speculative trading in derivative securities of Capital One stock and from using their Capital One stock in a margin account or pledging Capital One stock as collateral for margin loans.a loan.
Equity Grant Practices
Capital One strives to maintain equity grant practices that demonstrate high standards of corporate governance. Annual incentive awards are approved by the Committee and the independent directors (or by delegated authority to the Chief Human Resources Officer for certain employees who are not executive officers) at regularly scheduled meetings in the first quarter of each year. The date of grant is the actual date on which the Committee approves the awards. The Committee may grant awards of restricted stock, restricted stock units, stock options or other equity awards outside of the annual incentive cycle, usually in connection with hiring a new executive. For a newly hired executive, the date of grant is the later of the date of Committee approval or the executive’s start date.cycle. The Committee has delegated
authority to the CEO to award restricted stock and stock-settled RSUs and to the Chief Human Resources Officer to award stock-settled and cash-settled RSUs (but not options or other equity awards) to associatesemployees who are not executive officers, subject to a maximum amount of $2 million for any employee in any one year. These awards are designed to be used for new hires and for special programs designed by management to incentivize and reward current employees of the Company. The Committee reviews all grants made by delegation at least twice aonce per year.
With respect to awards of stock options, the exercise price is always the Fair Market Value of the Company’s stock on the date of grant. Under the terms of our 2004 Stock Incentive Plan, “Fair Market Value” is equal to the closing price of the Company’s common stock on the date of grant.
The Company does not seek to time equity grants to take advantage of material non-public information and in no event is the grant date set to a date that is prior to the date of approval.
Tax Considerations
The Committee carefully considers the tax impacts of its compensation programs on the Company, as well as on its executives. To maintain flexibility in compensating executive officers, the Committee does not require all compensation to be paid or awarded in a tax-deductible manner. However, it is the Committee’s intent to maximize tax deductibility to the extent reasonable, provided the Company’s programs remain consistent with the Company’s overall executive compensation objectives.
With respect to the named executive officers (other than the Chief Financial Officer), Section 162(m) of the Internal Revenue Code limits the federal tax deduction for compensation paid to the executive to $1 million. Amounts in excess of $1 million are also eligible for the deduction if the compensation qualifies as “performance-based.” The Company’s 2004 Stock Incentive Plan provides for the establishment of specific performance thresholds to be tied to equity-based awards in orderthat may allow these awards to qualify these incentive awards as “performance-based.”“performance-based” for the purposes of 162(m).
The Company expects that the award of stock options and performance shares to the CEO and NEOs in 2013 were2014 will be deductible as “performance-based” compensation. The vesting of restricted stock units granted to the CEO and restricted stock awardsstock-settled RSUs granted to the NEOs in January 20132014 is based oncontingent upon the achievement of the performance-based vesting conditionsconditions. Specifically, the CEO and NEOs would receive these awards as long as the Company achieves a Core Earnings ROA of better than or equal to negative two percent (-2%) for the applicable fiscal year. As further described in detail“Additional Performance Conditions and Recovery Provisions – Performance-Based Vesting Provisions” beginning on page 44, additional vesting conditions also apply that could further limit the vesting of these awards.
For purposes of the above performance metric, Core Earnings ROA means the ratio, expressed as a percentage, of (A) the Company’s Core Earnings for the 2014 fiscal year to (B) the Company’s average total assets for the period. Core Earnings has the same meaning as described earlier under “Additional Performance Conditions and Recovery Provisions – Performance-Based Vesting Provisions” beginning on page 44 and therefore are expected to be deductible as “performance-based” compensation.44.
In January 2013,February 2014, the Committee and the independent directors established a performance threshold that the Company had to meet in order for the cash-settled restricted stock unitsfollowing awards to executive officers of the Company, including the named executive officers, for the 2014 performance year to be granted: performance share awards, RSUs (other than the RSUs representing a portion of base salary) to be awarded to the named executive officers and the deferred cash bonus to be awarded to the CEO in January 2014 to be deductible.CEO. Under the threshold, the named executive officersCEO and NEOs would receive theirthese awards as long asonly if the Company achieved positive earnings per share (“EPS”) onCore Earnings ROA from Continuing Operations for the 2014 fiscal year. For purposes of this performance metric, Core Earnings ROA from Continuing Operations means the ratio, expressed as a percentage, of (A) the Company’s Core Earnings from Continuing Operations for the 2014 fiscal year to (B) the Company’s average total assets for the period. Core Earnings from Continuing Operations means the Company’s net income from continuing operations, less extraordinary items,excluding, on a tax-adjusted basis, the impact of (i) impairment or amortization of intangible assets, (ii) the build or release of the allowance for loan and lease losses, calculated as the 2013 fiscal year.difference between the provision for loan and lease losses and charge-offs, net of recoveries, and (iii) the change in the combined uncollectible finance charge and fee reserve.
The 2004 Stock Incentive Plan allowsCompany’s Core Earnings ROA from Continuing Operations for certain extraordinary items to be excluded from the EPS calculation, including, among other things, asset write-downs, reorganization and restructuring programs, mergers, acquisitions or divestitures, and the effect of changes in tax laws, accounting principles or regulations, or other laws or provisions affecting reported results. The Company’s EPS on continuing operations for 2013fiscal year 2014 was positive and the performance-based vesting conditions were achieved.positive. Therefore, the Company expects the awards were made in January 2014 and are expected2015 to be deductibletax-deductible as “performance-based” compensation.
The Summary Compensation Table below provides information concerning compensation for the fiscal years ended December 31, 2014, 2013 2012 and 20112012 for the named executive officers.
As discussed under “Chief Executive Officer Compensation” in the “Compensation Discussion and Analysis” section beginning on page 35, 85%78% of the CEO’s total compensation is equity-based and at-risk to the performance of the Company’s stock price, with all100% of his compensation deferred for a three-year period. Amounts shown in the table below for the CEO for 20132014 represent stock options, and performance shares, and stock-settled RSUs granted in January 20132014 and a deferred cash bonus awarded in January 20142015 for 20132014 performance. The CEO also was granted restricted stock unitscash-settled RSUs in January 20142015 for the 20132014 performance year, which are not shown in the table below. Amounts shown in the “Stock Awards” column for 20132014 also include restricted stock unitscash-settled RSUs granted to the CEO in January 20132014 for the 20122013 performance year.
As discussed under “NEO Compensation” beginning on page 40, under the NEOs’ 20132014 compensation program, base salary comprised approximately 35% of NEO total target compensation. Each NEO received a portion of his or her 20132014 base salary in cash that was paid throughout the year and a portion in restricted stock unitscash-settled RSUs that were granted in January 20132014 and settled in cash in December 2013.February 2015. These restricted stock unitscash-settled RSUs are included in the table below in the “Stock Awards” column for 2013.2014. For the NEOs, amounts shown for 20132014 in the table below also include stock options, performance shares, shares of restricted stock,stock-settled RSUs, and restricted stock units that werecash-settled RSUs granted in January 20132014 for the 20122013 performance year. The NEOs also were granted equity awards in January 20142015 for the 20132014 performance year, which are not shown in the table below. The NEOs were not eligible for cash bonuses for 2013.2014.
Amounts paid to the CEO and the NEOs in 20132014 for other compensation and benefit programs are listed under the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” and “All Other Compensation” columns. The details of these program amounts are provided in the footnotes.
Please see the footnotes to the table below for an additional explanation regarding compensation attributable to each performance year. Further information on the timing of awards under the 20132014 compensation programs for the CEO and the NEOs can be found under “Compensation Components” in the “Compensation Discussion and Analysis” section beginning on page 33.34.
20132014 Summary Compensation Table
Name and Principal Position | Year | Salary (3) | Bonus (4) | Stock Awards (5) | Option Awards (6) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings (7) | All Other Compensation (8) | Total | ||||||||
Richard D. Fairbank(1) Chairman, CEO and President | 2013 | $0 | $2,843,750 | $10,937,569 | $4,375,012 | $2,177 | $136,017 | $18,294,525 | ||||||||
2012 | $0 | $2,187,500 | $15,950,051 | $4,375,009 | $3,550 | $89,264 | $22,605,374 | |||||||||
2011 | $0 | $0 | $10,500,079 | $8,003,906 | $4,608 | $159,465 | $18,668,058 | |||||||||
Stephen S. Crawford(2) Chief Financial Officer | 2013 | $1,326,923 | $0 | $10,832,068 | $0 | – | $223,225 | $12,382,216 | ||||||||
Gary L. Perlin(2) Former Chief Financial Officer | 2013 | $1,335,000 | $0 | $4,772,669 | $741,679 | – | $248,397 | $7,097,745 | ||||||||
2012 | $1,267,452 | $0 | $5,473,622 | $741,667 | – | $240,571 | $7,723,312 | |||||||||
2011 | $1,000,000 | $0 | $5,435,749 | $1,224,598 | – | $288,392 | $7,948,739 | |||||||||
Ryan M. Schneider(2) President, Card | 2013 | $1,093,308 | $0 | $3,405,670 | $473,342 | – | $204,084 | $5,176,404 | ||||||||
2012 | $1,032,394 | $0 | $4,235,215 | $591,559 | – | $204,151 | $6,063,319 | |||||||||
2011 | $953,333 | $0 | $3,680,867 | $956,247 | – | $203,526 | $5,793,973 | |||||||||
John G. Finneran, Jr.(2) General Counsel and Corporate Secretary | 2013 | $953,769 | $0 | $3,342,536 | $464,511 | $293 | $203,963 | $4,965,072 | ||||||||
2012 | $907,760 | $0 | $3,989,126 | $518,657 | $1,113 | $198,199 | $5,614,855 | |||||||||
Jonathan W. Witter(2) President, Retail and Direct Banking | 2013 | $870,769 | $0 | $3,160,115 | $511,122 | – | $177,952 | $4,719,958 |
Name and Principal Position | Year | Salary (3) | Bonus (4) | Stock Awards (5) | Option Awards (6) | Change in Non-Qualified Deferred Compensation Earnings (7) | All Other Compensation (8) | Total | ||||||||
Richard D. Fairbank(1) Chairman, CEO and President | 2014 | $0 | $4,410,000 | $13,343,815 | $1,750,000 | $3,195 | $99,464 | $19,606,474 | ||||||||
2013 | $0 | $2,843,750 | $10,937,569 | $4,375,012 | $2,177 | $136,017 | $18,294,525 | |||||||||
2012 | $0 | $2,187,500 | $15,950,051 | $4,375,009 | $3,550 | $89,264 | $22,605,374 | |||||||||
Stephen S. Crawford(2) Chief Financial Officer | 2014 | $1,526,538 | $0 | $5,376,001 | $755,714 | – | $277,002 | $7,935,255 | ||||||||
2013 | $1,326,923 | $0 | $10,832,068 | $0 | – | $223,225 | $12,382,216 | |||||||||
Ryan M. Schneider(2) President, Card | 2014 | $1,116,462 | $0 | $4,251,285 | $609,345 | – | $207,210 | $6,184,302 | ||||||||
2013 | $1,093,308 | $0 | $3,405,670 | $473,342 | – | $204,084 | $5,176,404 | |||||||||
2012 | $1,032,394 | $0 | $4,235,215 | $591,559 | – | $204,151 | $6,063,319 | |||||||||
John G. Finneran, Jr.(2) General Counsel and Corporate Secretary | 2014 | $974,692 | $0 | $3,708,724 | $478,413 | $842 | $195,481 | $5,358,152 | ||||||||
2013 | $953,769 | $0 | $3,342,536 | $464,511 | $293 | $203,963 | $4,965,072 | |||||||||
2012 | $907,760 | $0 | $3,989,126 | $518,657 | $1,113 | $198,199 | $5,614,855 | |||||||||
Sanjiv Yajnik(2) President, Financial Services | 2014 | $912,923 | $0 | $3,477,040 | $448,616 | – | $186,306 | $5,024,885 |
(1) | Mr. Fairbank’s compensation for |
(2) | NEO compensation for |
(3) | The amounts shown in this column represent the cash portion of base salary for NEOs. The remaining portion of base salary for |
(4) | The amount shown in this column reflects Mr. Fairbank’s deferred cash bonus for |
(5) | The amounts shown in this column for |
accordance with FASB ASC Topic 718. |
(6) | The amounts shown in this column for |
(7) | The amounts shown in this column represent the change in the actuarial present value of the accumulated pension benefits for Messrs. Fairbank and Finneran under the Cash Balance Pension Plan and the Excess Cash Balance Plan. The interest crediting rate for the Cash Balance Pension Plan changes annually based on the average yield of 5-year Treasury Securities for the preceding 12 months. For the Excess Cash Balance Plan, the interest crediting rate changes monthly based on the Wall Street Journal Prime Rate. |
(8) | All other compensation consists of the following on a per executive basis: |
Named Executive Officer | Auto (a) | Travel and Aircraft | Health Screening | Driver and Security | Company Contributions to Defined Contribution Plans (b) | Insurance (c) | Other | Auto (a) | Travel and Aircraft | Health Screening | Driver and Security | Company Contributions to Defined Contribution Plans (b) | Insurance (c) | Other (d) | ||||||||||||||
Richard D. Fairbank | $0 | $0 | $1,720 | $117,557 (d) | $0 | $16,740 | $0 | $645 | $0 | $1,655 | $79,596 (e) | $0 | $16,740 | $828 | ||||||||||||||
Stephen S. Crawford | $0 | $0 | $0 | $0 | $217,725 | $5,500 | $0 | $31,124 | $0 | $0 | $0 | $237,600 | $7,450 | $828 | ||||||||||||||
Gary L. Perlin | $17,909 | $0 | $0 | $0 | $211,725 | $16,740 | $2,023 (e) | |||||||||||||||||||||
Ryan M. Schneider | $18,710 | $0 | $0 | $5,183 (f) | $175,991 | $4,200 | $0 | $18,745 | $0 | $3,636 | $3,314 (f) | $176,750 | $4,650 | $115 | ||||||||||||||
John G. Finneran, Jr. | $17,567 | $0 | $0 | $14,601 (f) | $155,055 | $16,740 | $0 | $16,210 | $0 | $1,900 | $4,589 (f) | $155,850 | $16,740 | $192 | ||||||||||||||
Jonathan W. Witter | $11,081 | $772 | $0 | $18,349 (f) | $143,592 | $4,158 | $0 | |||||||||||||||||||||
Sanjiv Yajnik | $16,999 | $0 | $3,211 | $5,204 (f) | $146,820 | $12,480 | $1,592 |
(a) | Represents the value attributable to personal use of |
(b) | Represents Company contributions under qualified and non-qualified deferred compensation programs and other supplemental executive retirement benefits. |
(c) | Represents life insurance premiums paid on behalf of the executives. |
(d) | Represents incidental expenses incurred in connection with corporate events. |
(e) | Includes cost attributable to personal use of a driver who also provides for Mr. Fairbank’s personal security ($ |
(f) | Includes aggregate cost to the Company for home security services. |
20132014 Grants of Plan-Based Awards Table
The Grants of Plan-Based Awards table provides details on equity incentive plan awards granted in 2013,2014 including stock options, performance shares, shares of restricted stockcash-settled RSUs and restricted stock units.stock-settled RSUs.
The columns reporting “Estimated Future Payouts Under Equity Incentive Plan Awards,” “All Other Stock Awards” and “All Other Option Awards” relate to Capital One’s equity-based incentive awards to the named executive officers.
For the CEO in 2013,2014, the awards are comprised of stock options, and performance shares, and stock-settled RSUs granted in January 20132014 as part of the CEO’s 20132014 compensation program and restricted stock unitscash-settled RSUs granted in January 20132014 for 20122013 performance.
For the NEOs in 2013,2014, the awards are comprised of stock options, performance shares, shares of restricted stock,cash-settled RSUs, and restricted stock unitsstock-settled RSUs granted in January 20132014 for the 20122013 performance year and restricted stock unitscash-settled RSUs granted in January 20132014 as a portion of 20132014 base salary (as described under “Base Salaries” in the “Compensation Discussion and Analysis” section on page 41).
Each award of restricted stock (restricted stock unitsstock-settled RSUs (as well as cash-settled RSUs for the CEO) and stock options reported below is also subject to performance-based vesting provisions tied to core earnings and return on assets that will reduce the total number of shares delivered at vesting if the Company does not achieve certain performance thresholds during the three-year vesting period. See “Additional Performance Conditions and Recovery Provisions” in the “Compensation Discussion and Analysis” section beginning on page 44 for more details on the performance-based vesting provisions.
20132014 Grants of Plan-Based Awards Table
Name and Principal Position | Award Type | Date of Grant (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards (2) ($/Sh) | Grant Date Fair Value of Stock and Option Awards (3) | Award Type | Date of Grant (1) | Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units | All Other Option Awards: Number of Securities Underlying Options | Exercise or Base Price of Option Awards (2) ($/Sh) | Grant Date Fair Value of Stock and Option Awards (3) | ||||||||||||||||||
Target |
Maximum |
Target |
Maximum | |||||||||||||||||||||||||||||
Richard D. Fairbank Chairman, CEO and President | Performance Shares Stock Options RSUs
| 1/31/2013 | 155,363 | 233,045 | – | – | – | $8,750,044 | Performance Shares (3) | 1/30/2014 | 123,309 | 184,964 | – | – | – | $8,750,007 | ||||||||||||||||
1/31/2013 | – | – | – | 325,985 | $56.32 | $4,375,012 | Stock Options | 1/30/2014 | – | – | – | 108,944 | $70.96 | td,750,000 | ||||||||||||||||||
1/31/2013 | – | – | 38,841 | – | – | td,187,525 | Cash-Settled RSUs (4) | 1/30/2014 | – | – | 40,076 | – | – | td,843,793 | ||||||||||||||||||
Richard D. Fairbank Chairman, CEO and President | Stock-Settled RSUs (5) | 1/30/2014 | – | – | 24,662 | – | – | td,750,016 | ||||||||||||||||||||||||
RSUs (4) Restricted Stock (5)
| 2/4/2013 | – | – | 18,092 | – | – | td,020,208 | Performance Shares(3) | 1/30/2014 | 14,378 | 21,567 | – | – | – | td,020,263 | |||||||||||||||||
2/4/2013 | – | – | 174,000 | – | – | $9,811,860 | Stock Options | 1/30/2014 | – | – | – | 47,046 | $70.96 | $755,714 | ||||||||||||||||||
Gary L. Perlin Former Chief Financial Officer | Performance Shares Stock Options RSUs RSUs(4) Restricted Stock
| 1/31/2013 | 17,778 | 26,667 | – | – | – | td,001,257 | ||||||||||||||||||||||||
1/31/2013 | – | – | – | 55,263 | $56.32 | $741,679 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 19,556 | – | – | td,101,394 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 17,778 | – | – | td,001,257 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 29,630 | – | – | td,668,762 | ||||||||||||||||||||||||||
Stephen S. Crawford Chief Financial Officer | Cash-Settled RSUs | 1/30/2014 | – | – | 21,566 | – | – | td,530,323 | ||||||||||||||||||||||||
Cash-Settled RSUs (6) | 1/30/2014 | – | – | 15,855 | – | – | td,125,071 | |||||||||||||||||||||||||
Stock-Settled RSUs | 1/30/2014 | – | – | 23,962 | – | – | td,700,344 | |||||||||||||||||||||||||
Performance Shares Stock Options RSUs RSUs(4) Restricted Stock
| 1/31/2013 | 11,346 | 17,019 | – | – | – | $639,007 | Performance Shares(3) | 1/30/2014 | 11,593 | 17,390 | – | – | – | $822,639 | |||||||||||||||||
Ryan M. Schneider President, Card | 1/31/2013 | – | – | – | 35,269 | $56.32 | $473,342 | Stock Options | 1/30/2014 | – | – | – | 37,934 | $70.96 | $609,345 | |||||||||||||||||
1/31/2013 | – | – | 15,601 | – | – | $878,648 | Cash-Settled RSUs | 1/30/2014 | – | – | 17,398 | – | – | td,234,562 | ||||||||||||||||||
1/31/2013 | – | – | 14,613 | – | – | $823,004 | Cash-Settled RSUs(6) | 1/30/2014 | – | – | 11,599 | – | – | $823,065 | ||||||||||||||||||
1/31/2013 | – | – | 18,910 | – | – | td,065,011 | Stock-Settled RSUs | 1/30/2014 | – | – | 19,321 | – | – | td,371,018 | ||||||||||||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | Performance Shares Stock Options RSUs RSUs(4) Restricted Stock
| 1/31/2013 | 12,372 | 18,558 | – | – | – | $696,791 | Performance Shares(3) | 1/30/2014 | 10,113 | 15,170 | – | – | – | $717,618 | ||||||||||||||||
1/31/2013 | – | – | – | 34,611 | $56.32 | $464,511 | Stock Options | 1/30/2014 | – | – | – | 29,783 | $70.96 | $478,413 | ||||||||||||||||||
1/31/2013 | – | – | 13,609 | – | – | $766,459 | Cash-Settled RSUs | 1/30/2014 | – | – | 15,178 | – | – | td,077,031 | ||||||||||||||||||
1/31/2013 | – | – | 12,749 | – | – | $718,024 | Cash-Settled RSUs(6) | 1/30/2014 | – | – | 10,119 | – | – | $718,044 | ||||||||||||||||||
1/31/2013 | – | – | 20,619 | – | – | td,161,262 | Stock-Settled RSUs | 1/30/2014 | – | – | 16,855 | – | – | td,196,031 | ||||||||||||||||||
Jonathan W. Witter President, Retail and Direct Banking | Performance Shares Stock Options RSUs RSUs(4) Restricted Stock | 1/31/2013 | 12,252 | 18,378 | – | – | – | $690,033 | ||||||||||||||||||||||||
1/31/2013 | – | – | – | 38,084 | $56.32 | $511,122 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 11,719 | – | – | $660,014 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 11,719 | – | – | $660,014 | ||||||||||||||||||||||||||
1/31/2013 | – | – | 20,420 | – | – | td,150,054 | ||||||||||||||||||||||||||
Sanjiv Yajnik President, Financial Services | Performance Shares(3) | 1/30/2014 | 9,483 | 14,225 | – | – | – | $672,914 | ||||||||||||||||||||||||
Stock Options | 1/30/2014 | – | – | – | 27,928 | $70.96 | $448,616 | |||||||||||||||||||||||||
Cash-Settled RSUs | 1/30/2014 | – | – | 14,227 | – | – | td,009,548 | |||||||||||||||||||||||||
Cash-Settled RSUs(6) | 1/30/2014 | – | – | 9,485 | – | – | $673,056 | |||||||||||||||||||||||||
Stock-Settled RSUs | 1/30/2014 | – | – | 15,805 | – | – | td,121,523 |
(1) | Date on which awards were approved by the Compensation Committee and independent |
(2) | Equal to the fair market value of a share of Capital One’s common stock on the date of grant determined on the basis of the closing price as reported by the NYSE Composite Transaction Tape. |
(3) | The grant date fair value for each option awarded on January |
Volatility | Risk-Free Interest Rate | Dividend Yield | Expected Life | Risk-Free Interest Rate | Dividend Yield | Expected Life | ||||||
31.87% | 1.07% | 2.29% | 5.6 Years | |||||||||
25.53% | 1.92% | 1.74% | 6.1 Years |
The grant date fair values for the performance shares if the maximum level of performance is achieved are as follows: $13,125,066$13,125,010 for Mr. Fairbank, $1,501,885$1,530,394 for Mr. Perlin, $958,510Crawford, $1,233,959 for Mr. Schneider, $1,045,187$1,076,428 for Mr. Finneran, and $1,035,045$1,009,371 for Mr. Witter.Yajnik.
(4) | Grant of |
(5) | Grant of stock-settled RSUs representing 10% of the CEO’s 2014 total target compensation, introduced in 2014 to account for the reduction of the stock |
(6) | Grant of cash-settled RSUs representing a portion of base salary for |
20132014 Option Exercises and Stock Vested Table
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||
Name & Principal Position
| Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting (2) | Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting (2) | ||||||||
Richard D. Fairbank Chairman, CEO and President | 360,000 | $5,104,188 | 316,772 | $18,083,840 | 566,000 | $163,785 | 303,979 | $22,912,886 | ||||||||
Stephen S. Crawford Chief Financial Officer | 0 | $0 | 18,092 | $1,286,965 | 0 | $0 | 35,571 | $2,446,166 | ||||||||
Gary L. Perlin Former Chief Financial Officer | 274,070 | $3,568,281 | 83,762 | $5,073,141 | ||||||||||||
Ryan M. Schneider President, Card | 121,295 | $5,329,019 | 61,582 | $3,736,956 | 72,683 | $2,596,741 | 65,192 | $4,757,336 | ||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | 187,438 | $8,594,565 | 48,860 | $2,991,470 | 0 | $0 | 57,136 | $4,176,124 | ||||||||
Jonathan W. Witter President, Retail and Direct Banking | 0 | $0 | 79,273 | $4,990,603 | ||||||||||||
Sanjiv Yajnik President, Financial Services | 7,630 | $28,696 | 51,805 | $3,782,929 |
(1) | The value realized is the pre-tax value of the shares (market price less the exercise price) received. |
(2) | The value realized for awards other than certain cash-settled |
20132014 Outstanding Equity Awards at Fiscal Year-End Table
Option Awards (1), (2) | Stock Awards (2) | Option Awards (1), (2) | Stock Awards (2) | |||||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable |
Option |
Option | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock that Have Not Vested (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested (4) | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable |
Option |
Option | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock that Have Not Vested (4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested (4) | ||||||||||||||||||||||||||||||||
Richard D. Fairbank Chairman, CEO and President | 330,851 | (8) | td5,346,495 | 781,261 | (9) | $59,852,367 | 260,957 (6) | td1,542,000 | 813,219 (7) | $67,131,228 | ||||||||||||||||||||||||||||||||||||||
566,000 | (5) | 0 | $82.39 | 12/19/2014 | 573,000 (5) | 0 | $87.28 | 12/19/2015 | ||||||||||||||||||||||||||||||||||||||||
573,000 | (5) | 0 | $87.28 | 12/19/2015 | 594,851 (5) | 0 | $76.45 | 12/10/2016 | ||||||||||||||||||||||||||||||||||||||||
594,851 | (5) | 0 | $76.45 | 12/10/2016 | 1,661,780 (5) | 0 | $50.99 | 12/09/2017 | ||||||||||||||||||||||||||||||||||||||||
1,661,780 | (6) | 0 | $50.99 | 12/09/2017 | 970,403 (5) | 0 | td8.28 | 1/28/2019 | ||||||||||||||||||||||||||||||||||||||||
970,403 | (6) | 0 | td8.28 | 1/28/2019 | 559,333 (5) | 0 | $36.55 | 1/26/2020 | ||||||||||||||||||||||||||||||||||||||||
559,333 | (6) | 0 | $36.55 | 1/26/2020 | 608,366 (5) | 0 | $48.28 | 1/25/2021 | ||||||||||||||||||||||||||||||||||||||||
0 | 608,366 | (6) | $48.28 | 1/25/2021 | 0 | 360,009 (5) | $45.75 | 1/30/2022 | ||||||||||||||||||||||||||||||||||||||||
0 | 360,009 | (7) | $45.75 | 1/30/2022 | 0 | 325,985 (5) | $56.32 | 1/30/2023 | ||||||||||||||||||||||||||||||||||||||||
0 | 325,985 | (7) | $56.32 | 1/30/2023 | 0 | 108,944 (5) | $70.96 | 1/29/2024 | ||||||||||||||||||||||||||||||||||||||||
Stephen S. Crawford Chief Financial Officer | 174,000 | (10) | $13,330,140 | 0 | $0 | 199,812 (9) | td6,494,481 | 21,567 (7) | td,780,356 | |||||||||||||||||||||||||||||||||||||||
Gary L. Perlin Former Chief Financial Officer | 117,342 | (13) | $8,989,571 | 91,915 | (9) | $7,041,608 | ||||||||||||||||||||||||||||||||||||||||||
77,220 | (11) | 0 | $78.71 | 3/14/2015 | ||||||||||||||||||||||||||||||||||||||||||||
83,510 | (11) | 0 | $88.81 | 3/2/2016 | ||||||||||||||||||||||||||||||||||||||||||||
122,450 | (11) | 0 | $76.79 | 3/1/2017 | ||||||||||||||||||||||||||||||||||||||||||||
62,052 | (11) | 31,028 | (11) | $48.28 | 1/25/2021 | |||||||||||||||||||||||||||||||||||||||||||
20,343 | (12) | 40,687 | (12) | $45.75 | 1/30/2022 | |||||||||||||||||||||||||||||||||||||||||||
0 | 55,263 | (12) | $56.32 | 1/30/2023 | ||||||||||||||||||||||||||||||||||||||||||||
Stephen S. Crawford Chief Financial Officer | 0 | 47,046 (8) | $70.96 | 1/29/2024 | ||||||||||||||||||||||||||||||||||||||||||||
Ryan M. Schneider President, Card | 89,659 | (13) | $6,868,776 | 68,701 | (9) | $5,263,184 | 89,924 (10) | $7,423,226 | 70,480 (7) | $5,818,083 | ||||||||||||||||||||||||||||||||||||||
15,650 | (11) | 0 | $78.71 | 3/14/2015 | 15,650 (8) | 0 | $78.71 | 3/14/2015 | ||||||||||||||||||||||||||||||||||||||||
17,890 | (11) | 0 | $88.81 | 3/2/2016 | 17,890 (8) | 0 | $88.81 | 3/2/2016 | ||||||||||||||||||||||||||||||||||||||||
26,250 | (11) | 0 | $76.79 | 3/1/2017 | 26,250 (8) | 0 | $76.79 | 3/1/2017 | ||||||||||||||||||||||||||||||||||||||||
63,700 | (11) | 0 | $48.95 | 2/20/2018 | 63,700 (8) | 0 | $48.95 | 2/20/2018 | ||||||||||||||||||||||||||||||||||||||||
48,454 | (11) | 24,229 | (11) | $48.28 | 1/25/2021 | 32,451 (8) | 16,227 (8) | $45.75 | 1/30/2022 | |||||||||||||||||||||||||||||||||||||||
16,225 | (12) | 32,453 | (12) | $45.75 | 1/30/2022 | 11,756 (8) | 23,513 (8) | $56.32 | 1/30/2023 | |||||||||||||||||||||||||||||||||||||||
0 | 35,269 | (12) | $56.32 | 1/30/2023 | 0 | 37,934 (8) | $70.96 | 1/29/2024 | ||||||||||||||||||||||||||||||||||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | 82,897 | (13) | $6,350,739 | 67,084 | (9) | $5,139,305 | 82,749 (10) | $6,830,930 | 68,867 (7) | $5,684,930 | ||||||||||||||||||||||||||||||||||||||
57,760 | (11) | 0 | $78.71 | 3/14/2015 | 57,760 (8) | 0 | $78.71 | 3/14/2015 | ||||||||||||||||||||||||||||||||||||||||
63,650 | (11) | 0 | $88.81 | 3/2/2016 | 63,650 (8) | 0 | $88.81 | 3/2/2016 | ||||||||||||||||||||||||||||||||||||||||
88,510 | (11) | 0 | $76.79 | 3/1/2017 | 88,510 (8) | 0 | $76.79 | 3/1/2017 | ||||||||||||||||||||||||||||||||||||||||
149,890 | (11) | 0 | $48.95 | 2/20/2018 | 149,890 (8) | 0 | $48.95 | 2/20/2018 | ||||||||||||||||||||||||||||||||||||||||
37,748 | (11) | 18,876 | (11) | $48.28 | 1/25/2021 | 56,624 (8) | 0 | $48.28 | 1/25/2021 | |||||||||||||||||||||||||||||||||||||||
14,226 | (12) | 28,453 | (12) | $45.75 | 1/30/2022 | 28,452 (8) | 14,227 (8) | $45.75 | 1/30/2022 | |||||||||||||||||||||||||||||||||||||||
0 | 34,611 | (12) | $56.32 | 1/30/2023 | 11,536 (8) | 23,075 (8) | $56.32 | 1/30/2023 | ||||||||||||||||||||||||||||||||||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | 0 | 29,783 (8) | $70.96 | 1/29/2024 | ||||||||||||||||||||||||||||||||||||||||||||
113,979 | (13) | $8,731,931 | 41,548 | (14) | $3,182,992 | |||||||||||||||||||||||||||||||||||||||||||
10,768 | (12) | 21,539 | (12) | $45.75 | 1/30/2022 | |||||||||||||||||||||||||||||||||||||||||||
0 | 38,084 | (12) | $56.32 | 1/30/2023 | ||||||||||||||||||||||||||||||||||||||||||||
76,997 (10) | $6,356,102 | 63,334 (7) | $5,228,222 | |||||||||||||||||||||||||||||||||||||||||||||
11,670 (8) | 0 | $88.81 | 3/2/2016 | |||||||||||||||||||||||||||||||||||||||||||||
23,560 (8) | 0 | $76.79 | 3/1/2017 | |||||||||||||||||||||||||||||||||||||||||||||
37,204 (8) | 0 | $48.28 | 1/25/2021 | |||||||||||||||||||||||||||||||||||||||||||||
Sanjiv Yajnik President, Financial Services | 25,676 (8) | 12,839 (8) | $45.75 | 1/30/2022 | ||||||||||||||||||||||||||||||||||||||||||||
10,816 (8) | 21,634 (8) | $56.32 | 1/30/2023 | |||||||||||||||||||||||||||||||||||||||||||||
0 | 27,928 (8) | $70.96 | 1/29/2024 |
(1) | Stock options granted generally have time-based vesting schedules, are exercisable upon vesting and vest earlier upon the optionee’s termination of employment for death, disability, or upon a change of control of Capital One. Certain stock options, as noted in the footnotes below, are also subject to performance-based vesting requirements. They are transferable only to or for the benefit of immediate family members. |
(2) | The following table details vesting dates for all outstanding equity awards; the date listed as the vesting date for performance shares is the date by which the Compensation Committee must certify the performance of the Company over the applicable performance period. |
First Vesting | Second Vesting | Third Vesting | Fourth Vesting | Fifth Vesting | First Vesting | Second Vesting | Third Vesting | Fourth Vesting | Fifth Vesting | |||||||||||||||||||||||||||||||||||||||
Name |
Grant |
Grant Type |
Vesting Date |
# of Shares | Vesting Date | # of | Vesting Date | # of | Vesting Date | # of Shares | Vesting Date | # of Shares |
Grant |
Grant Type |
Vesting Date |
# of Shares | Vesting Date | # of Shares | Vesting Date | # of Shares | Vesting Date | # of Shares | Vesting Date | # of Shares | ||||||||||||||||||||||||
Richard D. Fairbank | 12/20/2004 | Option Award | 12/20/2009 | 566,000 | 12/20/2005 | Option Award | 12/20/2010 | 573,000 | ||||||||||||||||||||||||||||||||||||||||
12/20/2005 | Option Award | 12/20/2010 | 573,000 | 12/11/2006 | Option Award | 12/11/2011 | 594,851 | |||||||||||||||||||||||||||||||||||||||||
12/11/2006 | Option Award | 12/11/2011 | 594,851 | 12/10/2007 | Option Award | 12/10/2010 | 1,661,780 | |||||||||||||||||||||||||||||||||||||||||
12/10/2007 | Option Award | 12/10/2010 | 1,661,780 | 1/29/2009 | Option Award | 1/29/2012 | 970,403 | |||||||||||||||||||||||||||||||||||||||||
01/29/2009 | Option Award | 01/29/2012 | 970,403 | 1/27/2010 | Option Award | 1/27/2013 | 559,333 | |||||||||||||||||||||||||||||||||||||||||
01/27/2010 | Option Award | 01/27/2013 | 559,333 | 1/26/2011 | Option Award | 1/26/2014 | 608,366 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Perf Share Award | 03/15/2014 | 82,851 | 1/31/2012 | Perf Share Award | 3/15/2015 | 191,257 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Unit Award | 01/26/2014 | 134,632 | 1/31/2012 | Restricted Stock Unit Award | 2/10/2015 | 157,378 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Option Award | 01/26/2014 | 608,366 | 1/31/2012 | Option Award | 2/10/2015 | 360,009 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Perf Share Award | 03/15/2015 | 191,257 | 1/31/2013 | Perf Share Award | 3/15/2016 | 155,363 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Unit Award | 02/10/2015 | 157,378 | 1/31/2013 | Restricted Stock Unit Award | 2/10/2016 | 38,841 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Option Award | 02/10/2015 | 360,009 | 1/31/2013 | Option Award | 2/10/2016 | 325,985 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Perf Share Award | 03/15/2016 | 155,363 | 1/30/2014 | Perf Share Award | 3/15/2017 | 123,309 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Unit Award | 02/10/2016 | 38,841 | 1/30/2014 | Restricted Stock Unit Award | 2/15/2017 | 40,076 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Option Award | 02/10/2016 | 325,985 | 1/30/2014 | Restricted Stock Unit Award | 2/15/2017 | 24,662 | |||||||||||||||||||||||||||||||||||||||||
Richard D. Fairbank | 1/30/2014 | Option Award | 2/15/2017 | 108,944 | ||||||||||||||||||||||||||||||||||||||||||||
02/04/2013 | Restricted Stock Award | 02/04/2014 | 34,800 | 02/04/2015 | 34,800 | 02/04/2016 | 34,800 | 02/04/2017 | 34,800 | 02/04/2018 | 34,800 | 2/4/2013 | Restricted Stock Award | 2/4/2014 | 34,800 | 2/4/2015 | 34,800 | 2/4/2016 | 34,800 | 2/4/2017 | 34,800 | 2/4/2018 | 34,800 | |||||||||||||||||||||||||
1/30/2014 | Perf Share Award | 3/15/2017 | 14,378 | |||||||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 2/15/2015 | 7,988 | 2/15/2016 | 7,987 | 2/15/2017 | 7,987 | |||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 1/30/2014 | 771 | 2/15/2015 | 6,932 | 2/15/2016 | 6,932 | 2/15/2017 | 6,931 | |||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 1/1/2015 | 15,855 | |||||||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Option Award | 2/15/2015 | 15,681 | 2/15/2016 | 15,682 | 2/15/2017 | 15,683 | |||||||||||||||||||||||||||||||||||||||||
03/15/2005 | Option Award | 03/15/2006 | 25,739 | 03/15/2007 | 25,740 | 03/15/2008 | 25,741 | |||||||||||||||||||||||||||||||||||||||||
03/03/2006 | Option Award | 03/03/2007 | 27,808 | 03/03/2008 | 27,809 | 03/03/2009 | 27,893 | |||||||||||||||||||||||||||||||||||||||||
03/02/2007 | Option Award | 03/02/2008 | 40,816 | 03/02/2009 | 40,816 | 03/02/2010 | 40,818 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Perf Share Award | 03/15/2014 | 10,738 | |||||||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Award | 01/26/2012 | 11,184 | 01/26/2013 | 11,185 | 01/26/2014 | 5,831 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Unit Award | 01/26/2012 | 11,743 | 01/26/2013 | 11,744 | 01/26/2014 | 11,745 | |||||||||||||||||||||||||||||||||||||||||
01/26/2011 | Option Award | 01/26/2012 | 31,026 | 01/26/2013 | 31,026 | 01/26/2014 | 31,028 | |||||||||||||||||||||||||||||||||||||||||
Gary L. Perlin | 01/31/2012 | Perf Share Award | 03/15/2015 | 21,886 | ||||||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Award | 02/10/2013 | 12,159 | 02/10/2014 | 12,159 | 02/10/2015 | 12,158 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Unit Award | 02/10/2013 | 13,131 | 02/10/2014 | 13,131 | 02/10/2015 | 13,132 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Option Award | 02/10/2013 | 20,343 | 02/10/2014 | 20,343 | 02/10/2015 | 20,344 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Perf Share Award | 03/15/2016 | 17,778 | |||||||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Award | 02/10/2014 | 9,877 | 02/10/2015 | 9,876 | 02/10/2016 | 9,877 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Unit Award | 02/10/2014 | 6,518 | 02/10/2015 | 6,519 | 02/10/2016 | 6,519 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Option Award | 02/10/2014 | 18,420 | 02/10/2015 | 18,421 | 02/10/2016 | 18,422 | |||||||||||||||||||||||||||||||||||||||||
3/15/2005 | Option Award | 3/15/2006 | 5,216 | 3/15/2007 | 5,217 | 3/15/2008 | 5,217 | |||||||||||||||||||||||||||||||||||||||||
03/15/2005 | Option Award | 03/15/2006 | 5,216 | 03/15/2007 | 5,217 | 03/15/2008 | 5,217 | 3/3/2006 | Option Award | 3/3/2007 | 5,957 | 3/3/2008 | 5,957 | 3/3/2009 | 5,976 | |||||||||||||||||||||||||||||||||
03/03/2006 | Option Award | 03/03/2007 | 5,957 | 03/03/2008 | 5,957 | 03/03/2009 | 5,976 | 3/2/2007 | Option Award | 3/2/2008 | 8,749 | 3/2/2009 | 8,750 | 3/2/2010 | 8,751 | |||||||||||||||||||||||||||||||||
03/02/2007 | Option Award | 03/02/2008 | 8,749 | 03/02/2009 | 8,750 | 03/02/2010 | 8,751 | 2/21/2008 | Option Award | 2/21/2009 | 21,233 | 2/21/2010 | 21,233 | 2/21/2011 | 21,234 | |||||||||||||||||||||||||||||||||
02/21/2008 | Option Award | 02/21/2009 | 21,233 | 02/21/2010 | 21,233 | 02/21/2011 | 21,234 | 1/31/2012 | Perf Share Award | 3/15/2015 | 17,456 | |||||||||||||||||||||||||||||||||||||
01/26/2011 | Perf Share Award | 03/15/2014 | 8,385 | 1/31/2012 | Restricted Stock Award | 2/10/2013 | 9,698 | 2/10/2014 | 9,698 | 2/10/2015 | 9,697 | |||||||||||||||||||||||||||||||||||||
Ryan M. Schneider | 01/26/2011 | Restricted Stock Award | 01/26/2012 | 8,733 | 01/26/2013 | 8,734 | 01/26/2014 | 8,735 | 1/31/2012 | Restricted Stock Unit Award | 2/10/2013 | 9,521 | 2/10/2014 | 9,521 | 2/10/2015 | 9,522 | ||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Unit Award | 01/26/2012 | 7,974 | 01/26/2013 | 7,974 | 01/26/2014 | 7,975 | 1/31/2012 | Option Award | 2/10/2013 | 16,225 | 2/10/2014 | 16,226 | 2/10/2015 | 16,227 | |||||||||||||||||||||||||||||||||
01/26/2011 | Option Award | 01/26/2012 | 24,227 | 01/26/2013 | 24,227 | 01/26/2014 | 24,229 | 1/31/2013 | Perf Share Award | 3/15/2016 | 11,346 | |||||||||||||||||||||||||||||||||||||
01/31/2012 | Perf Share Award | 03/15/2015 | 17,456 | 1/31/2013 | Restricted Stock Award | 2/10/2014 | 6,304 | 2/10/2015 | 6,303 | 2/10/2016 | 6,303 | |||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Award | 02/10/2013 | 9,698 | 02/10/2014 | 9,698 | 02/10/2015 | 9,697 | 1/31/2013 | Restricted Stock Unit Award | 2/10/2014 | 5,200 | 2/10/2015 | 5,200 | 2/10/2016 | 5,201 | |||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Unit Award | 02/10/2013 | 9,521 | 02/10/2014 | 9,521 | 02/10/2015 | 9,522 | 1/31/2013 | Option Award | 2/10/2014 | 11,756 | 2/10/2015 | 11,756 | 2/10/2016 | 11,757 | |||||||||||||||||||||||||||||||||
01/31/2012 | Option Award | 02/10/2013 | 16,225 | 02/10/2014 | 16,226 | 02/10/2015 | 16,227 | 1/30/2014 | Perf Share Award | 3/15/2017 | 11,593 | |||||||||||||||||||||||||||||||||||||
01/31/2013 | Perf Share Award | 03/15/2016 | 11,346 | 1/30/2014 | Restricted Stock Unit Award | 2/15/2015 | 6,441 | 2/15/2016 | 6,440 | 2/15/2017 | 6,440 | |||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Award | 02/10/2014 | 6,304 | 02/10/2015 | 6,303 | 02/10/2016 | 6,303 | 1/30/2014 | Restricted Stock Unit Award | 1/30/2014 | 620 | 2/15/2015 | 5,593 | 2/15/2016 | 5,593 | 2/15/2017 | 5,592 | |||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Unit Award | 02/10/2014 | 5,200 | 02/10/2015 | 5,200 | 02/10/2016 | 5,201 | 1/30/2014 | Restricted Stock Unit Award | 1/1/2015 | 11,599 | |||||||||||||||||||||||||||||||||||||
01/31/2013 | Option Award | 02/10/2014 | 11,756 | 02/10/2015 | 11,756 | 02/10/2016 | 11,757 | 1/30/2014 | Option Award | 2/15/2015 | 12,644 | 2/15/2016 | 12,645 | 2/15/2017 | 12,645 | |||||||||||||||||||||||||||||||||
03/15/2005 | Option Award | 03/15/2006 | 19,253 | 03/15/2007 | 19,253 | 03/15/2008 | 19,254 | 3/15/2005 | Option Award | 3/15/2006 | 19,253 | 3/15/2007 | 19,253 | 3/15/2008 | 19,254 | |||||||||||||||||||||||||||||||||
03/03/2006 | Option Award | 03/03/2007 | 21,195 | 03/03/2008 | 21,195 | 03/03/2009 | 21,260 | 3/3/2006 | Option Award | 3/3/2007 | 21,195 | 3/3/2008 | 21,195 | 3/3/2009 | 21,260 | |||||||||||||||||||||||||||||||||
03/02/2007 | Option Award | 03/02/2008 | 29,503 | 03/02/2009 | 29,503 | 03/02/2010 | 29,504 | 3/2/2007 | Option Award | 3/2/2008 | 29,503 | 3/2/2009 | 29,503 | 3/2/2010 | 29,504 | |||||||||||||||||||||||||||||||||
02/21/2008 | Option Award | 02/21/2009 | 49,962 | 02/21/2010 | 49,963 | 02/21/2011 | 49,965 | 2/21/2008 | Option Award | 2/21/2009 | 49,962 | 2/21/2010 | 49,963 | 2/21/2011 | 49,965 | |||||||||||||||||||||||||||||||||
John G. Finneran, Jr. | 01/26/2011 | Perf Share Award | 03/15/2014 | 7,258 | 1/26/2011 | Option Award | 1/26/2012 | 18,874 | 1/26/2013 | 18,874 | 1/26/2014 | 18,876 | ||||||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Award | 01/26/2012 | 4,089 | 01/26/2013 | 4,090 | 01/26/2014 | 4,091 | 1/31/2012 | Perf Share Award | 3/15/2015 | 17,005 | |||||||||||||||||||||||||||||||||||||
01/26/2011 | Restricted Stock Unit Award | 01/26/2012 | 7,938 | 01/26/2013 | 7,938 | 01/26/2014 | 7,939 | 1/31/2012 | Restricted Stock Award | 2/10/2013 | 9,448 | 2/10/2014 | 9,448 | 2/10/2015 | 9,446 | |||||||||||||||||||||||||||||||||
01/26/2011 | Option Award | 01/26/2012 | 18,874 | 01/26/2013 | 18,874 | 01/26/2014 | 18,876 | 1/31/2012 | Restricted Stock Unit Award | 2/10/2013 | 8,872 | 2/10/2014 | 8,872 | 2/10/2015 | 8,873 | |||||||||||||||||||||||||||||||||
01/31/2012 | Perf Share Award | 03/15/2015 | 17,005 | 1/31/2012 | Option Award | 2/10/2013 | 14,226 | 2/10/2014 | 14,226 | 2/10/2015 | 14,227 | |||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Award | 02/10/2013 | 9,448 | 02/10/2014 | 9,448 | 02/10/2015 | 9,446 | 1/31/2013 | Perf Share Award | 3/15/2016 | 12,372 | |||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Unit Award | 02/10/2013 | 8,872 | 02/10/2014 | 8,872 | 02/10/2015 | 8,873 | 1/31/2013 | Restricted Stock Award | 2/10/2014 | 6,873 | 2/10/2015 | 6,872 | 2/10/2016 | 6,874 | |||||||||||||||||||||||||||||||||
01/31/2012 | Option Award | 02/10/2013 | 14,226 | 02/10/2014 | 14,226 | 02/10/2015 | 14,227 | 1/31/2013 | Restricted Stock Unit Award | 2/10/2014 | 4,536 | 2/10/2015 | 4,536 | 2/10/2016 | 4,537 | |||||||||||||||||||||||||||||||||
01/31/2013 | Perf Share Award | 03/15/2016 | 12,372 | 1/31/2013 | Option Award | 2/10/2014 | 11,536 | 2/10/2015 | 11,537 | 2/10/2016 | 11,538 | |||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Award | 02/10/2014 | 6,873 | 02/10/2015 | 6,872 | 02/10/2016 | 6,874 | 1/30/2014 | Perf Share Award | 3/15/2017 | 10,113 | |||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Unit Award | 02/10/2014 | 4,536 | 02/10/2015 | 4,536 | 02/10/2016 | 4,537 | 1/30/2014 | Restricted Stock Unit Award | 2/15/2015 | 5,619 | 2/15/2016 | 5,618 | 2/15/2017 | 5,618 | |||||||||||||||||||||||||||||||||
01/31/2013 | Option Award | 02/10/2014 | 11,536 | 02/10/2015 | 11,537 | 02/10/2016 | 11,538 | 1/30/2014 | Restricted Stock Unit Award | 1/30/2014 | 541 | 2/15/2015 | 4,879 | 2/15/2016 | 4,879 | 2/15/2017 | 4,879 | |||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 1/1/2015 | 10,119 | |||||||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Option Award | 2/15/2015 | 9,927 | 2/15/2016 | 9,928 | 2/15/2017 | 9,928 | |||||||||||||||||||||||||||||||||||||||||
12/29/2010 | Restricted Stock Unit Award | 01/15/2011 | 18,880 | 02/15/2012 | 50,346 | 02/15/2013 | 33,039 | 01/15/2014 | 55,065 | |||||||||||||||||||||||||||||||||||||||
Jonathan W. Witter | 01/31/2012 | Perf Share Award | 03/15/2015 | 11,585 | ||||||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Award | 02/10/2013 | 6,437 | 02/10/2014 | 6,437 | 02/10/2015 | 6,435 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Restricted Stock Unit Award | 02/10/2013 | 6,951 | 02/10/2014 | 6,951 | 02/10/2015 | 6,952 | |||||||||||||||||||||||||||||||||||||||||
01/31/2012 | Option Award | 02/10/2013 | 10,768 | 02/10/2014 | 10,769 | 02/10/2015 | 10,770 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Perf Share Award | 03/15/2016 | 12,252 | |||||||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Award | 02/10/2014 | 6,807 | 02/10/2015 | 6,806 | 02/10/2016 | 6,807 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Restricted Stock Unit Award | 02/10/2014 | 3,906 | 02/10/2015 | 3,906 | 02/10/2016 | 3,907 | |||||||||||||||||||||||||||||||||||||||||
01/31/2013 | Option Award | 02/10/2014 | 12,694 | 02/10/2015 | 12,695 | 02/10/2016 | 12,695 | |||||||||||||||||||||||||||||||||||||||||
3/3/2006 | Option Award | 3/3/2007 | 3,886 | 3/3/2008 | 3,886 | 3/3/2009 | 3,898 | |||||||||||||||||||||||||||||||||||||||||
Sanjiv Yajnik | 3/2/2007 | Option Award | 3/2/2008 | 7,853 | 3/2/2009 | 7,853 | 3/2/2010 | 7,854 | ||||||||||||||||||||||||||||||||||||||||
1/26/2011 | Option Award | 1/26/2012 | 18,601 | 1/26/2013 | 18,601 | 1/26/2014 | 18,603 | |||||||||||||||||||||||||||||||||||||||||
1/31/2012 | Perf Share Award | 3/15/2015 | 15,346 | |||||||||||||||||||||||||||||||||||||||||||||
1/31/2012 | Restricted Stock Award | 2/10/2013 | 8,526 | 2/10/2014 | 8,526 | 2/10/2015 | 8,525 | |||||||||||||||||||||||||||||||||||||||||
1/31/2012 | Restricted Stock Unit Award | 2/10/2013 | 8,006 | 2/10/2014 | 8,007 | 2/10/2015 | 8,007 | |||||||||||||||||||||||||||||||||||||||||
1/31/2012 | Option Award | 2/10/2013 | 12,838 | 2/10/2014 | 12,838 | 2/10/2015 | 12,839 | |||||||||||||||||||||||||||||||||||||||||
1/31/2013 | Perf Share Award | 3/15/2016 | 11,599 | |||||||||||||||||||||||||||||||||||||||||||||
1/31/2013 | Restricted Stock Award | 2/10/2014 | 6,444 | 2/10/2015 | 6,443 | 2/10/2016 | 6,445 | |||||||||||||||||||||||||||||||||||||||||
1/31/2013 | Restricted Stock Unit Award | 2/10/2014 | 4,252 | 2/10/2015 | 4,253 | 2/10/2016 | 4,254 | |||||||||||||||||||||||||||||||||||||||||
1/31/2013 | Option Award | 2/10/2014 | 10,816 | 2/10/2015 | 10,817 | 2/10/2016 | 10,817 | |||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Perf Share Award | 3/15/2017 | 9,483 | |||||||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 2/15/2015 | 5,269 | 2/15/2016 | 5,268 | 2/15/2017 | 5,268 | |||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 1/30/2014 | 447 | 2/15/2015 | 4,594 | 2/15/2016 | 4,593 | 2/15/2017 | 4,593 | |||||||||||||||||||||||||||||||||||||||
1/30/2014 | Restricted Stock Unit Award | 1/1/2015 | 9,485 | |||||||||||||||||||||||||||||||||||||||||||||
1/30/2014 | Option Award | 2/15/2015 | 9,309 | 2/15/2016 | 9,309 | 2/15/2017 | 9,310 |
(3) | For stock options granted before April 23, 2009, the exercise price is equal to the fair market value of common stock on the date of grant determined on the basis of the average high and low sales prices as reported by the NYSE Composite Transaction Tape. For stock options granted on or after April 23, 2009, the exercise price is equal to the closing price of common stock on the date of grant as reported by the NYSE Composite Transaction Tape. |
(4) | Market value based on the closing price of a share of Capital One’s common stock on the last trading day of |
(5) |
For grants awarded prior to |
Represents the maximum number of shares |
(8) | Stock options granted to the NEOs prior to 2011 are fully vested. Stock options granted to the NEOs in 2012-2013 vest 33% annually beginning on February 10 after the first anniversary of the date of grant (subject to performance-based vesting provisions), and grants in 2014 vest 33% annually beginning on February 15 after the first anniversary of the date of grant (subject to performance-based vesting provisions). See “Performance-Based Vesting Provisions” in the “Compensation Discussion and Analysis” section on page 44 for details. |
(9) | For the award granted prior to 2014, vests 20% annually beginning on the first anniversary of the date of grant. For the awards granted after January 1, 2014, vest 33% annually beginning on February 15 after the first anniversary of the date of grant, except for the cash-settled RSUs representing a portion of 2014 base salary which vested in full on January 1, 2015, and were paid February 15, 2015. For the cash-settled RSUs granted on January 30, 2014 that vest 33% annually, a portion of the award vested on the grant date in connection with withholdings made by the Company on behalf of the individuals. The stock-settled RSU award is subject to performance-based vesting provisions (see “Performance-Based Vesting Provisions” in |
(10) | For awards granted prior to 2014, vest 33% annually beginning on February 10 after the first anniversary of the date of grant. For awards granted after January 1, 2014, vest 33% annually beginning on February 15 after the first anniversary of the date of grant, except for the cash-settled RSUs representing a portion of 2014 base salary which vested in full on January 1, 2015, and were paid February 15, 2015. For the cash-settled RSUs granted on January 30, 2014 that vest 33% annually, a portion of the award vested on the grant date in connection with withholdings made by the Company on behalf of the individuals. Restricted stock grants and stock-settled RSU awards are subject to performance-based vesting provisions (see “Performance-Based Vesting Provisions” in the “Compensation Discussion and Analysis” section on page 44 for details). |
Pension Benefits
Capital One Programs
Prior to November 1995, Capital One offered a Cash Balance Pension Plan (“CBPP”) and an Excess Cash Balance Plan (“Excess CBPP”) to all full-time salaried associates and certain executive officers. Both of these programs were frozen in December 1995; however, interest credits continue to accrue on plan balances on a quarterly basis for the CBPP and on a monthly basis for the Excess CBPP. The CBPP crediting rate changes annually based on the average annual yield of 5-year Treasury Securities for the preceding 12 months ending October of the prior year (0.8%(1.04% annual average for 2013)2014). The Excess CBPP interest crediting rate changes monthly based on the Wall Street Journal Prime Rate (3.3% annual average for 2013)2014).
Messrs. Fairbank and Finneran participated in these programs. The estimated annual payouts upon retirement in the CBPP and the Excess CBPP as of December 31, 2013,2014, are $2,148$1,950 and $6,544,$5,996, respectively, for Mr. Fairbank, and $1,504$1,371 and $1,027,$945, respectively, for Mr. Finneran. These projected benefits assume interest credits under the CBPP to be 3.35%2.65% credited quarterly and under the Excess CBPP to be 4.60%3.85% credited monthly. Accounts in either plan are distributed after separation from service. Distribution options from the CBPP plan are lump sum (eligible for rollover to another qualified plan or personal IRA) or an annuity option. The Excess CBPP will be distributed in the same form as the CBPP, as a lump sum (not eligible for rollover) or as an annuity. Since the CBPP and Excess CBPP are account-based defined benefit plans, years of service are not tracked.
20132014 Pension Benefits Table
Name and Principal Position
| Plan Name (1)
| Present Value of Accumulated Benefit (2,3,4) | Payments During Last Fiscal Year | Plan Name (1)
| Present Value of
| Payments During Last
| ||||||
Richard D. Fairbank Chairman, CEO and President | Cash Balance Pension Plan
| td5,890 | $0 | Cash Balance Pension Plan
| td6,485 | $0 | ||||||
Excess Cash Balance Plan | $78,818 | $0 | Excess Cash Balance Plan | $81,418 | $0 | |||||||
Stephen S. Crawford Chief Financial Officer | - | - | - | - | - | - | ||||||
Gary L. Perlin Former Chief Financial Officer | - | - | - | |||||||||
Ryan M. Schneider President, Card | - | - | - | - | - | - | ||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | Cash Balance Pension Plan
| td8,613 | $0 | Cash Balance Pension Plan
| td9,036 | $0 | ||||||
Excess Cash Balance Plan | td2,708 | $0 | Excess Cash Balance Plan | td3,127 | $0 | |||||||
Jonathan W. Witter President, Retail and Direct Banking | - | - | - | |||||||||
Sanjiv Yajnik President, Financial Services | - | - | - |
(1) | In November 1995, Capital One amended the CBPP and the Excess CBPP to eliminate further pay-based credits to participants as of December 31, 1995, and to provide that there would be no new participants in such plans on or after January 1, 1996. Interest continues to be credited on plan balances on a quarterly (CBPP) or monthly (Excess CBPP) basis. |
(2) | For the CBPP, the interest crediting rate changes annually based on the average annual yield of 5-year Treasury Securities for the preceding 12 months ending October of the prior year. The average annual interest rate for |
(3) | The amounts shown are the present value of the accrued benefit under the same actuarial assumptions and measurement date used for financial accounting purposes. |
(4) | Consistent with the measurement date used for financial disclosure for the pension plans, the amounts for each year are determined as of a December 31, |
Capital One’s Voluntary Non-Qualified Deferred Compensation Programs
Capital One offers its Voluntary Non-Qualified Deferred Compensation Plan (“VNQDCP”) to eligible associates.
In 2013,2014, our NEOs could elect to contribute up to 50% of the cash portion of their respective base salaries and up to 100% of the restricted stock unit portion of their respective base salaries on a tax-deferred basis. Messrs. Crawford, Perlin, Schneider, Finneran, and WitterYajnik participated in the program in 2013.2014.
In 2013,2014, 100% of the CEO’s deferred cash bonus was mandatorily deferred for three years under the VNQDCP and will pay out in lump sum in the first quarter of 2016. The CEO does not receive company contributions under the VNQDCP.
In addition to participant deferrals, Capital One makes contributions under the VNQDCP. Company contributions vest immediately when posted to the VNQDCP.
Participants in the VNQDCP have the option to direct their individual deferrals among thirteenseventeen different investment offerings made available by the plan: Fidelity Retirement Money Market Portfolio, Blackrock Bond Index Fund, PIMCO Total Return Fund Institutional, Dodge & Cox Balanced Fund, Dodge & Cox Stock Fund, Goldman SachsT. Rowe Price Institutional Large Cap Value Fund, Northern Small Cap Value Fund, Fidelity Spartan S&P 500 Index Fund, Hartford MidBlackrock Small Cap Index Fund, Y, Fidelity Capital Appreciation Fund, Wells Fargo Advantage CapitalT. Rowe Price Institutional Large Cap Growth Fund, The Hartford Mid Cap Fund, The Hartford Small Company HLS IAFund, Blackrock ACWI ex-US Index Fund, Dodge & Cox International Stock Fund, Vanguard Total World Stock Index, and Lazard Emerging Markets Equity Portfolio IA. Equity.
Individual investment returns experienced in 20132014 were as follows: Mr. Fairbank 6.54%4.95% or $71,506,$182,199, Mr. Crawford 4.85%1.71% % or $7,830, Mr. Perlin 24.18% or $669,296,$5,743, Mr. Schneider 0.01% or $22, Mr. Finneran -1.91%4.85% or -$45,671,$120,768 and Mr. Witter 25.57%Yajnik 7.22% or $248,838.$64,323. Distributions under the VNQDCP may be made to participants according to their respective elected schedule for distribution in accordance with plan terms. The distribution schedules available under the plan include lump sum and 5, 10 or 15 year annual installments. Distributions occur based upon the following events: termination of employment, death, disability, in-service distribution election or change of control.
Prior to December 31, 2005, Capital One offered its executives an Excess Savings Plan (“ESP”). The plan was frozen as of December 31, 2005; no additional participants are permitted to enter the plan, and no compensation is taken into account after this date. Messrs. Fairbank, Perlin, Schneider, Finneran, and FinneranYajnik participated in the ESP and, as such, returns on these investments are reported for 2013.2014. Effective January 1, 2008, the ESP was merged into the VNQDCP, and participants in the ESP have the option to direct their individual investments among the same offerings as the VNQDCP. Individual investment returns experienced in 20132014 were as follows: Mr. Fairbank 32.37%13.66% or $92,898, Mr. Perlin -1.92% or -$1,980,$51,878, Mr. Schneider 0.01% or $13, Mr. Finneran 13.66% or $158,066, and Mr. Finneran 10.81%Yajnik 4.69% or $112,918.$13,088.
20132014 Non-Qualified Deferred Compensation Table
Name and Principal Position | Plan Name | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY (2) | Aggregate Earnings in Last FY (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE (4) | ||||||||
Richard D. Fairbank Chairman, CEO and President | Voluntary Non-Qualified Deferred Compensation Plan | $2,187,500 | $0 | $71,506 | $0 | $ | 2,259,006 | |||||||
Excess Saving Plan | $0 | $0 | $92,898 | $0 | $ | 379,846 | ||||||||
2003 Performance Share Award (5) | $0 | $0 | $4,514,583 | $0 | $ | 18,515,105 | ||||||||
Stephen S. Crawford Chief Financial Officer | Voluntary Non-Qualified Deferred Compensation Plan | $11,538 | $198,600 | $7,830 | $0 | $ | 217,968 | |||||||
Excess Saving Plan | - | - | - | - | - | |||||||||
Gary L. Perlin Former Chief Financial Officer
| Voluntary Non-Qualified Deferred Compensation Plan | $13,350 | $192,600 | $669,296 | $0 | $ | 3,539,805 | |||||||
Excess Saving Plan | $0 | $0 | -$1,980 | $0 | $ | 101,032 | ||||||||
Ryan M. Schneider President, Card | Voluntary Non-Qualified Deferred Compensation Plan | $10,933 | $157,001 | $22 | $147,403 | $ | 330,533 | |||||||
Excess Saving Plan | $0 | $0 | $13 | $0 | $ | 129,333 | ||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary
| Voluntary Non-Qualified Deferred Compensation Plan | $9,538 | $135,930 | -$45,671 | $0 | $ | 2,416,048 | |||||||
Excess Saving Plan | $0 | $0 | $112,918 | $0 | $ | 1,157,351 | ||||||||
Jonathan W. Witter President, Retail and Direct Banking | Voluntary Non-Qualified Deferred Compensation Plan | $17,415 | $124,467 | $248,838 | $0 | $ | 1,290,092 | |||||||
Excess Saving Plan | - | - | - | - | - |
Name and Principal Position | Plan Name | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY (2) | Aggregate Earnings in Last FY (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE (4) | ||||||||
Richard D. Fairbank Chairman, CEO and President | Voluntary Non-Qualified Deferred Compensation Plan | $2,843,750 | $0 | $182,199 | $0 | $5,284,955 | ||||||||
Excess Saving Plan | $0 | $0 | $51,878 | $0 | $431,724 | |||||||||
2003 Performance Share Award (5) | $0 | $0 | $1,435,579 | $0 | $19,950,684 | |||||||||
Stephen S. Crawford Chief Financial Officer | Voluntary Non-Qualified Deferred Compensation Plan | $15,265 | $218,100 | $5,743 | $0 | $457,076 | ||||||||
Excess Saving Plan | - | - | - | - | - | |||||||||
Ryan M. Schneider President, Card | Voluntary Non-Qualified Deferred Compensation Plan | $11,165 | $157,410 | $22 | $162,286 | $336,843 | ||||||||
Excess Saving Plan | $0 | $0 | $13 | $0 | $129,346 | |||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | Voluntary Non-Qualified Deferred Compensation Plan | $9,747 | $136,350 | $120,768 | $0 | $2,682,913 | ||||||||
Excess Saving Plan | $0 | $0 | $158,066 | $0 | $1,315,417 | |||||||||
Sanjiv Yajnik President, Financial Services | Voluntary Non-Qualified Deferred Compensation Plan | $9,129 | $127,320 | $64,323 | $0 | $1,023,100 | ||||||||
Excess Saving Plan | $0 | $0 | $13,088 | $0 | $292,188 |
(1) | Reflects executive contributions made for |
(2) | Registrant contributions are also included in the amounts reported as “Company Contributions to Defined Contribution Plans” in footnote 8 to the Summary Compensation Table. |
(3) | Includes earnings on total assets in the VNQDCP and the ESP. |
(4) | All the amounts shown in this column, other than earnings on deferred compensation, were included in compensation amounts reported in prior years for those executives that were NEOs in such prior years and in the amounts required to be reported pursuant to the then applicable rules. Of these balances, the following amounts were included in compensation amounts reported in the Summary Compensation Tables in prior year proxy statements beginning with the 2007 proxy statement: Mr. |
(5) | Includes the value of restricted stock units that were granted to Mr. Fairbank in December 2003, subject to Capital One’s earnings per share performance relative to its comparator group over a three-year period from January 1, 2004 through December 31, 2006 (the “Performance Period”). On March 2, 2007, the independent directors of the Board certified, following the end of the Performance Period, the achievement of the performance target. Because the Company ranked in the 76th percentile for the Performance Period relative to the comparator group, Mr. Fairbank acquired the right to receive 241,680 shares of Capital One’s common stock on March 31, 2007. Delivery of these shares is deferred until the end of Mr. Fairbank’s employment with the Company. Similar to other deferred compensation, Mr. Fairbank neither acquired these shares nor realized any value from these shares in |
Potential Payments Upon Termination or Change of Control
Overview
The disclosure in the table below illustrates payouts that the named executive officers could receive under certain hypothetical termination scenarios. Actual circumstances resulting in the departure of a named executive officer cannot be predicted and may differ from the assumptions used in the information outlined below. The Company has adopted plans providing certain standards governing named executive officer separation payments (reflected in the table below) in order to protect the Company’s interests in the event of an acquisition as well as to provide competitive benefits to senior executives.
The Compensation Committee reviews each executive officer’s separation on a case by case basis and exercises its business judgment, with the approval of the independent directors, to customize the terms of such separations in consideration of the relevant circumstances, including:
Restrictive Covenants
Capital One maintains a competitive advantage in part through the intellectual property developed and utilized by our senior executives. Capital One has asked certain NEOs to enter into various agreements that contain restrictive covenants related to confidentiality, non-competition, non-solicitation and ownership of work product, as described below.
Standard Non-Competition Agreement
Under Capital One’s standard non-competition agreement program, NEOs may be restricted as to what competitive services they may provide to an entity following separation from Capital One, typically for a period of up to two years. In recognition of these restrictions, the agreement calls for payments to be made to the NEO during periods of enforcement of the non-competition restrictions, subject to certain circumstances and conditions. Messrs. Crawford, Perlin,Schneider, and SchneiderYajnik are parties to standard non-competition agreements.
For 2013,2014, potential payments following termination under the standard non-competition agreement are 15% of the NEO’s target total compensation for each year of enforcement and up to eighteen months of subsidized health insurance premiums and administrative fees under COBRA if the NEO elects such coverage, subject to certain terms and conditions. For voluntary terminations, the previously described payments are only made for the second year of enforcement. In the case of the NEO’s involuntary termination for any reason other than death, disability or cause, the payments are made in two lump sums, the first following termination and the second upon completion of the enforcement period. However, there are no payments under the non-competition agreement if benefits are payable under a change of control agreement. Payments related to the non-competition agreement are separate from any severance payments that may be made upon the NEO’s departure. However, severance payments are typically offset in part by payments related to the non-competition agreement so that total payment amounts are consistent with the program’s intent.
Non-Competition and Non-Solicitation of Customer Agreement
Mr. Witter is party to a non-competition and non-solicitation of customer agreement. For 2013, potential payments following termination are an amount equal to his cash base salary in effect on his termination date for each year of enforcement and up to eighteen months of subsidized health insurance premiums under COBRA if Mr. Witter elects such coverage, subject to certain terms and conditions. The payments are made in two lump
sums, the first following termination and the second following the completion of the second year anniversary of his termination. Mr. Witter is entitled to such payments only if Capital One terminates his employment, other than for cause, death or disability, and enforces the non-competition covenant. He is not entitled to payment under his non-competition agreement if he voluntarily terminates his employment. In addition, the agreement includes a two year covenant not to solicit customers.
Confidentiality, Work Product and Non-Solicitation of Employee Agreement
Messrs. Crawford, Perlin, Schneider, and WitterYajnik are parties to confidentiality, work product and non-solicitation of employee agreements. The confidentiality provisions of these agreements generally provide that at all times during and following employment with the Company, the NEO may not use for personal benefit or the benefit of others, or divulge to others, any of Capital One’s confidential information, except as expressly authorized by Capital One or required by legal process.
Further, the NEO, upon separation from Capital One, shall return any and all of Capital One’s confidential information to Capital One.
Generally, under the non-solicitation of employee provisions of these agreements, for a period of two years following separation from Capital One, the NEO shall not directly or indirectly solicit or induce any associate of Capital One to become employed by any person or entity engaged in competition with Capital One, hire or engage any associate of Capital One to provide services to a competitor, or directly or indirectly solicit or induce any associate of Capital One to end his or her employment based on confidential information the NEO learned about the employee while they were employed by Capital One.
Payments under Certain Termination Scenarios
Upon separation from the Company, the named executive officers, regardless of the reason for termination, receive certain earned, but previously unpaid, payments, such as accrued but unused vacation pay and amounts earned and vested under the Company’s qualified and non-qualified retirement programs. In addition, cash-settled restricted stock unitsRSUs granted to NEOs after the end of a performance year continue to vest according to the original provisions upon separation except for any reason other than cause because these are deferred awards attributable to prior performance and are intended to replace cash bonuses, which would otherwise already have been paid to an executive.
Voluntary Termination
An NEO who voluntarily terminates employment with Capital One may receive payments related to non-competition covenants (described above, if applicable) and any contractual payments to which the NEO may otherwise be entitled. Cash-settled RSUs granted to NEOs at the beginning of a performance year representing a portion of base salary are pro-rated and continue to vest according to their original terms upon voluntary termination. In addition, an NEO has the ability following separation to exercise vested but unexercised options for 3 months following voluntary termination.
Involuntary Termination Without Cause
An NEO whose employment with Capital One is terminated involuntarily, for performance or job elimination, is entitled to receive the amounts set forth in the Company’s Executive Severance Plan. For 2013,2014, potential payments under the Executive Severance Plan were 30% of total target compensation. If an NEO’s Non-Competition Agreement is enforced, payments under the Executive Severance Plan will be offset by any amounts paid under the Non-Competition Agreement and the NEO will be eligible for (i) an additional payment of up to 90% of the severance payments in exchange for executing a release of claims against the Company, as well as (ii) continued coverage through broad-based and executive life insurance programs, outplacement services and any contractual payments to which the NEO may otherwise have been entitled. Cash-settled RSUs granted to NEOs at the beginning of the performance year representing a portion of base salary are pro-rated and continue to vest according to their original terms upon an involuntary termination. Performance shares granted to NEOs will vest on a pro-rata basis if an involuntary termination without cause occurs during the performance period. For outstanding performance shares granted to the CEO, an involuntary termination without cause prior to January 1 of the year following the year in which the grant is made will result in the award being forfeited in its entirety. A subsequent involuntary termination without cause will result in the award vesting, in whole or in part, after the completion of the applicable performance period based on Company performance during the performance period. In addition, named executive officers have the ability following separation to exercise vested but unexercised options for two years. If a named executive officer’s employment with Capital One is
terminated as a result of death or disability, his unvested stock options, restricted stock and restricted stock units will vest in full and his performance shares will vest on a pro-rata basis based on actual Company performance during the performance period.
Termination for Cause
Generally, an NEO whose employment with Capital One is terminated for cause receives no additional benefits but is required to comply with any applicable restrictive covenants related to confidentiality, non-competition, non-solicitation of employees or customers, and ownership of work product, as described above. Cash-settled RSUs granted to NEOs at the beginning of the performance year representing a portion of base-salary are pro-rated and continue to vest according to their original terms upon a termination for cause because these are deferred awards representing base salary that would otherwise already have been paid to an executive. In addition, if terminated for cause, named executive officers have the ability following separation to exercise vested but unexercised options for 3 months.
Payments upon Retirement
As with all executives who are eligible for retirement, named executive officers who retire from Capital One may receive the following amounts: payments related to non-competition covenants as if they had terminated voluntarily (described above); partially subsidized participation in retiree medical coverage (including dependantsdependents as applicable), provided that the executive became eligible to retire on or before December 31, 2012; coverage through the executive life insurance program (at a reduced benefit); and any contractual payments to which he or she may otherwise be entitled.
Upon retirement, shares of restricted stock, all restricted stock units (other than thecash-settled RSUs representing a portion of base salary delivered as restricted stock units)base-salary, which vest pro-rata) and stock options continue to vest according to their original terms, which, for shares of restricted stock, stock-settled restricted stock units (all restricted stock units for the CEO) and stock options granted on or after 2012, also includes performance-based vesting provisions. In addition, performance shares granted to named executive officers will continue to vest after retirement, except the 20132014 performance share grant to the CEO which would be forfeited if he retired on or before December 31, 2013.2014. For stock options granted on or before December 1, 2005, the executive has one year from the date of separationretirement to exercise vested but unexercised options. StockFor stock options granted after December 1, 2005 must be exercised byand prior to January 1, 2010 the executive has the earlier of five years from the date of retirement or the expiration of the option term. Unvestedterm to exercise vested but unexercised options. For stock options will continue to vestgranted on or after retirement according to their original terms, and all stock options may be exercisedJanuary 1, 2010 the executive has until the expiration of the option term.term to exercise vested but unexercised options.
Change of Control
Each named executive officer is a party to an agreement (a “Change of Control Agreement”) that provides for certain payments in the event his or her employment is terminated within two years following (or in anticipation of) a change of control, either involuntarily without cause or voluntarily for good reason. Amounts payable in each of these scenarios are outlined below.
In the agreements, a change of control occurs if one or more of the following events take place: (i) an acquisition of 20% or more of Capital One’s common stock or the combined voting power of the voting securities by a person or group, (ii) certain changes in the majority of the Board of Directors, (iii) consummation of a reorganization, merger, share exchange or consolidation or similar transaction, sale of all assets or the acquisition of another company, except where all or substantially all of Capital One’s stockholders receive 50% or more of the stock of the resulting company, at least a majority of the board of directors of the resulting company were incumbent board members, and no person owns 20% or more of the resulting company who did not own such stock immediately before the business combination or (iv) approval by stockholders of a complete liquidation or dissolution of Capital One.
All named executive officer Change of Control Agreements providing for a potential excise tax gross-up after a change of control have expired and have been replaced with new Change of Control Agreements that do not provide for an excise tax gross-up.
Involuntary Termination For Cause
Named executive officers terminated involuntarily for cause following a change of control receive no additional benefits.
Voluntary Termination With Good Reason or Involuntary Termination Without Cause
For 2013,2014, the potential payments that the named executive officers could receive under certain termination scenarios are based on a percentage of target total compensation. For the CEO, the potential payments are based on a multiple of his notional salary and cash bonus (as described below). As of December 31, 2013,2014, if a change of control of Capital One occurs, then following a voluntary termination with good reason or involuntary termination without cause, a named executive officer may receive certain benefits as outlined below:
¡ | A lump-sum payment of 2.5 times the sum of his current notional salary and the “Highest Annual Bonus,” which is the highest of (i) the target annual bonus for the year in which the change of |
control occurs (or the mid-point if no target is established), (ii) the target annual bonus for the year immediately before the year the change of control occurs (or midpoint if no target is established), or (iii) the annual bonus paid or payable for the most recently completed fiscal year; and |
¡ | The cash value, prorated through the date of termination, of the Highest Annual Bonus. |
¡ | The cash value, prorated through the date of termination, of the current year’s target annual incentive award, whether in the form of cash or equity-based compensation; and |
¡ | 112.5% of the highest of (i) the NEO’s current target total compensation, (ii) the NEO’s target total compensation for the prior year, or (iii) the NEO’s actual total compensation for the prior year. |
¡ | An amount equal to the employer contributions under the Company’s qualified and non-qualified retirement, healthcare and life insurance programs for 2.5 years as well as access to such healthcare and life insurance plans for the named executive officer (and |
¡ | Service credit of 2.5 years for purposes of determining vesting under any supplemental or excess defined contribution plan and eligibility under any applicable retiree medical plan; |
¡ | Outplacement services of up to $30,000 for one full year (the named executive officer must begin to take advantage of the services within one year of the date of termination); and |
¡ | Any contractual payments to which the named executive officer may otherwise have been entitled. |
As forBeginning in January 2015, all associates holding equity awards granted to named executive officers will require a so-called “double trigger” for accelerated vesting in connection with a change of control. Upon a change of control, all equity awards continue to vest according to their original schedule. The vesting of such awards will only accelerate if a named executive officer is involuntarily terminated without cause or voluntarily terminates for good reason within the two years following a change of control. All outstanding awards under Capital One’s stock incentive plansequity grants awarded prior to January 2015 vest in full immediately upon a change of control.
In addition, as of December 31, 2013, Messrs. Perlin, Schneider, Finneran, and Witter were parties to Change of Control Agreements under which they were entitled to an additional payment in an amount such that after the payment of all income and excise taxes, they would have been in the same after-tax position as if no excise tax had been imposed, provided that the gross-up results in an after-tax benefit of at least 110% of the applicable safe harbor amount (in the event the payments do not meet that threshold, payments are reduced so that no excise tax is imposed). All named executive officer Change of Control Agreements providing for a potential excise tax gross-up after a change of control have expired prior to the date of this proxy statement and have been replaced with new Change of Control Agreements that do not provide for an excise tax gross-up.
Richard D. Fairbank
Mr. Fairbank receives no regular base salary. In light of this, for 2013,2014, Mr. Fairbank’s payment in the event of a termination following a change of control was based on a notional salary of $1 million.million and his Highest Annual Bonus. The Committee reviews and establishes thisthe notional salary amount on an annual basis, based on market trends related to CEO compensation and recommendations provided by F.W. Cook. Mr. Fairbank is a party to a Change of Control Agreement.
Stephen S. Crawford, Ryan M. Schneider, John G. Finneran, Jr., and Sanjiv Yajnik
Mr.Messrs. Crawford, isSchneider, Finneran, and Yajnik are generally eligible for the same payments upon termination, as the other NEOs at Capital One.and are all party to a Change of Control Agreement. For 2013,2014, these payments were calculated based on his 2013their 2014 target total compensation value. Mr.values. Messrs. Crawford, is aSchneider and Yajnik are party to a standard Non-Competition Agreement and a Confidentiality, Work Product and Non-Solicitation of Employee Agreement, as well as to a Change of Control Agreement.
Gary L. Perlin
As previously announced, Mr. Perlin retired from his role as Chief Financial Officer of the Company effective May 24, 2013, and separated from the Company on February 1, 2014. Until his separation from the Company, Mr. Perlin was a party to a Change of Control Agreement. Mr. Perlin is currently a party to a standard Non-Competition Agreement and a Confidentiality, Work Product and Non-Solicitation of Employee Agreement, as well as to a Special Agreement and Release.
Ryan M. Schneider
Mr. Schneider is generally eligible for the same payments upon termination as the other NEOs at Capital One. For 2013, these payments were calculated based on his 2013 target total compensation value. Mr. Schneider is a party to a standard Non-Competition Agreement and a Confidentiality, Work Product and Non-Solicitation of Employee Agreement, as well as to a Change of Control Agreement.
John G. Finneran, Jr.
Mr. Finneran is generally eligible for the same payments upon termination as the other NEOs at Capital One. For 2013, these payments were calculated based on his 2013 target total compensation value. Mr. Finneran is a party to a Change of Control Agreement.
Jonathan W. Witter
Mr. Witter is a party to a Non-Competition and Non-Solicitation of Customer Agreement as discussed above in the “Non-Competition and Non-Solicitation of Customer Agreement” section beginning on page 64 and is eligible for the payments described above pursuant to that agreement. For 2013, certain payments were calculated based on his 2013 target total compensation value and his 2013 cash base salary. Mr. Witter is also party to a Confidentiality, Work Product and Non-Solicitation of Employee Agreement, as well as to a Change of Control Agreement.
20132014 Potential Payments and Benefits Upon Termination or Change of Control Tables by Named Executive Officer
Name and Principal Position | Situation | Cash Severance (1) | Retirement Plan Contributions (2) | Acceleration and Continuation of Equity Awards (3) | Continuation of Medical/Welfare Benefits (4) | Excise Tax Gross Up (5) | Total | |||||||
Richard D. Fairbank Chairman, CEO and President | Voluntary Termination | NA | NA | NA | NA | NA | NA | |||||||
Involuntary Termination | NA | NA | NA | NA | NA | NA | ||||||||
Retirement | $0 | $0 | $81,305,031 | $419,000 | $0 | $81,724,031 | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
CIC* | $2,503,131 | $0 | $93,207,391 (6) | $241,021 | NA | $95,951,543 | ||||||||
Stephen S. Crawford Chief Financial Officer | Voluntary Termination | $1,125,000 | $0 | $0 | $0 | $0 | $1,125,000 | |||||||
Involuntary Termination | $4,275,000 | $0 | $13,330,140 | $15,491 | $0 | $17,620,631 | ||||||||
Retirement | NA | NA | NA | NA | NA | NA | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
CIC* | $8,645,041 | $544,994 | $13,330,140 (6) | $183,195 | NA | $22,703,370 | ||||||||
Gary L. Perlin Former Chief Financial Officer (7) | Retirement | $0 | $0 | $16,106,778 | $404,000 | $0 | $16,510,778 | |||||||
Ryan M. Schneider President, Card | Voluntary Termination | $822,750 | $0 | $3,265,042 | $0 | $0 | $4,087,792 | |||||||
Involuntary Termination | $3,126,450 | $0 | $5,089,098 | $14,193 | $0 | $8,229,741 | ||||||||
Retirement | NA | NA | NA | NA | NA | NA | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
CIC* | $7,002,385 | $440,529 | $12,121,187 (6) | $84,634 | $7,486,728 | $27,135,463 | ||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | Voluntary Termination | $0 | $0 | $11,272,420 | $0 | $0 | $11,272,420 | |||||||
Involuntary Termination | $1,435,500 | $0 | $11,272,420 | $10,000 | $0 | $12,717,920 | ||||||||
Retirement | $0 | $0 | $11,272,420 | $311,000 | $0 | $11,583,420 | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
CIC* | $5,404,651 | $388,123 | $11,272,420 (6) | $200,252 | $0 | $17,265,446 | ||||||||
Jonathan W. Witter President, Retail and Direct Banking | Voluntary Termination | $0 | $0 | $1,962,901 | $0 | $0 | $1,962,901 | |||||||
Involuntary Termination | $2,948,000 | $0 | $7,086,261 | $14,151 | $0 | $10,048,412 | ||||||||
Retirement | NA | NA | NA | NA | NA | NA | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||
CIC* | $5,617,027 | $359,430 | $11,995,502 (6) | $168,664 | $6,464,506 | $24,605,129 |
Name and Principal Position | Situation | Cash Severance (1) | Retirement Plan Contributions (2) | Acceleration and Awards (3) | Continuation of Medical/Welfare Benefits (4) | Excise Tax Gross Up (5) | Total | |||||||
Richard D. Fairbank Chairman, CEO and President | Voluntary Termination | NA | NA | NA | NA | NA | NA | |||||||
Involuntary Termination | NA | NA | NA | NA | NA | NA | ||||||||
Retirement | $0 | $0 | $73,217,060 | $462,000 | NA | $73,679,060 | ||||||||
For Cause Termination | $0 | $0 | $0 | $0 | NA | $0 | ||||||||
CIC* | $12,253,417 | $0 | $83,396,218 (6) | $242,267 | NA | $95,891,902 | ||||||||
Stephen S. Crawford Chief Financial Officer | Voluntary Termination | $1,129,500 | $0 | $3,025,458 | $0 | NA | $4,154,958 | |||||||
Involuntary Termination | $4,292,100 | $0 | $14,911,691 | $17,433 | NA | $19,221,224 | ||||||||
Retirement | NA | NA | NA | NA | NA | NA | ||||||||
For Cause Termination | $0 | $0 | $1,308,830 | $0 | NA | $1,308,830 | ||||||||
CIC* | $9,611,826 | $595,012 | $18,226,648 (6) | $180,685 | NA | $28,614,171 | ||||||||
Ryan M. Schneider President, Card | Voluntary Termination | $826,050 | $0 | $3,987,165 | $0 | NA | $4,813,215 | |||||||
Involuntary Termination | $3,138,990 | $0 | $6,371,276 | $14,640 | NA | $9,524,906 | ||||||||
Retirement | NA | NA | NA | NA | NA | NA | ||||||||
For Cause Termination | $0 | $0 | $957,497 | $0 | NA | $957,497 | ||||||||
CIC* | $7,350,212 | $442,628 | $12,411,388 (6) | $84,984 | NA | $20,289,212 | ||||||||
John G. Finneran, Jr. General Counsel and Corporate Secretary | Voluntary Termination | $0 | $0 | $11,564,825 | $0 | NA | $11,564,825 | |||||||
Involuntary Termination | $1,441,500 | $0 | $11,564,825 | $10,000 | NA | $13,016,325 | ||||||||
Retirement | $0 | $0 | $11,564,825 | $450,000 | NA | $12,014,825 | ||||||||
For Cause Termination | $0 | $0 | $835,323 | $0 | NA | $835,323 | ||||||||
CIC* | $6,515,721 | $390,289 | $11,564,825 (6) | $196,372 | NA | $18,667,207 | ||||||||
Sanjiv Yajnik President, Financial Services | Voluntary Termination | $675,600 | $0 | $10,726,854 | $0 | NA | $11,402,454 | |||||||
Involuntary Termination | $2,567,280 | $0 | $10,726,854 | $10,000 | NA | $13,304,134 | ||||||||
Retirement | $675,600 | $0 | $10,726,854 | $313,000 | NA | $11,715,454 | ||||||||
For Cause Termination | $0 | $0 | $782,987 | $0 | NA | $782,987 | ||||||||
CIC* | $4,033,306 | $367,675 | $10,726,854 (6) | $154,392 | NA | $15,282,227 |
* | Represents potential payments and benefits upon change of control for involuntary termination without cause or voluntary for good reason. “Acceleration and Continuation of Equity Awards” represents the value of equity where vesting is accelerated upon change of control, assuming, where applicable, that all performance metrics have been achieved at their target level. |
The table above is intended to reflect potential payments to named executive officers across a range of potential separation scenarios, assuming the change of control or separation occurred on December 31, 2013.2014.
The amounts shown in the table above do not include payments and benefits that are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. The named executive officers also are eligible to receive certain pension benefits and certain qualified and non-qualified deferred compensation amounts upon termination. These amounts are outlined in the 20132014 Pension Benefits Table on page 6162 and the 20132014 Non-Qualified Deferred Compensation Table on page 63,64, respectively, and are not included in the table above.
Other amounts not included in the table above are the following:
(1) | Represents cash amounts paid for severance or in relation to enforcement of non-competition covenants as described under “Restrictive Covenants” beginning on page |
(2) | Represents the value of projected contributions to retirement plans during the severance period. |
(3) | Represents the value of equity where vesting is accelerated or continued by the triggering event. For stock options, this represents the in-the-money value. For stock awards, this represents the fair market value of the |
(4) | Represents the value of potential payments made on the executive’s behalf for continuation of medical and welfare benefits during the severance period. Includes programs such as medical, dental, insurance, outplacement services and related benefits. Only includes programs that are specific to the named executive officers; does not include the value of programs generally available to all employees upon separation from the Company. |
(5) |
(6) | Most currently unvested equity awards will be treated in a similar manner following a named executive officer’s termination of employment for death or disability. Due to differences in the vesting provisions of performance shares, the value of the acceleration and continuation of unvested equity awards for each named executive officer following the termination of his employment for death or disability on December 31, |
Equity Compensation Plan Information
The following table provides information as of December 31, 2013,2014, with respect to shares of Capital One common stock that may be issued under our existing compensation plans.
Plan Category | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights (3) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||
(a) | (b) | ( c) | (a) | (b) | (c) | |||||||
Equity compensation plans approved by security holders (1) | 13,713,649 (4) | $56.87 | 17,328,992 (6) | 14,011,073 (4) | $55.75 | 29,787,036 (6) | ||||||
Equity compensation plans not approved by security holders (2) | 619,435 (5) | $68.66 | 0 (7) | 201,568 (5) | $64.41 | 0 (7) | ||||||
Total | 14,333,084 | $57.41 | 17,328,992 | 14,212,641 | $55.87 | 29,787,036 |
(1) | The following plans have been approved by Capital One stockholders and are currently in effect: the 2004 Stock Incentive Plan and the 2002 Associate Stock Purchase Plan. |
(2) | The 1999 Directors Plan, which is described below, was terminated in April 2009 and has not been approved by Capital One stockholders. In conjunction with the acquisition of Hibernia National Bank (“Hibernia”) in November 2005, Capital One assumed three existing Hibernia stock incentive plans. In conjunction with the acquisition of North Fork Bancorporation (“North Fork”) in December 2006, Capital One assumed fifteen existing North Fork stock incentive plans. Options outstanding under these plans were converted to Capital One options outstanding and are included in the amounts reported in this row. As of December 31, |
(3) | Does not reflect restricted stock units and performance shares because they have no exercise price. |
(4) | Excludes purchase rights accruing under the 2002 Associate Stock Purchase Plan and |
(5) | Includes 54,456 outstanding restricted stock units under the 1999 Directors Plan. |
(6) | Represents |
(7) | There are no shares available for future issuance under the equity compensation plans not approved by security holders. |
Description of Non-StockholderNon-Security Holder Approved Equity Compensation Plans
Set forth below is a brief description of the material features of each Capital One equity compensation plan that was adopted without the approval of Capital One’s stockholderssecurity holders and that had grants outstanding or shares available for issuance as of December 31, 2013.2014.
1999 Directors Plan
The 1999 Directors Plan was adopted by the Board on April 29, 1999, and terminated on April 28, 2009. The plan authorized a maximum of 825,000 shares of Capital One’s common stock for the grant of non-qualified stock options, restricted stock and restricted stock units to members of the Board who arewere not otherwise employed by Capital One or any subsidiary of Capital One at the time an award iswas granted. The number of shares available for issuance under the plan included shares granted under the plan subject to options that expired or otherwise terminated unexercised and shares forfeited pursuant to restrictions on restricted stock or deferred stock. The plan is administered by the Board.
The exercise price of stock options granted under the plan could not be less than the fair market value, as defined in the 1999 Directors Plan, of Capital One common stock on the date of grant. The maximum term of each stock option was ten years, and vesting schedules were determined at the time of grant. The Board could, in its discretion, grant options that by their terms became fully exercisable upon a change of control, as defined in the 1999 Directors Plan.
The Board could award restricted stock to eligible directors. During the restricted period, a director cannot dispose of any restricted shares and must forfeit any restricted shares granted to such director if he or she ceases to be a member of the Board. The Board had the authority to establish the terms and conditions upon which these restrictions will lapse. The Board could also, at any time, accelerate the time at which any or all restrictions would lapse or remove any and all such restrictions. Subject to any applicable restrictions, a participant who received an award of restricted stock would have all of the rights of a stockholder with respect to the shares subject to the award, including but not limited to the right to vote the shares and the right to receive all dividends and other distributions paid with respect to the shares.
The Board could award restricted stock units to eligible directors under the plan. The Board has the authority to establish, in its discretion, the length of the vesting period; any restrictions with respect to an award of restricted stock units and the terms and conditions upon which restrictions, if any, shall lapse.
The Board has retained the right to cancel any awards outstanding under the plan in exchange for a cash payment equal to any such award’s value as of the date of cancellation.
Currently, no shares are available for issuance under this plan other than shares subject to outstanding equity awards under the plan.
All members of the Compensation Committee participated in the review and discussion of the Compensation Discussion and Analysis (“CD&A”) with management. Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this proxy statement.
The Compensation Committee | Mayo A. Shattuck III (Chair) |
Patrick W. Gross
Ann Fritz Hackett
Lewis Hay, III
Benjamin P. Jenkins, III
The foregoing Report of the Compensation Committee on Executive Compensation shall not be deemed to be soliciting material or filed with the SEC and is not incorporated by reference into any of Capital One’s previous or future filings with the SEC, except as otherwise explicitly specified by Capital One in any such filing.
The Board of Directors restructured its Audit and Risk Committee into two separate Committees, which are the current Audit Committee and Risk Committee, in May 2013. The charter of the Audit Committee was most recently approved by the Committee and the full Board of Directors on January 29, 2014.28, 2015.
In accordance with its charter, the Audit Committee assists the Board of Directors in the oversight of:
The Audit Committee has implemented procedures to enable it to devote the attention it deems appropriate to each of the matters assigned to it under its charter. In carrying out its responsibilities, the Audit Committee and the former Audit and Risk Committee met a total of tentwelve times during 2013, with the Audit Committee meeting five times since June 2013 and the former Audit and Risk Committee meeting five times prior to the restructuring in May 2013.2014. Pursuant to Capital One’s Corporate Governance Principles and applicable law, the Audit Committee is comprised solely of independent directors.
In discharging its oversight responsibility, the Audit Committee has reviewed and discussed Capital One’s audited financial statements for the fiscal year ended December 31, 2013,2014, and the assessment of the effectiveness of Capital One’s internal control over financial reporting, with management and Ernst & Young LLP (“Ernst & Young”), Capital One’s independent auditors. The Audit Committee has also discussed with Ernst & Young the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board. In addition, the Audit Committee has received the written disclosures and the letter from Ernst & Young required by the applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young their independence from Capital One. Based on its review and discussions with management and Ernst & Young, and pursuant to a delegation of authority from the Board of Directors, the Audit Committee has approved the inclusion of the audited financial statements in Capital One’s Annual Report on Form 10-K for the fiscal year ending December 31, 2013,2014, for filing with the SEC.
The Audit Committee: | Bradford H. Warner (Chair and “Audit Committee Financial Expert”) | |
Benjamin P. Jenkins, III | ||
Peter E. Raskind (“Audit Committee Financial Expert”) | ||
Catherine G. West |
The foregoing Report of the Audit Committee shall not be deemed to be soliciting material or filed with the SEC and is not incorporated by reference into any of Capital One’s previous or future filings with the SEC, except as otherwise explicitly specified by Capital One in any such filing.
All of Capital One’s directors are elected at each annual meeting of stockholders and hold such office until the next annual meeting of stockholders, and until their successors are duly elected and qualified. Each nominee has consented to serve a one-year term. Information about the proposed nominees for election as directors is set forth under “Information about our Directors and Executive Officers” in the “Corporate Governance at Capital One” section beginning on page 1716 of this proxy statement.
In the event a nominee ceases to be available for election, the Board of Directors may designate a substitute as a nominee or reduce the size of the Board. If the Board designates a substitute nominee, proxies will be voted for the election of such substitute. As of the date of this proxy statement, the Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve as a director.
The nominees for election this year are:
Richard D. Fairbank | Pierre E. Leroy | |||||
Patrick W. Gross | Peter E. Raskind | |||||
Ann Fritz Hackett | Mayo A. Shattuck III | |||||
Lewis Hay, III | Bradford H. Warner | |||||
Benjamin P. Jenkins, III | Catherine G. West |
***
The Board of Directors unanimously recommends that you vote ““FOR”FOR” each of these director nominees.
The Audit Committee, pursuant to authority granted to it by the Board of Directors, is directly responsible for the appointment, compensation, retention and oversight of Capital One’s independent auditors. The Audit Committee evaluates the independent auditors’ qualifications, performance and independence at least annually and periodically considers whether to continue to retain our current independent auditor or engage another firm. In connection with applicable partner rotation requirements, the Audit Committee and its Chair are involved in considering the selection of Ernst & Young’s new lead engagement partner.
For 2014,2015, the Audit Committee has appointed the firm of Ernst & Young as independent auditors. Ernst & Young has served as Capital One’s independent auditors since 1994. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young as Capital One’s independent auditors is in the best interests of Capital One and its stockholders.
The Board of Directors is submitting this proposal to the vote of the stockholders as a matter of good corporate governance. If stockholders do not ratify the selection of Ernst & Young, the Audit Committee will reconsider their appointment as our independent auditors.
The fees billed for professional services provided by Ernst & Young for fiscal years 20132014 and 20122013 are shown in the following table:
Fees (dollars in millions) | 2013 | 2012 | 2014 | 2013 | ||||
Audit Fees | $10.22 | $11.16 | $10.14 | $10.22 | ||||
Audit-Related Fees | $1.49 | $1.36 | $1.22 | $1.49 | ||||
Tax Fees | $0.04 | $0.04 | $0.26 | $0.32 | ||||
All Other Fees | $0.00 | $0.00 | $0.00 | $0.00 |
Audit fees include fees for the audit of our annual financial statements, the review of financial statements included in our quarterly reports on Form 10-Q and services that normally would be provided by the auditor in connection with statutory and regulatory filings or engagements and that generally only the independent auditor can provide. In addition to fees for an audit or review in accordance with generally accepted auditing standards, this category contains fees for comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC. Audit-related fees are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and traditionally are performed by the independent auditor, such as: employee benefit plan audits; due diligence related to mergers and acquisitions; internal control reviews; attestation services that are not required by statute or regulation; and consultation concerning financial accounting and reporting standards. Tax fees include corporate and subsidiary compliance, consulting, international and employee benefit services. All other fees would include fees for services that are not defined as Audit, Audit-related or Tax and are not specifically prohibited by the SEC.
The Audit Committee is responsible for overseeing the amount of Audit fees paid to Ernst & Young. The Audit Committee has reviewed the fees paid to Ernst & Young and has considered whether the fees paid for non-Audit services are compatible with maintaining Ernst & Young’s independence. The Audit Committee also adopted policies and procedures to approve services provided by Ernst & Young in accordance with the Sarbanes-Oxley Act of 2002 and rules of the SEC promulgated thereunder. These policies and procedures involve annual pre-approval by the Audit Committee of the types of services to be provided by Capital One’s independent auditor and fee limits for each type of service on both a per engagement and aggregate level. Additional service engagements that exceed these pre-approved limits must be submitted to the Audit Committee for further pre-approval. Under the policy adopted by the Audit Committee, Tax fees are limited to 25% of combined Audit and Audit-related fees, and services that would fall under the category “All Other Fees” are prohibited. Capital One’s policy, for administrative ease, allows for a $25,000de minimis exception to the pre-approval procedures; however, any services provided pursuant to this exception must be approved at the next meeting of the Audit
Committee. Additionally, Capital One has established policies to provide for adherence to Sarbanes-Oxley Act requirements relating to the rotation of partners engaged in Capital One’s audit by the independent auditors.
Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
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The Board of Directors unanimously recommends that you vote“FOR” the ratification of Ernst & Young LLP as Capital One’s independent auditors for 2014.2015.
SECTION XII – APPROVAL AND ADOPTION OF CAPITAL ONE’S THIRD AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN (ITEM 3 ON PROXY CARD)
Early in 2004 the Board of Directors adopted the Capital One Financial Corporation 2004 Stock Incentive Plan (the “2004 Plan”), which was then approved by stockholders at the Annual Meeting held on April 29, 2004. The 2004 Plan was subsequently resubmitted for approval, and reapproved by stockholders, at the Annual Meetings held on April 27, 2006, and April 23, 2009, in order to increase the number of shares available for issuance under the 2004 Plan and to make certain technical changes.
This year, the Board has adopted, subject to stockholder approval, an amended and restated version of the 2004 Plan (the “Third Amended and Restated 2004 Plan”) in order to increase the number of shares of Capital One common stock (each a “Share,” collectively, the “Shares”) available for issuance under the 2004 Plan by an additional 15 million Shares, extend the term of the 2004 Plan for an additional 10 years, revise the list of performance metrics that may be used under the 2004 Plan, and make certain technical changes.
The current 2004 Plan share reserve of 40 million Shares, which number includes Shares that have already been issued or are subject to outstanding award under the 2004 Plan as described below, is not sufficient to cover all of the awards anticipated to be granted in 2015 and beyond, and thus Capital One needs to increase the reserve of Shares under the 2004 Plan so that it may continue to make equity awards that promote the interests of Capital One and its stockholders by ensuring that Capital One’s executives and employees maintain a strong link to Company performance through their stock ownership. The Compensation Committee and the Board of Directors believe that compensating Capital One executives with equity awards encourages the creation of long-term stockholder value and the delivery of consistent medium- and long-term results. The 2004 Plan provides sound and safe governance and continued alignment with the interests of our stockholders and:
The Board reviewed projected share usage when considering the number of additional shares to add to the 2004 Plan. Depending on scenarios and assumptions, the 15 million Shares proposed to be added to the 2004 Plan, in combination with the remaining authorized Shares and Shares added back to the 2004 Plan from forfeitures of awards granted under the 2004 Plan, is expected to satisfy Capital One’s equity compensation needs for at least four years. The Board is committed to effectively managing the number of Shares available for issuance under the 2004 Plan while minimizing stockholder dilution.
Some stockholders view potential dilution and burn rate as significant calculations when determining whether to support any equity plan proposal. If the Third Amended and Restated 2004 Plan is approved, Capital One’s total potential dilution from the 2004 Plan would increase, from 4.4% to 7.0%, based on our common stock outstanding as of December 31, 2013. Capital One manages its long-term dilution goal by limiting the number of shares subject to equity awards that it grants annually, commonly referred to as burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation plans, and is defined as the number of shares subject to awards granted under Capital One’s equity incentive plans, including the target number of outstanding performance shares, divided by total common shares outstanding at the end of the year. Over the past three fiscal years, Capital One’s annual burn rate has averaged 1.09%. The Board believes that this burn rate has been within the range granted by its peer companies and is reasonable from a competitive standpoint.
Outstanding Equity Awards. As of December 31, 2013, there were 8,589,692 Shares available for grant under the 2004 Plan, which is the only plan from which Capital One currently grants equity awards. For purposes of this calculation, performance shares are considered at their target amount. Also as of December 31, 2013, Capital One had the following outstanding equity awards:
The closing price of our common stock on December 31, 2013 was $76.61.
Summary of Material Provisions of the Third Amended and Restated 2004 Stock Incentive Plan
The material terms of the Third Amended and Restated 2004 Plan are summarized below and are qualified in their entirety by reference to the full text of the Third Amended and Restated 2004 Plan, which is provided as Appendix A to this proxy statement. Because this is a summary, it may not contain all the information that you may consider important, and thus, we encourage you to read the full text of the Third Amended and Restated 2004 Plan. Copies of the Third Amended and Restated 2004 Plan will also be available at your request at the Annual Meeting.
Types of Awards
Awards under the Third Amended and Restated 2004 Plan may be in the form of: (i) cash-based awards; (ii) options, which may be incentive stock options, as defined in the Internal Revenue Code of 1986, as amended (the “Code”) (“ISOs”) (which are tax advantageous for the participant but with respect to which Capital One does not receive a deduction) or non-qualified stock options (“NQSOs”); (iii) stock appreciation rights (“SARs”); (iv) restricted stock; (v) restricted stock units (“RSUs”); (vi) performance shares; (vii) performance units; (viii) annual incentive pool awards; or (ix) other stock-based awards (“Other Stock-Based Awards”) (collectively, “Awards”).
Duration of the Third Amended and Restated 2004 Plan
The Third Amended and Restated 2004 Plan will become effective May 1, 2014 if it is approved by our stockholders. Unless terminated sooner as provided therein, the Third Amended and Restated 2004 Plan will terminate May 1, 2024, which is ten (10) years from its effective date. After the Third Amended and Restated 2004 Plan is terminated, no new Awards may be granted but Awards previously granted will remain outstanding in accordance with the terms and conditions of the Third Amended and Restated 2004 Plan and as specified under the applicable grant agreement.
Shares Available for Awards
The total number of Shares available for issuance under the Third Amended and Restated 2004 Plan, subject to adjustment in accordance with certain anti-dilution provisions described below, will not exceed an aggregate amount of 55 million Shares, which number includes Shares that have already been issued or are subject to outstanding awards under the 2004 Plan, described above, as well as the proposed 15 million additional Shares. Management anticipates that 55 million Shares will be sufficient for new equity Awards to Capital One’s employees, directors and third party service providers, if any, for at least the next four years.
Shares covered by an Award will only be counted as used under the authorized Share and Award limits set forth in the Third Amended and Restated 2004 Plan to the extent they are actually issued and delivered to a participant or such participant’s designated transferee and are not forfeited by the participant and returned to Capital One. Any Shares that are related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of Shares, which are forfeited by the participant to Capital One (including pursuant to performance-based vesting conditions), which are settled in cash in lieu of Shares, or which (subject to the 2004 Plan’s prohibition on repricing, cashing out or exchanging out-of-the-money stock options or stock appreciation rights) are exchanged with the Compensation Committee’s permission prior to the issuance of Shares for Awards not involving the issuance or delivery of Shares, will be available again for grant under the Third Amended and Restated 2004 Plan. Except to the extent otherwise required by applicable law or stock exchange rules, if (i) the exercise price of any option granted under the Third Amended and Restated 2004 Plan is satisfied by tendering Shares to Capital One (by either actual delivery or by attestation), or (ii) an SAR is exercised, then only the number of Shares issued, net of the Shares so tendered or withheld, if any, will be deemed issued and delivered
for purposes of determining the maximum number of Shares available for issuance under the Third Amended and Restated 2004 Plan and the maximum number of Shares available for issuance as ISOs and NQSOs. Except to the extent otherwise required by applicable law or stock exchange rules, the maximum number of Shares available for issuance under the Third Amended and Restated 2004 Plan will not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional restricted stock, RSUs, performance shares, or Other Stock-Based Awards. The Shares available for issuance under the Third Amended and Restated 2004 Plan may be authorized and unissued Shares or treasury Shares.
Annual Award Limits
The maximum aggregate number of Shares with respect to which options may be granted in any one plan year to any one participant will be 2,500,000, plus the number of Shares under such annual award limit with respect to which options were not granted determined as of the close of the previous plan year. The maximum aggregate number of Shares with respect to which SARs may be granted in any one plan year to any one participant will be 2,500,000 plus the number of Shares under such annual award limit with respect to which SARs were not granted determined as of the close of the previous plan year. The maximum aggregate number of Shares that may be granted as restricted stock or with respect to which RSUs may be granted in any one plan year to any one participant will be 2,000,000 plus the number of Shares under such annual award limit with respect to which restricted stock and RSUs were not granted determined as of the close of the previous plan year. The maximum aggregate amount that any one participant may be granted in any one plan year with respect to performance units or performance shares will be 2,500,000 Shares or an amount equal to the value of 2,500,000 Shares, as applicable, plus the number of Shares under such annual award limit with respect to which performance units and performance shares were not granted determined as of the close of the previous plan year. The maximum aggregate amount that any one participant may be granted in any one plan year with respect to cash-based Awards not denominated in Shares may not exceed $30,000,000 or, with respect to cash-based Awards denominated in Shares, an amount equal to the value of 2,000,000 Shares plus the amount under such annual award limit with respect to which cash-based Awards were not granted determined as of the close of the previous plan year. The maximum aggregate number of Shares with respect to which Other Stock-Based Awards may be granted in any one plan year to any one participant will be 2,000,000 plus the number of Shares under such annual award limit with respect to which Other-Stock Based Awards were not granted determined as of the close of the previous plan year. The award limits for Annual Incentive Pool Awards are discussed below.
Adjustments in Authorized Shares
In the event of any corporate event or transaction (including, but not limited to, a change in the Shares or the capitalization of Capital One), such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of Capital One, combination of Shares, exchange of Shares, dividend in kind, extraordinary cash dividend or other like change in capital structure or distribution to stockholders of Capital One, or any similar corporate event or transaction, the Compensation Committee, in order to prevent dilution or enlargement of participants’ rights under the Third Amended and Restated 2004 Plan, will substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Third Amended and Restated 2004 Plan or under certain Awards, the number and kind of Shares subject to outstanding Awards, the exercise or grant price applicable to outstanding Awards, the annual award limits described above and other value determinations applicable to outstanding Awards. The Compensation Committee will also make appropriate adjustments or modifications in the terms of any Awards to reflect such corporate events or transactions, including the modification of performance goals and performance periods. Subject to applicable law, the Compensation Committee is also authorized to issue new Awards or assume awards granted under plans of other entities in connection with any merger, consolidation, acquisition of property or stock or reorganization upon such terms and conditions it deems appropriate.
Administration
The Third Amended and Restated 2004 Plan will be administered by the Compensation Committee. The Compensation Committee will have full and exclusive discretionary power to do all things that it determines to be necessary or appropriate in connection with the administration of the Third Amended and Restated 2004 Plan,
including, without limitation: (a) to prescribe, amend and rescind rules and regulations relating to the Third Amended and Restated 2004 Plan and to define terms not otherwise defined therein; (b) to determine which persons are eligible for Awards granted thereunder and the timing of any such Awards; (c) to prescribe and amend the terms of the Award agreements, to grant Awards and determine the terms and conditions thereof; (d) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, retention, vesting, exercisability, settlement or recoupment of any Award; (e) to prescribe and amend the terms of or form of any document or notice required to be delivered to Capital One by participants under the Third Amended and Restated 2004 Plan; (f) to determine the extent to which adjustments are required pursuant to the terms of the Third Amended and Restated 2004 Plan; (g) to interpret and construe the Third Amended and Restated 2004 Plan, any rules and regulations thereunder and the terms and conditions of any Award granted thereunder, and to make exceptions to any such provisions if the Compensation Committee, in good faith, determines that it is appropriate to do so; (h) to approve corrections in the documentation or administration of any Award; and (i) to make all other determinations deemed necessary or advisable for the administration of the Third Amended and Restated 2004 Plan.
The Compensation Committee may delegate to one or more of its members or other members of the Board of Directors or to one or more officers or management committees of Capital One (including its subsidiaries and affiliates) or to one or more agents or advisors such duties or powers as it may deem advisable, and the Compensation Committee or any person to whom it has delegated duties or powers as aforesaid may employ one or more persons to render advice with respect to any responsibility the Compensation Committee or such person may have under the Third Amended and Restated 2004 Plan. In addition, the Compensation Committee may, by resolution, authorize one or more officers or management committees of Capital One to do one or more of the following on the same basis as can the Compensation Committee: (a) designate employees to be recipients of Awards; and (b) determine the type, number of Shares subject thereto and all other terms and conditions of any such Awards; provided, however, (i) the Compensation Committee may not delegate such responsibilities to any such officer or management committee for Awards granted to a director, an employee that is considered an Insider (as defined in the Third Amended and Restated 2004 Plan) or an employee that is considered a Covered Employee or who, in the sole determination of the Compensation Committee, may become a Covered Employee (as defined below); (ii) the resolution providing such authorization sets forth the total number of Shares that may be subject to Awards such officer(s) or management committee(s) may grant and any other limitations on the delegated authority that the Compensation Committee may deem appropriate or advisable; and (iii) the officer(s) or management committee(s) must report periodically to the Compensation Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated in the manner and at such times as requested by the Compensation Committee.
To the fullest extent permitted by applicable law and subject to Capital One’s Restated Certificate of Incorporation and Restated Bylaws, neither Capital One nor any member of the Compensation Committee will be liable for any action, omission or determination of the Compensation Committee relating to the Third Amended and Restated 2004 Plan or any Award, and Capital One will indemnify and hold harmless each member of the Compensation Committee and each other person to whom any duty or power relating to the administration or interpretation of the Third Amended and Restated 2004 Plan or any Award has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Compensation Committee) arising out of any such action, omission or determination relating to the Third Amended and Restated 2004 Plan or any Award.
The Compensation Committee may enter into agreements with third parties, on such terms and conditions as it determines, pursuant to which such third parties may issue Awards to the participants in lieu of Capital One’s issuance thereof or assume the obligations of Capital One under any Awards previously issued by Capital One.
Eligibility
All employees of Capital One, its affiliates and its subsidiaries and members of the Board are eligible to be granted Awards under the Third Amended and Restated 2004 Plan. Certain individual consultants, agents, advisors and independent contractors who render services to Capital One (“Third Party Service Providers”) are also eligible to participate in the Third Amended and Restated 2004 Plan. As stated above, participants will be
selected by the Compensation Committee, in its sole discretion, from among those eligible. The approximate number of employees and non-management directors eligible to be granted Awards under the Third Amended and Restated 2004 Plan as of December 31, 2013 were 41,951 and 9, respectively.
In lieu of making Awards directly to employees, directors or Third Party Service Providers, the Compensation Committee may make Awards under the Third Amended and Restated 2004 Plan through or to a trust or other funding vehicle which then makes Awards to participants or which issues interests in Awards held by it to participants, on such terms and conditions as determined by the Compensation Committee.
General Terms and Conditions of Awards
In general, and subject to the terms and provisions of the Third Amended and Restated 2004 Plan (including those described below), Awards may be granted to participants on such dates, in such form and number and upon such terms and conditions (including the effect, if any, of a Change of Control, death, Disability or Retirement (as each such term is defined in the Third Amended and Restated 2004 Plan)) as determined from time to time by the Compensation Committee. Each Award granted will be evidenced by an Award agreement that will specify such terms and conditions. In addition, each participant’s Award agreement will set forth the extent to which the participant will have the right to exercise, retain or receive an Award or to have such Award vest or pay out, as applicable, following the termination of such participant’s employment with, or provision of services to, Capital One, its affiliates or subsidiaries, as the case may be.
Except as otherwise provided in the Third Amended and Restated 2004 Plan, in a participant’s Award agreement or as otherwise determined at any time by the Compensation Committee, no Award granted under the Third Amended and Restated 2004 Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
The Compensation Committee may specify in an Award agreement that the participant’s rights, payments and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions. Failure by a participant to comply with any of the terms and conditions of the Third Amended and Restated 2004 Plan or any Award agreement will be grounds for the cancellation and forfeiture of such Award.
Options. The Compensation Committee may grant to a participant the right to purchase Shares in such amounts and upon such terms as the Compensation Committee determines (including in satisfaction of Capital One’s obligations pursuant to options with reload features granted under the prior stock incentive plans), subject to the following restrictions. An option may be granted as an ISO or as a non-qualified stock option, as determined by the Compensation Committee and as set forth in any applicable Award agreement. The exercise price per Share will be determined by the Compensation Committee and may be at, above or indexed to, the fair market value of a Share on the date of grant; provided that, in no event will the exercise price per Share be less than 100% of the fair market value of a Share on the date of grant. Options granted under the Third Amended and Restated 2004 Plan will vest and become exercisable at such time and upon such terms and conditions as may be determined by the Compensation Committee; provided that no option will be exercisable later than the tenth (10th) anniversary of its date of grant. Notwithstanding the foregoing, options granted to participants outside of the United States may have a term of greater than ten (10) years.
The purchase price for the Shares as to which an option is exercised will be paid to Capital One in full at the time of exercise (i) in cash or its equivalent; (ii) in Shares having a fair market value equal to the aggregate exercise price for the Shares being purchased and satisfying such other requirements as may be imposed by the Compensation Committee; (iii) partly in cash and partly in such Shares; (iv) by a cashless (broker-assisted) exercise; or (v) by any other method approved or accepted by the Compensation Committee.
The Compensation Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an option granted under the Third Amended and Restated 2004 Plan as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
The Compensation Committee is not permitted to grant options containing, or amend options previously granted to include, reload features providing for the automatic grant of options with respect to the number of already owned Shares delivered by the participant to exercise options.
SARs. The Compensation Committee may grant to a participant an SAR independent of an option or in tandem with an option or designated portion thereof at the time the related option is granted or at any time prior to the exercise or cancellation of the related option. The grant price of an SAR that is either granted independently of any options or the exercise of which does not require the forfeiture of any rights under a related option (a “Freestanding SAR”) will be determined by the Compensation Committee; provided that, in no event will the grant price per Share be less than 100% of the fair market value of a Share on the date of grant. The grant price of an SAR that is granted in connection with a related option and the exercise of which requires the forfeiture of the right to purchase Shares under the related option (a “Tandem SAR”) will be equal to the exercise price of the related option.
The term of an SAR granted under the Third Amended and Restated 2004 Plan will be determined by the Compensation Committee; provided that no SAR will be exercisable later than the tenth (10th) anniversary of the date of its grant. Notwithstanding the foregoing, SARs granted to participants outside of the United States may have a term of greater than ten (10) years.
Freestanding SARs may be exercised upon the terms and conditions as imposed by the Compensation Committee and Tandem SARs may only be exercised with respect to all or part of the Shares subject to the related option upon the surrender of the right to exercise the equivalent portion of the related option.
Upon the exercise of an SAR, the participant will be entitled to receive, with respect to each Share to which such SAR relates, an amount in cash and/or Shares, as the case may be, equal to the excess of (i) the fair market value of a Share on the date of exercise over (ii) the grant price of the SAR. The Compensation Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an SAR granted under the Third Amended and Restated 2004 Plan as it may deem advisable, including, without limitation, a requirement that the participant hold the Shares received upon exercise of an SAR for a specified period of time.
Restricted Stock and Restricted Stock Units. The Compensation Committee may grant to a participant Shares of restricted stock and/or RSUs. RSUs are similar to Shares of restricted stock except that no Shares are actually awarded to the participant on the date of grant. The Shares of restricted stock and/or the RSUs granted to a participant under the Third Amended and Restated 2004 Plan will not be transferable until the end of the applicable period of restriction established by the Compensation Committee (and in the case of RSUs until the date of delivery of Shares or other payment), or upon earlier satisfaction of any other conditions as specified by the Compensation Committee. The Compensation Committee will impose such other conditions and/or restrictions on any Shares of restricted stock or RSUs as it may deem advisable, including a requirement that the participant pay a stipulated purchase price for each Share of restricted stock or each RSU, restrictions based upon achievement of performance goals, service-based restrictions and/or restrictions under applicable laws or under the requirements of any stock exchange or securities market upon which such Shares are listed or traded. For the avoidance of doubt, imposing restrictions based upon the achievement of performance goals will not result in shares of restricted stock or RSUs being converted to performance shares or performance units for purposes of the 2004 Plan, including for purposes of the annual award limits described above.
Generally, Shares of restricted stock will become freely transferable by the participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of applicable tax withholding obligations) and RSUs will be settled in cash, Shares or a combination of cash and Shares, as the Compensation Committee determines.
To the extent permitted by law, unless otherwise determined by the Compensation Committee and set forth in an Award agreement, participants holding Shares of restricted stock will be granted the right to exercise full voting rights and to receive all dividends and other distributions paid with respect to those Shares during the period of restriction, while recipients of RSUs will not be granted such rights, dividends or distributions during the period of restriction, except as specifically determined by the Compensation Committee and as permitted by law.
Performance Units and Performance Shares. The Compensation Committee may grant performance units and/or performance shares to participants under the Third Amended and Restated 2004 Plan in such amounts and upon such terms as the Compensation Committee determines. Each performance unit will have an initial value that is established by the Compensation Committee at the time of grant and each performance share will have an initial value equal to the fair market value of a Share on the date of grant. In addition to any non-performance terms set forth by the Compensation Committee, the Compensation Committee will set performance goals which, depending on the extent to which they are met, will determine the value and/or number of performance units or performance shares to be paid out to participants. Participants will be entitled to payment, in the form of cash and/or Shares, equal to the value and number of applicable performance units and performance shares earned by participants over the designated performance period following the end of such performance period.
Cash-Based Awards and Other Stock-Based Awards. The Compensation Committee may grant cash-based Awards and Other Stock-Based Awards to participants, in such amounts and upon such terms and conditions as the Compensation Committee may determine. Other Stock-Based Awards may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions outside of the United States.
Each cash-based Award will specify a payment amount or payment range and each Other Stock-Based Award will be expressed in terms of Shares or units based on Shares, each as determined by the Compensation Committee. The Compensation Committee may also establish any performance goals with respect to cash-based Awards or Other Stock-Based Awards, in which case the number and/or value of cash-based Awards or Other Stock-Based Awards that will be paid out to the participant will depend on the extent to which the performance goals (and any other non-performance terms and conditions) are met. Payment with respect to a cash-based Award or Other Stock-Based Award will be made in accordance with the terms of the Award, in cash and/or Shares as determined by the Compensation Committee.
Performance-Based Compensation. The Compensation Committee may grant Awards to participants who at the time of such grant are deemed “covered employees” (as defined in Code Section 162(m) and the regulations thereunder) (“Covered Employees”), that are intended to qualify under the requirements of Code Section 162(m) for deductibility of remuneration paid to Covered Employees. The performance goals upon which the grant, payment or vesting of an Award to a Covered Employee (other than an Annual Incentive Pool Award awarded or credited as described below) that is intended to qualify as performance-based compensation under Section 162(m) will be limited to goals set by reference to the following performance measures, either individually, alternatively, or in any combination, applied to either Capital One as a whole or to a business unit or subsidiary or affiliate or any combination thereof, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Compensation Committee: net earnings or net income (before or after taxes); earnings per share; net sales growth; net operating profit; return measures (including, but not limited to return on assets, capital, equity or sales); cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); cash flow per share; earnings before or after taxes, interest, depreciation and/or amortization; gross or operating margins; productivity ratios; share price (including, but not limited to, growth measures and total stockholder return); expense targets or ratios; charge-off levels; revenue growth; deposit growth; margins; operating efficiency; operating expenses; economic value added; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; debt reduction; capital targets; and consummation of acquisitions, dispositions, projects or other specific events or transactions.
The Compensation Committee has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the performance measures set forth by the Compensation Committee with respect to such Award. The Compensation Committee also has the authority to use any other performance measures in connection with Awards under the Third Amended and Restated 2004 Plan that are not intended to qualify as performance-based compensation under Code Section 162(m) (or any successor thereto).
The Compensation Committee will determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given participant and, if they have, to so certify and ascertain the amount of the applicable Award. The Compensation Committee may provide in any such Award that any
evaluation of performance may include or exclude any of the following events that occurs during a performance period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles or regulations, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary, unusual, and/or nonrecurring items of gain or loss as defined under United States generally accepted accounting principles for the applicable year, (f) mergers, acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they may be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
In the event that the requirements of Section 162(m) and the regulations thereunder change to permit Compensation Committee discretion to alter the governing performance measures without obtaining stockholder approval of such changes, the Compensation Committee will have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Compensation Committee determines that it is advisable to grant Awards that do not qualify as performance-based compensation and/or to amend previously granted Awards in a way that would disqualify them as performance-based compensation, the Compensation Committee may make such grants without satisfying the requirements of Code Section 162(m) and may base vesting on performance measures other than those set forth in the Third Amended and Restated 2004 Plan and/or make such amendments.
Annual Incentive Pool Awards. The Compensation Committee may designate employees, including but not limited to Covered Employees, who are eligible to receive a monetary payment in any plan year based upon a percentage of an incentive pool equal to the greater of (i) 3% of Capital One’s Consolidated Operating Earnings for the plan year, (ii) 20% of Capital One’s Operating Cash Flow for the plan year, and (iii) 5% of Capital One’s Net Income for the plan year (as each such term is defined in the Third Amended and Restated 2004 Plan). The Compensation Committee will allocate an incentive pool percentage to each participating employee for each plan year; provided that the incentive pool percentage for any one participant may not exceed 50% of the total pool, the sum of the incentive pool percentages for all participants cannot exceed 100% of the total pool and the monetary payment for any one participant may not exceed $10,000,000. As soon as possible following the determination of the incentive pool for a plan year, the Compensation Committee will calculate each participant’s portion of the incentive pool based upon the percentage established at the beginning of the plan year. The Compensation Committee has the discretion to adjust all such Awards downwards, but in no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way.
Dividend Equivalents. The Compensation Committee may grant dividend equivalents to any participant based on the dividends declared on Shares that are subject to any Award. Such dividend equivalents may be awarded or paid in the form of cash, Shares, restricted stock, RSUs or a combination thereof and will be determined by such formula and at such time and be subject to such accrual, forfeiture or payout restrictions or limitations as determined by the Compensation Committee in its discretion.
Deferrals. The Compensation Committee may permit or require (including for purposes of allowing deductibility under Code Section 162(m)) a participant to defer his or her receipt of the payment of cash or the delivery of Shares that would otherwise be due to such participant by virtue of the lapse or waiver of restrictions with respect to Shares of restricted stock or RSUs, or the satisfaction of any requirements or performance goals with respect to performance shares, performance units, cash-based Awards, Other Stock-Based Awards and annual incentive pool Awards. If any such deferral is required or permitted, the Compensation Committee will establish rules and procedures for such payment or Share delivery and any notional earnings to be credited on such deferred amounts, provided that in the case of any Award intended to qualify as performance-based compensation such earnings will be in compliance with Code Section 162(m).
Amendment, Modification, Suspension and Termination; No Repricings. The Compensation Committee may, at any time, alter, amend, modify, suspend or terminate the Third Amended and Restated 2004 Plan and any Award agreement in whole or in part; provided, however, that no amendment of the Third Amended and Restated 2004 Plan or an Award will be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule. Furthermore, other than in connection with a change in Capital One’s capitalization, the Compensation Committee will not, without stockholder approval, reduce the exercise price or
grant price of a previously awarded option or SAR and, at any time when the exercise price or grant price of the previously awarded option or SAR is above the fair market value of a Share, the Compensation Committee will not, without stockholder approval, cancel and re-grant or exchange such option or SAR for cash or a new Award with a lower (or no) exercise price or grant price or take any other action that would be considered a repricing for purposes of US generally accepted accounting principles or any applicable stock exchange rule.
No termination, amendment, suspension or modification of the Third Amended and Restated 2004 Plan or an Award agreement will materially adversely affect any Award previously granted under the Third Amended and Restated 2004 Plan without the written consent of the participant holding such Award. The Compensation Committee may, however, terminate any Award previously granted and any Award agreement relating thereto in whole or in part upon payment of certain consideration (as set forth in the Third Amended and Restated 2004 Plan) or, in the case of options only, thirty (30) days after an acceleration of exercisability.
The Compensation Committee may authorize the repurchase of any Award by Capital One at any time for such price and on such terms and conditions as the Compensation Committee may determine, provided that without the prior approval of Capital One’s stockholders, the Compensation Committee may not permit the repurchase by Capital One of options or SARs with an exercise price or grant price, respectively, above the fair market value of the Shares at the time of such repurchase. The Compensation Committee may make adjustments in the terms and conditions of, and the performance criteria included in, Awards in recognition of unusual or nonrecurring events affecting Capital One or the financial statements of Capital One or of changes in applicable laws, regulations or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits to be made available under the Third Amended and Restated 2004 Plan.
Successors. All obligations of Capital One under the Third Amended and Restated 2004 Plan with respect to Awards granted thereunder will be binding on any successor to Capital One, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of Capital One.
Tax Withholding. Capital One may deduct or withhold, or require the participant to remit to Capital One, any taxes due as a result of or in connection with the Third Amended and Restated 2004 Plan or any Award. Participants may elect, or the Compensation Committee may require, the withholding of Shares to satisfy the participant’s withholding obligations.
Participants Based Outside of the United States. In order to comply with the laws in other jurisdictions in which Capital One, its affiliates or its subsidiaries operate or have employees, directors or Third Party Service Providers, the Compensation Committee will have the power to (i) determine which affiliates and subsidiaries will be covered by the Third Amended and Restated 2004 Plan, (ii) determine which employees, directors and Third Party Service Providers outside of the United States are eligible to participate in the Third Amended and Restated 2004 Plan, (iii) modify the terms and conditions of any Award granted to participants outside of the United States to comply with foreign laws, (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable and (v) take any action that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approval.
New Plan Benefits. Because benefits under the Third Amended and Restated 2004 Plan will depend on the Compensation Committee’s actions and the fair market value of the Shares at various future dates, it is not possible to determine the benefits that will be received by directors, executive officers and other employees if the Third Amended and Restated 2004 Plan is approved by stockholders. As of December 31, 2013, the closing price of our common stock was $76.61 per share.
Aggregate Past Grants under the 2004 Plan. The table below shows, as to each named executive officer and the various indicated groups, the number of Shares of Capital One common stock subject to equity awards made under the 2004 Plan since inception through December 31, 2013.
Name | Number of Options Granted (#) | Number of Shares of Restricted Stock and RSUs Granted (#) | Number of Performance Shares Granted at Target (#) | |||
Richard D. Fairbank | 6,219,747 | 241,680 | 613,630 | |||
Stephen S. Crawford | 0 | 174,000 | 0 | |||
Gary L. Perlin | 1,065,574 | 519,618 | 78,974 | |||
Ryan M. Schneider | 462,061 | 289,862 | 53,259 | |||
John G. Finneran, Jr. | 710,043 | 383,030 | 57,866 | |||
Jonathan W. Witter | 70,391 | 218,186 | 23,837 | |||
Other current executive officers as a group (6 persons) | 2,400,259 | 1,556,413 | 243,344 | |||
Current non-management directors as a group (9 persons) | 215,915 | 153,377 | 0 | |||
All employees, excluding current executive officers | 7,929,607 | 13,264,402 | 234,435 |
Material Tax and Other Considerations Relating to the Third Amended and Restated 2004 Plan
Section 162(m) of the Code. The Board of Directors believes that it is in the best interests of Capital One and its stockholders to continue to provide for an equity incentive plan under which equity-based compensation awards made to Capital One’s executive officers can qualify for deductibility by Capital One for federal income tax purposes. Accordingly, the Third Amended and Restated 2004 Plan (and the 2004 Plan and all amendments and restatements to date) has been structured in a manner such that awards under it may satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m) (“Section 162(m)”) of the Code; however, there can be no guarantee that amounts payable under the Third Amended and Restated 2004 Plan will be treated as qualified “performance-based compensation” under Code Section 162(m). In general, under Section 162(m), in order for Capital One to be able to deduct compensation in excess of $1 million paid in any one year to Capital One’s chief executive officer or any of Capital One’s three other most highly compensated executive officers (other than the chief financial officer), such compensation must qualify as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by Capital One’s stockholders at least once every five years. For purposes of Section 162(m), the material terms of the Third Amended and Restated 2004 Plan include (i) the employees eligible to receive compensation, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goals. With respect to Awards under the Third Amended and Restated 2004 Plan, each of these aspects is discussed above, and stockholder approval of the Third Amended and Restated 2004 Plan will constitute approval of each of these aspects of the Third Amended and Restated 2004 Plan for purposes of the approval requirements of Section 162(m). The material terms of the performance goals under which compensation may be paid were most recently approved by Capital One’s stockholders at its 2009 Annual Meeting.
Federal Income Tax Consequences. The following is a summary description of the federal income tax consequences generally arising with respect to Awards granted pursuant to the Third Amended and Restated 2004 Plan. The discussion is intended solely for general information and does not make specific representations to any Award recipient. A recipient’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the federal income tax laws and regulations frequently have been revised and may be changed again at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the Third Amended and Restated 2004 Plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences.
The grant of an option or SAR will create no tax consequences for the participant or Capital One. A participant will not generally recognize taxable income upon exercising an ISO (except that the alternative minimum tax may apply). Upon exercising an option other than an ISO, the participant must generally recognize ordinary income equal to the excess of the fair market value of the freely transferable and nonforfeitable Shares acquired on the date of exercise over the exercise price. Upon exercise of an SAR, the participant must generally recognize ordinary income equal to the cash or the fair market value of the freely transferable and nonforfeitable Shares received.
Upon a disposition of Shares acquired upon exercise of an ISO before the end of the applicable ISO holding periods, the participant must generally recognize ordinary income equal to the lesser of (i) the fair market value of the Shares at the date of exercise of the ISO minus the exercise price, or (ii) the amount realized upon the disposition of the ISO Shares minus the exercise price. Otherwise, a participant’s disposition of Shares acquired upon the exercise of an option (including an ISO for which the ISO holding periods are met) generally will result in capital gain or loss measured by the excess of the sale price over the participant’s tax basis in such Shares (the tax basis generally being the exercise price plus any amount previously recognized as ordinary income in connection with the exercise of the option).
Capital One generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an option or SAR. Capital One generally is not entitled to a tax deduction relating to amounts that represent a capital gain to a participant. Accordingly, Capital One will not be entitled to any tax deduction with respect to an ISO if the participant holds the Shares in satisfaction of the ISO holding periods prior to disposition of the Shares.
With respect to Awards other than options and SARs involving the issuance of Shares or other property that is restricted as to transferability and subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the fair market value of the Shares or other property received at the first time the Shares or other property become transferable or no longer subject to a substantial risk of forfeiture, whichever occurs earlier. Under the Third Amended and Restated 2004 Plan, a participant may be permitted or required to elect to be taxed at the time of receipt of Shares or other property rather than upon lapse of restrictions on transferability or substantial risk of forfeiture, but if the participant subsequently forfeits such Shares or property, the participant would not be entitled to any tax deduction, including as a capital loss, for the value of the Shares or property on which he or she previously paid tax. In such case, the participant must file any such election with the Internal Revenue Service within thirty (30) days of the receipt of the Shares or other property. Capital One generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant.
With respect to Awards other than options and SARs granted under the Third Amended and Restated 2004 Plan that result in the payment or issuance of cash or Shares or other property that is either not restricted as to transferability or not subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the cash or the fair market value of Shares or other property received. Any deferral of the time of payment or issuance will generally result in the deferral of the time the participant will be liable for income taxes with respect to such payment or issuance. Capital One generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant.
Code Section 162(m) limits the ability of publicly held companies to deduct compensation paid during a fiscal year to any one employee in excess of one million dollars, unless such compensation qualifies as “performance-based compensation” (as defined in Code Section 162(m)) or meets another exception specified in Code Section 162(m). Generally, Awards granted under the Third Amended and Restated 2004 Plan may be designed to be deductible by Capital One, without regard to the limit set by Code Section 162(m). However, the rules and regulations promulgated under Section 162(m) of the Code are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the Third Amended and Restated 2004 Plan will be deductible under all circumstances. The Third Amended and Restated 2004 Plan does permit Awards to be granted that would be subject to such limit and that would not qualify as “performance-based compensation” or meet another exception in Code Section 162(m). In such case,
Capital One’s deductions with respect to such Awards would be subject to the limitations imposed by Code Section 162(m).
Awards that are granted, accelerated or enhanced upon the occurrence of a change of control may give rise, in whole or in part, to “excess parachute payments” within the meaning of Code Section 280G and, to such extent, will be non-deductible by Capital One and subject to a 20% excise tax by the participant.
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The Board of Directors recommends that you vote “FOR” the proposal to approve and adopt the Capital One Financial Corporation Third Amended and Restated 2004 Stock Incentive Plan.
SECTION XIII – ADVISORY APPROVAL OF CAPITAL ONE’S 20132014 NAMED EXECUTIVE OFFICER COMPENSATION
(ITEM 43 ON PROXY CARD)
We are offering to our stockholders a non-binding advisory vote on our 20132014 Named Executive Officer compensation, including the compensation of our Chief Executive Officer, pursuant to Section 14A of the Securities and Exchange Act of 1934. While the vote is non-binding, the Board of Directors values the opinions that stockholders express through their votes and in any additional dialogue. The Board of Directors will consider the outcome of the vote when making future compensation decisions.
As discussed in the “Compensation Discussion and Analysis” section beginning on page 31, our Board of Directors generally has provided compensation programs for the CEO and the NEOs that are competitive with the market, performance-based and transparent and that align with our stockholders’ interests over multiple time horizons. Our CEO and NEO compensation programs generally have consisted primarily of performance-based incentive opportunities, including multiple types of equity instruments with multi-year vesting schedules. The ultimate value of the equity-based awards made to our CEO and the NEOs is subject to Capital One’s sustained performance over time, both on an absolute basis and relative to our peers.
For 2013,2014, approximately 85%78% of the CEO’s total compensation is equity-based and at-risk to the performance of the Company’s stock price, with alland 100% of his compensation is deferred for a three-year period. As discussed under “NEO Compensation” beginning on page 40,34, under the 20132014 NEO compensation program approximately 80% of total target compensation was provided through equity-based vehicles which were all at-risk based on the performance of the Company’s stock price and subject to vesting over multiple time horizons.
Additional information relevant to your vote can be found in the “Compensation Discussion and Analysis” section of this proxy statement on pages 31 to 51 and in the “Named Executive Officer Compensation” section on pages 52 to 70.
We ask for your advisory vote on the following resolution:
“Resolved, that Capital One’s stockholders hereby provide their advisory approval of the 20132014 Named Executive Officer compensation as disclosed pursuant to the rules of the SEC in the Compensation Discussion and Analysis, the Summary Compensation Table, the other compensation tables and the related notes and narratives in this proxy statement.”
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The Board of Directors unanimously recommends that you vote“FOR” advisory approval of our 20132014 Named Executive Officer compensation as disclosed in this proxy statement.
The Board of Directors has resolved to hold annual advisory votes on executive compensation. Accordingly, the next advisory vote on executive compensation will occur at the 20152016 Annual Meeting, unless the Board of Directors modifies its policy on the frequency of holding such advisory votes.
SECTION XIVXIII – APPROVAL OF AMENDMENTSAMENDMENT TO CAPITAL ONE’S RESTATED CERTIFICATE OF INCORPORATION TO REMOVE SUPERMAJORITY VOTING STANDARDS APPLICABLEALLOW STOCKHOLDERS TO CERTAIN ACTIONS (ITEM 5REQUEST SPECIAL MEETINGS OF THE STOCKHOLDERS
(ITEM 4 ON PROXY CARD)
Overview
The Board of Directors recommends that Capital One’s stockholders approve amendmentsan amendment to Capital One’s Restated Certificate of Incorporation (the “Certificate”) to removeallow one or more stockholders who own at least 25% of the supermajority voting requirements currently inCompany’s common stock and who satisfy certain procedures to require that the Company call a special meeting of the stockholders (the “Proposed Certificate Amendment”). Stockholders do not presently have the ability to require that the Company call a special meeting of the stockholders.
The Proposed Certificate Amendment
If the Proposed Certificate Amendment is approved by stockholders, the Certificate and replace them with majority voting standards, as described below. Capital One proposed these same amendments for stockholder approval at our 2013 Annual Stockholder Meeting. In connection withwill provide that meeting, we actively solicited stockholdersthe Company is required to vote for these amendments, including engaging directly with some of our largest stockholders. While stockholders owning almost eighty percent of our stock voted in favor of these amendments last year, the level of support was not sufficient to approve the amendments. Because the Board of Directors continues to believe that these amendments are appropriate, we are again asking stockholders to vote “For” these proposed amendments.
These amendments are set forth in Item 5(a), Item 5(b) and Item 5(c) below (together, the “Proposed Amendments”). In lightcall a special meeting of the differing naturestockholders upon the written request of the provisions affected, this matter is presented as three Items. The vote required to approve each of the Proposed Amendments is discussed below. Approval of any one of these Items is not conditioned upon approval of the other Items.
As discussed inor more detail below, our Certificate currently contains the following supermajority voting provisions:stockholders who:
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provide the information regarding the stockholder(s) requesting the special meeting and the proposed special meeting, and satisfy such additional procedures, as provided for in the Bylaws from time to time. As discussed further below, the Proposed Certificate Amendment utilizes a “net long” definition of stock ownership for purposes of determining whether stockholders requesting a special meeting satisfy the 25% ownership threshold. Under the “net long” definition, a person will be deemed to “own” only those shares of outstanding Voting Stock as to which the person possesses both (i) full voting and investment rights pertaining to the |
References in this discussion to votes of the outstanding shares and to(ii) the “Voting Stock” meanfull economic interest in (including the Company’s outstandingopportunity for profit and risk of loss on) such shares, of capital stock entitled to vote generallywhich terms may be further defined in the electionBylaws from time to time.
The Board of directors. Currently, Capital One common stock isDirectors unanimously recommends that you vote “FOR” the only class or series of Voting Stock outstanding. The Proposed Amendments do not affect the voting rights of the Company’s preferred stock.Certificate Amendment.
Purpose and Effect of the Proposed AmendmentsCertificate Amendment
The Proposed Amendments are theCertificate Amendment is a result of the Board of Directors’ ongoing review of our corporate governance principles. After receivingprinciples and consideration of the stockholder input andproposal discussed below. In developing the advice of management and outside advisors,Proposed Certificate Amendment, the Board of Directors (including all members of the Governance and Nominating Committee) carefully considered the relative weightimplications of amending our Certificate to allow stockholders to request that the arguments in favor of and opposed to supermajority voting requirements.Company call a special meeting.
The Board of Directors recognizes that supermajority voting requirements are intendedproviding stockholders the ability to protect against self-interested action by large stockholders, including in the context of hostile acquisitionsrequire that may be viewed as undervaluing the Company call special meetings is viewed by requiring broadsome stockholders as an important corporate governance practice. However, special meetings of the stockholders can cause the Company to incur substantial expenses and can be potentially disruptive to its business operations and to long-term stockholder support for certain typesinterests. Accordingly, the Board of transactionsDirectors believes that special meetings of the stockholders should be extraordinary events that should not be held in close proximity to an annual meeting or governance changes.when the matters to be addressed have been recently considered or are planned to be considered at another meeting. The Board of Directors also recognizes that many investors and otherswould continue to have begunthe ability to view
supermajority vote provisions as conflicting with principlesIn light of good corporate governance. For example, some stockholders and commentators argue that supermajority voting requirements should be eliminated due to a perception that they could limit the Board of Directors’ accountability to stockholders or stockholder participation in corporate governance.
It is important to note that the Proposed Amendments may make it more difficult forthese considerations, the Board of Directors believes that it strikes an appropriate balance between enhancing stockholder rights and adequately protecting stockholder interests to protect stockholders’ interests if presentedprovide that stockholders who
1 | References in this discussion to votes of the outstanding shares and to the “Voting Stock” mean the outstanding shares of capital stock of the Company entitled to vote generally in the election of directors. Currently, Capital One common stock is the only class or series of Voting Stock outstanding. |
satisfy a 25% “net long” ownership threshold and comply with an acquisition proposalcertain additional procedures and limitations have the ability to request that undervalues the Company and may make it easier for one or more stockholderscall a special meeting.
In determining to remove directors or effect other corporate governance changes in the future. Nevertheless,utilize a 25% ownership threshold, the Board of Directors also considerednoted that even without the supermajority voting requirements described above (and recognizing25% ownership standard is the most prevalent standard among its peer companies that allow stockholders to call special meetings, and that a number of the Company’s institutional stockholders have in the past expressed support for a 25% ownership standard for stockholders to be able to request a special meeting of the stockholders. The Board of Directors previously authorized eliminationdetermined to adopt a “net long” definition of a classified board structure), there are other actionsownership because it believes that it can take if presentedonly stockholders with an acquisition proposalfull and continuing economic interest and voting rights in our Voting Stock should be entitled to request that undervalues the Company as well as provisions in federal and state law that may help deter any such attempted acquisition.call a special meeting.
Accordingly,As a result, the Board of Directors has considered thisthe matter, and upon recommendation of the Governance and Nominating Committee, adopted resolutions setting forth the Proposed Amendments,Certificate Amendment, declared the Proposed Amendmentssuch amendment advisable and unanimously resolved to submit such amendment to our stockholders for consideration and to recommend that stockholders vote“FOR”the Proposed Amendments to Capital One’s stockholders for consideration.Certificate Amendment.
Proposed Certificate Amendments to Remove Supermajority Voting Provisions
Item 5(a): Remove Supermajority Voting Standards for Future AmendmentsRelated Changes to the Bylaws and the
The Proposed Certificate
Description of Amendments
Currently, the Certificate states that stockholders can alter, amend or repeal Amendment authorizes the Bylaws only if(1) to specify the information required to be provided in connection with a stockholder’s request to call a special meeting, (2) to set forth continuing ownership requirements and additional procedures and conditions applicable to stockholders’ ability to request that action is approved by the affirmative vote of at least 80%Company call a special meeting, and (3) to define ownership for purposes of the voting power of the then outstanding Voting Stock, voting together as a single class (this supermajority voting provision is in Article VI, Paragraph (A)(i) of the Certificate). Likewise, the Certificate currently states that a supermajority vote of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class, is necessary to amend or repeal, or adopt a provision inconsistent with, the following provisions in the Certificate:
This Item 5(a) proposes to amend the Certificate so that future amendments to the Bylaws and the Certificate can be approved by a majority vote of the outstanding shares. Specifically, in this Item 5(a) we propose:
to delete each of the provisions setting forth a supermajority voting requirement for amending, repealing or adopting a provision inconsistent with the specified provisions in the Certificate. As a result, the standard for stockholder approval of any future amendments to each of those provisions would be the default voting“net long” ownership standard under the Delaware General Corporation Law, meaning that under current law future amendments
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In addition,Amendment. Accordingly, the Board of Directors has approved a conforming amendment to Section 7.1amended Article II of our Bylaws, contingent upon stockholder approval and implementation of the Bylaws which, like theProposed Certificate currently provides that stockholders can alter, amend or repeal the Bylaws only if that action is approved by the affirmative vote of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class. Amendment, to address these provisions.
Information Provisions.
The Bylaw amendment requires any special meeting request to set forth the same information regarding the business to be conducted at the meeting and regarding any director candidate to be nominated at the meeting that is required to be provided by a stockholder who proposes to introduce such business or to make director nominations at an annual meeting of stockholders. Any stockholder or beneficial owner who is seeking to call the special meeting or who solicits other stockholders to support calling the special meeting also must provide the same information as to its ownership of the Company’s stock and its interest in the matters proposed to be voted on at the special meeting that is required of a stockholder who proposes to introduce such business or to make director nominations at an annual meeting of stockholders. Each stockholder supporting the special meeting request must provide information as to the number of shares of the Company’s stock that it owns.
Ownership Provisions.
The Bylaw amendment elaborates on the “net long” ownership definition included in the Proposed Certificate Amendment by providing that borrowed or hedged shares do not count toward the 25% ownership threshold. However, holding shares through a nominee and the practice of share lending will not be deemed to interrupt ownership of shares that otherwise are deemed to be “owned” under this standard. Stockholders requesting a special meeting must hold the requisite number of shares through the date of the special meeting and provide updated ownership information at the record date and shortly before the date of the special meeting of stockholders.
Additional Provisions.
The Bylaw amendment sets forth certain procedural requirements that the Board believes are appropriate to avoid duplicative or unnecessary special meetings. Under these provisions, a special meeting request is not valid if:
Under the Bylaw amendment, if stockholders who requested a special meeting revoke the request or cease to own 25% of the Voting Stock, the Company is not required to hold the special meeting of the stockholders.
The Stockholder Proposal
As described below in Section XIV, Capital One has been notified that a stockholder intends to present a proposal for consideration at the Annual Meeting (the “Stockholder Proposal”) that also addresses stockholders’ ability to call special meetings of the stockholders. Although the Proposed Certificate Amendment and the Stockholder Proposal concern the same subject matter, the terms and effects of each proposal differ. Stockholders may vote on both the Proposed Certificate Amendment and the Stockholder Proposal, and approval of the Proposed Certificate Amendment is not conditioned on approval or disapproval of the Stockholder Proposal. Among the differences between the Proposed Certificate Amendment and the Stockholder Proposal are the following:
Neither the Proposed Certificate Amendment nor the Stockholder Proposal affect the Board of Directors replacesDirectors’ existing authority to call special meetings of stockholders.
You should carefully read the supermajority voting provision with the same majority vote standard proposed for Article VI, Paragraph (A)(i)descriptions of the Certificate,each proposal, and will become effective if stockholders approve the proposed amendments set forthCapital One’s statement in this Item 5(a).
Vote Required to Approve
Under the existing supermajority voting requirements in the Certificate, Item 5(a) will be approved if at least 80% of the common stock outstanding is voted in favor of such item, with abstentions and broker non-votes having the same effect as votes “against” this Item 5(a).
Item 5(b): Remove Supermajority Voting Standard for Removing Any Director from Office
Description of Amendment
Currently, the Certificate states that a director can be removed from office only by the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class. This Item 5(b) requests that stockholders approve an amendmentopposition to the supermajority voting requirementStockholder Proposal, in Article VIII, Paragraph (D) ofconsidering the Proposed Certificate that replacesAmendment and the reference to “80 percent” with “a majority.” As a result, stockholders would be able to remove any director from office by the affirmative vote of the holders of at least a majority of the voting power of the then outstanding Voting Stock, voting together as a single class.
Vote Required to Approve
Under the existing supermajority voting requirements in the Certificate, Item 5(b) will be approved if at least 80% of the common stock outstanding is voted in favor of such item, with abstentions and broker non-votes having the same effect as votes “against” this Item 5(b).
Item 5(c): Remove Supermajority Voting Standards Related to Certain Business Combinations
Description of Amendments
Currently, the Certificate states that two supermajority vote standards must be satisfied to approve certain business combination transactions involving the Company and any Interested Stockholder or any Affiliate of any Interested Stockholder (as defined in the Certificate). Specifically, any such transaction must be approved by the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Voting Stock, voting together as a single class,including the affirmative vote of the holders of at least 75% of the voting power of the then outstanding Voting Stock not owned directly or indirectly by an Interested Stockholder or any Affiliate of any Interested Stockholder (as defined in the Certificate). A related provision in the Certificate currently states that similar supermajority votes (applying an 80% standard instead of a 75% standard) are necessary to approve any amendment to or repeal of, or the adoption of any provisions inconsistent with, the Certificate provisions related to such business combinations.
This Item 5(c) proposes to amend the Certificate so that such transactions or amendments can be approved by majority votes. Specifically, in this Item 5(c) we propose:
If these amendments are approved, future stockholder votes under these provisions would require the affirmative vote of the holders of at least a majority of the voting power of the then outstanding Voting Stock, voting together as a single class,including the affirmative vote of the holders of at least a majority of the voting power of the then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder (as defined in the Certificate). The amended voting requirements in Article IX, Section 1, Paragraph (A) for approval of certain business combinations would continue to be required in addition to any affirmative vote required by law or the Certificate (including any votes required by the terms of any series of preferred stock).
Vote Required to Approve
As required by the existing voting requirements in the Certificate, Item 5(c) will be approved if at least 80% of the common stock outstanding (including, at least 80% of the voting power of the then outstanding common stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder (as defined in the Certificate), as determined by the Board of Directors pursuant to the Certificate), is voted in favor of this item, with abstentions and broker non-votes having the same effect as votes “against” this Item 5(c). Under the Certificate, the term “Interested Stockholder” includes any person or entity who or which, together with its affiliates, is the beneficial owner, directly or indirectly, of more than 5% of the then outstanding Voting Stock, with beneficial ownership being determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934 and including any shares a person or entity has the right to acquire or to vote.Proposal.
Additional Information
The general descriptionsdescription of the Proposed AmendmentsCertificate Amendment set forth above areis qualified in theirits entirety by reference to the text of the Proposed Amendments,Certificate Amendment, which areis attached as Appendix A to these proxy materials. In addition, the text of the Bylaw amendment, which can be amended from time to time, is attached as Appendix B to these proxy materials. Additions to the Certificate and the Bylaws are indicated by double underlining and deletions to the Certificate and the Bylaws are indicated by strike-outs.strike outs. Complete copies of the current Certificate and Bylaws are available on the Corporate Governance page of Capital One’s Internet site atwww.capitalone.com under “About Us/Investors.”
The Proposed Certificate Amendment is binding. If any of the Proposed Amendments areCertificate Amendment is approved, such approved amendments will become effective upon the filing of aCompany intends to file the Certificate of Amendment to Capital One’s Certificate with the Secretary of State of the State of Delaware.Delaware, and the Proposed Certificate Amendment will become effective at the time of that filing. If the Proposed Certificate Amendment is not approved by the requisite vote, then the Proposed Certificate Amendment will not be filed with the Secretary of State of the State of Delaware, the Bylaw amendment will not become effective and our stockholders will not have the ability to request that the Company call a special meeting of stockholders. Approval of the Proposed Certificate Amendment is not conditioned on approval or disapproval of the Stockholder Proposal, which means that the foregoing effects of approval or disapproval of the Proposed Certificate Amendment are not affected by approval or disapproval of the Stockholder Proposal.
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The Board of Directors unanimously recommends that you vote“FOR” “FOR” each of Item 5(a), Item 5(b) and Item 5(c)the Proposed Certificate Amendment in order to amend our Restated Certificate of Incorporation to removeallow one or more stockholders who own at least 25% of the supermajority voting requirementsCompany’s Voting Stock and replace them with majority voting standards as described above.who satisfy certain procedures to require that the Company call a special meeting of the stockholders
SECTION XVXIV – STOCKHOLDER PROPOSAL REGARDING AN INDEPENDENT BOARD CHAIRMANSPECIAL MEETINGS OF THE STOCKHOLDERS
(ITEM 65 ON PROXY CARD)
Capital One has been notified that a representative of John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278, intends to present the followinga proposal for consideration at the Annual Meeting.Meeting (the “Stockholder Proposal”) that addresses stockholders’ ability to call special meetings of the stockholders. Mr. Chevedden has submitted documentation indicating that he is the beneficial owner of no fewer than 100 shares of Capital One common stock. The Stockholder Proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of Mr. Chevedden.
RESOLVED: Shareholders requestIn a different proposal that ouris described above in Section XIII, the Board of Directors is recommending that Capital One’s stockholders approve an amendment to adopt a policy, and amend other governing documents as necessaryCapital One’s Certificate to reflect this policy,allow one or more stockholders owning at least 25% of the Company’s Voting Stock to require that the ChairCompany call a special meeting of the stockholders, which we refer to as the Proposed Certificate Amendment.Although the Proposed Certificate Amendment and the Stockholder Proposal concern the same subject matter, the terms and effects of each proposal differ.
• | The Board of Directors is recommending a vote FOR the Proposed Certificate Amendment (Item 4) and AGAINST the Stockholder Proposal described below (Item 5). |
Mr. Chevedden has submitted the following resolution:
Special Shareowner Meetings
Resolved, Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 20% of our Board of Directorsoutstanding common stock the power to be an independent member ofcall a special shareowner meeting. This proposal does not impact our Board. This independence requirement shall apply prospectively soboard’s current power to call a special meeting.
Special meetings allow shareowners to vote on important matters, such as not to violate any contractual obligation at the time this resolution is adopted. Compliance with this policy is waived if no independent director is available and willing to serve as Chair. The policy should also specify how to select aelecting new independent chairman if a current chairman ceases to be independentdirectors that can arise between annual shareholder meetings.
When our CEO Shareowner input on the timing of shareowner meetings is our board chairman, this arrangement can hinder our board’s ability to monitor our CEO’s performance. Many companies already have an independent Chairman. An independent Chairman isespecially important when events unfold quickly and issues may become moot by the prevailing practice in the United Kingdom and many international markets.next annual meeting. This proposal topic won 50%-plusmore than 70% support at 5 major U.S.Edwards Lifesciences and SunEdison in 2013. Vanguard sent letters to 350 of its portfolio companies in 2013 including 73%-support at Netflix. At our 2013asking them to consider providing the right for shareholders to call a special meeting.
A shareholder right to call a special meeting and to act by written consent are 2 complimentary ways to bring an important matter to the attention of management and shareholders outside the annual meeting management appearedcycle. This is important because there could be 15 months between annual meetings. A shareholder right to deliberately fail in obtainingcall a special meeting is one method to equalize the needed votesabsence of a shareholder right to act by written consent at Capital One.
An added incentive to vote for its proposals for a simple majority vote standard. One of the proposals needed an 80% vote and obtained a heart-breaking 79.99%.
Thisthis proposal should also be more favorably evaluated due tois our Company’s clearly improvable environmental, social and corporate governance and performance as reportedsummarized in 2013:2014:
GMI Ratings, an independent investment research firm, said Richard Fairbank received $22$26 million in 2013 Total Realized Pay. GM said Capital One had not disclosed specific, quantifiable performance target objectives for Mr. Fairbank. Capital One paid long-term incentives to executives without requiring the company to perform above the median of its peer group. GMI rated Capital One D for accounting. GMI said multiple related party transactions and shareholders voted 21% againstother potential conflicts of interest involving our executive pay. Unvested equity pay would not lapse upon CEO termination. COF can give long-term incentive pay tocompany’s board or senior managers should be reviewed in greater depth, as such practices raise concerns regarding potential self-dealing or abuse.
Director Patrick Gross received our CEO for below-median performance. Two directorshighest negative votes again. Mr. Gross had 18-years19-years long tenure which detracted from their independence: Ronald Dietzcan result in low independence and Patrick Gross.served on 5 public boards which can be a sign of over-extension. Nonetheless Mr. Gross was on our audit committeeexecutive pay and on the boards of 5 companies (over-committed) and received our highest negative votes (13%). The GMI Environmental, Social and Governance grade fornomination committees. In August 2014, Capital One was D.
Capital One agreed to pay $210 million to resolve chargessaid it received subpoenas from U.S. consumer and banking regulators that its vendors misled consumers into paying for extra credit card products. Capital One also agreed to pay $12 million to resolve allegations that our company violated special consumer protections in federal law for membersthe New York District Attorney’s Office as part of the military, the Justice Department announced. The government said COF wrongfully foreclosed on homes and improperly repossessed cars. In addition, the government said COF obtained wrongful court judgments against service members and improperly denied interest rate relief on credit card and car loans.
West Virginia Attorney General Darrell McGraw announced a $13 million settlement with COF, which was alleged to have used misleading advertising to unfairly saddle West Virginians in debt.money-laundering probe.
Returning to the core topic of this proposal from the context of our clearly improvable corporate governance, please vote to protect shareholder value:
Independent Board ChairmanSpecial Shareowner Meetings – Proposal 65
Statement in Opposition to the Stockholder Proposal
OurThe Board of Directors recommends that stockholders vote“AGAINST” the Stockholder Proposal in light of the Proposed Certificate Amendment set forth in Section XIII. The Board of Directors recognizes that providing stockholders the ability to request that the Company call special meetings is deeply committedviewed by some stockholders as an important corporate governance practice. However, special meetings of the stockholders can cause the Company to incur substantial expenses and can be potentially disruptive to the Company’s business operations and to long-term stockholder interests. Accordingly, the Board of Directors believes that special meetings of the stockholders should be extraordinary events. In addition, the Board of Directors believes that a small minority of stockholders should not be entitled to utilize the mechanism of special meetings for their own interests, which may not be shared more broadly by stockholders of the Company. Likewise, the Board of Directors believes that only stockholders with full and continuing economic interest in our Voting Stock and full voting rights should be entitled to request that the Company call a special meeting.
Capital One is dedicated to strong and effective corporate governance at Capital One. The Board believesprinciples that its existing leadership structure, wherepromote the Board has an active and empowered lead independent director and the flexibility to determine whether the chair will be the CEO or an independent director, provides the most effective and prudent leadership structure for our Company that has servedlong-term interests of our stockholders, well.
Capital One’s corporate governance practices demonstrate strong independent leadershipallow for responsible decision-making and effective independent oversightaccountability, and foster a culture that reflects the Company’s high standards of our Company.
Our Board has thoughtfully organizedindependence, transparency and stockholder rights. In recommending votes against the Board’s leadership structure to provide for effective and independent oversight by our independent directors:
Each of our committees is led by an independent committee chair who is actively engaged in the leadership of his or her committee. The independent committee chairs’ responsibilities include:
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Our Board believes Capital One and its stockholders are best served by governance policies that provide the Board flexibility to determine the most effective leadership structure for Capital One.
At Capital One, our governance principles allow the roles of Chair and CEO to be filled by the same or different individuals. This approach appropriately provides the Board the most flexibility to determine whether the two roles should be separate or combined based upon Capital One’s unique opportunities and challenges and the Board’s assessment of our Company’s leadership over time. Our Board has deep knowledge of our culture, strategy, business operations, and the talent, strengths and capabilities of our directors and Capital One’s senior management. In contrast, by adopting a policy to restrict our Board from exercising its judgment in selecting the Chair, as well as restricting the ability to combine the positions of Chair and CEO, this proposal would deprive the Board of the ability to select the most qualified and appropriate individual to lead the Board. Our Board is best positioned to determine the most effective leadership structure for Capital One at any given time.
Capital One’s stockholders are best served by our current leadership structure.
Our Board has determined that the most effective leadership structure for Capital One and our stockholders at this time is for Richard D. Fairbank to serve as both Chair and CEO of Capital One.
Mr. Fairbank founded Capital One and has served as CEO since shortly before Capital One’s initial public offering in late 1994 and Chair since early 1995. Mr. Fairbank is an industry pioneer, innovator and strategic thought leader in the areas of consumer credit analytics, underwriting and risk management, national brand, and talent and leadership development. As a direct result of Mr. Fairbank’s leadership, we have grown to become one of the largest consumer franchises with one of the most recognizable and established national brands. Because of Mr. Fairbank’s strategic vision, leadership, and thoughtful execution, we have grown and effectively transformed into one of the top 10 largest banks in the U.S. based on deposits. Over this period of time, we have delivered strong, long-term financial growth and returns in a safe and sound manner through adverse business cycles.
Our Board believes that Mr. Fairbank possesses the right combination of leadership qualities, strategic vision, industry experience and deep knowledge of the day-to-day operations of Capital One to understand and clearly articulate to the Board the opportunities, challenges and risks facing Capital One. The Board believes Mr. Fairbank in the combined role of Chair and CEO serves as a highly effective bridge between the Board and management, which is a critical component to executing on our business strategy and creating long-term value for our stockholders. We believe, at this time, our unified leadership structure enables our Board to present Capital One’s vision with one voice and to focus responsibly and effectively on the diverse and complex business, market and regulatory challenges facing companies in the rapidly changing and highly-regulated financial services industry.
For the reasons discussed above,Stockholder Proposal, the Board believes that it is important to consider not only the Proposed Certificate Amendment but also the Company’s current governance practices, including that:
In addition, in 2014, our existingstockholders approved amendments to Capital One’s Certificate that had been recommended by the Board leadership structure providesof Directors to adopt a majority voting standard in place of the supermajority voting standards applicable to certain stockholder actions. These practices reflect the Board of Directors’ commitment to carefully considered corporate governance standards that operate for the benefit of all stockholders.
In the Proposed Certificate Amendment, the Board of Directors is recommending that Capital One’s stockholders approve an amendment to Capital One’s Certificate to allow one or more stockholders owning at least 25% of the Company’s Voting Stock to require that the Company call a special meeting of the stockholders. In determining to utilize a 25% ownership threshold in the Proposed Certificate Amendment, the Board noted that the 25% ownership standard is the most effective governance frameworkprevalent standard among its peer companies, and that allows oura number of the Company’s institutional stockholders have in the past expressed support for a 25% ownership standard for stockholders to be able to request a special meeting of the stockholders. In light of these considerations, the Board of Directors believes that it strikes an appropriate balance between enhancing stockholder rights and adequately protecting stockholder interests to provide that stockholders who satisfy a 25% “net long” ownership standard and comply with certain additional procedures and limitations have the ability to request that the Company to benefit from Mr. Fairbank’s knowledge and leadership while appropriately maintaining strong independent and effective oversightcall a special meeting.
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The Board of our business and affairs through our empowered Lead Independent Director, independent key committees, experienced and committed directors, and frequent executive sessions without management in attendance.
Accordingly, the BoardDirectors unanimously recommends that you vote AGAINST this proposal. “AGAINST” the Stockholder Proposal Regarding Special Meetings of the Stockholders
Other Business
As of the date of this proxy statement, we know of no business that will be presented for consideration at the Annual Meeting other than the items referred to above. If other matters are properly brought before the meeting, the persons named in the accompanying proxy card will vote such proxy at their discretion.
Annual Report to Stockholders
Capital One’s Annual Report to Stockholders for the fiscal year ended December 31, 2013,2014, including consolidated financial statements, is being furnished along with this proxy statement to Capital One’s stockholders of record. The Annual Report to Stockholders does not constitute a part of the proxy soliciting material. A copy of the Annual Report as well as Capital One’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013,2014, may be obtained at the Annual Meeting, at our website atwww.capitalone.com under “About Us/Investors” or by contacting our Investor Relations department at Capital One’s address set forth on the Notice of Annual Stockholder Meeting. The Form 10-K, which is filed with the SEC, may also be obtained at the SEC’s website atwww.sec.gov.
Stockholder Proposals for 20152016 Annual Stockholder Meeting
Stockholders interested in submitting a proposal for inclusion in the proxy materials at Capital One’s 20152016 Annual Stockholder Meeting (“Capital One’s 20152016 Annual Meeting”) may do so by following the rules prescribed in Rule 14a-8 under the Securities Exchange Act of 1934. To be eligible for inclusion, stockholder proposals must be received by Capital One’s Corporate Secretary at the address on the Notice of Annual Stockholder Meeting no later than the close of business on November , 2014.18, 2015.
Under our Bylaws, if you wish to present other business before the stockholders at Capital One’s 20152016 Annual Meeting or nominate a director candidate, you must give proper written notice of any such business to the Corporate Secretary not before January 1, 2015,2016, and not after January 31, 2015.2016. If Capital One’s 20152016 Annual Meeting is not within thirty days before or sixty days after May 1, 2015,April 30, 2016, the anniversary date of this year’s Annual Meeting, notice must be delivered no earlier than the one hundred twentieth day prior to such annual meeting and notno later than the close of business on the later of the ninetieth day prior to such meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Your notice must include the information specified in our Bylaws concerning the business or nominee. Our Bylaws set forth the information that must be furnished to the Corporate Secretary in order for any such notice to be proper. A copy of our Bylaws may be obtained from the Corporate Secretary at Capital One’s address on the Notice of Annual Stockholder Meeting.
On behalf of the Board of Directors,
John G. Finneran, Jr.
Corporate Secretary
March , 201417, 2015
APPENDIX A – CAPITAL ONE FINANCIAL CORPORATION’S THIRD
AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
AMENDED AND RESTATED AS OF MAY 1, 2014
CONTENTS
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CAPITAL ONE FINANCIAL CORPORATION
THIRD AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
Article 1. Establishment, Purpose and Duration
1.1 Establishment. The Company established, effective as of April 29, 2004, an incentive compensation plan to be known as the 2004 Stock Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document, as it may be amended from time to time. The Plan is hereby amended and restated effective as of May 1, 2014 (the “Restatement Effective Date”).
The Plan permits the grant of Cash-Based Awards, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Annual Incentive Pool Awards, and Other Stock-Based Awards.
This amendment and restatement of the Plan shall become effective upon shareholder approval and shall remain in effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the interests of the Company and its shareholders by strengthening the Company’s ability to attract, motivate, and retain Associates, Directors and Third Party Service Providers of the Company, its Affiliates and Subsidiaries upon whose judgment, initiative, and efforts the financial success and growth of the business of the Company largely depend, and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of the Company and create value for shareholders.
1.3 Duration of the Plan. Effective with this amendment and restatement of the Plan, unless sooner terminated as provided herein, the Plan shall terminate ten years from the Restatement Effective Date. After the Plan is terminated, no new Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
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Article 3. Administration
3.1 General. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The Committee may employ attorneys, consultants, accountants, agents, and other persons, any of whom may be an Associate or Third Party Service Provider, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon Participants, the Company, and all other interested persons.
3.2 Authority of the Committee. Subject to the express provisions of the Plan, the Committee shall have full and exclusive discretionary power to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan, including, without limitation: (a) to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (b) to determine which persons are eligible for Awards granted hereunder and the timing of any such Awards; (c) to prescribe and amend the terms of the Award Agreements, to grant Awards and determine the terms and conditions thereof; (d) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, retention, vesting, exercisability, settlement or recoupment of any Award; (e) to prescribe and amend the terms of or form of any document or notice required to be delivered to the Company by Participants under this Plan; (f) to determine the extent to which adjustments are required pursuant to Section 4.4; (g) to interpret and construe the Plan, any rules and regulations under the Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions if the Committee, in good faith, determines that it is appropriate to do so; (h) to approve corrections in the documentation or administration of any Award; and (i) to make all other determinations deemed necessary or advisable for the administration of the Plan.
3.3 Delegation. Subject to this Section 3, the Committee may delegate to one or more of its members or other members of the Board or to one or more officers or management committees of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such duties or powers as it may deem advisable, and the Committee or any person to whom it has delegated duties or powers as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. In addition, the Committee may, by resolution, authorize one or more officers or management committees of the Company to do one or more of the following on the same basis as can the Committee: (a) designate Associates to be recipients of Awards; and (b) determine the type, number of Shares subject thereto and all other terms and conditions of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer or management committee for Awards granted to a Director, an Associate that is considered an Insider or an Associate that is considered a Covered Employee (or who, in the sole determination of the Committee, may become a Covered Employee); (ii) the resolution providing such authorization sets forth the total number of Shares that may be subject to Awards such officer(s) or management committee(s) may grant and any other limitations on the delegated authority that the Committee may deem appropriate or advisable; and (iii) the officer(s) or management committee(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated in the manner and at such times as requested by the Committee.
3.4 No Liability; Indemnity. To the fullest extent permitted from time to time by applicable law, subject to the Company’s Restated Certificate of Incorporation and Restated Bylaws (as each may be amended from time to time), neither the Company nor any member of the Committee shall be liable for any action, omission, or determination of the Committee relating to the Plan or any Award, and the Company shall indemnify and hold harmless each member of the Committee and each other person to whom any duty or power relating to the administration or interpretation of the Plan or any Award has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any such action, omission or determination relating to the Plan or any Award.
3.5 Third Party Agreements. Notwithstanding any other provision of the Plan (including without limitation Section 20.11 hereof), the Committee may enter into agreements with third parties pursuant to which such third parties may issue Awards to the Participants in lieu of the Company’s issuance thereof or assume the obligations of the Company under any Awards previously issued by the Company, in any case on such terms and conditions as may be determined by the Committee in its sole discretion.
3.6 Determination of Termination of Employment or Service.The Committee shall have the authority to determine in its discretion whether a Participant’s placement by the Company, an Affiliate or a Subsidiary on military or sick leave or other authorized leave of absence will be considered a termination of employment or services as a Director or Third Party Service Provider or a continuation of the employment or service relationship.
In addition, the Committee shall have the authority to determine whether to treat the service of a Participant who ceases to be an Associate but continues to be a Director or Third Party Service Provider as a continuation of Participant’s employment relationship or as a termination of employment for purposes of the Plan or any outstanding Award.
Unless the Committee determines otherwise, if a Participant is employed by, or provides services as a Third Party Service Provider to, an entity that ceases to be an Affiliate or a Subsidiary as the result of a corporate event or transaction, for purposes of any Award under the Plan, such Participant shall be deemed to have had his or her employment or services as a Third Party Service Provider terminated by the Company, its Affiliates and Subsidiaries at the time of such cessation.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Awards. Subject to adjustment as provided in Section 4.4 herein:
4.2 Share Usage.
4.3 Annual Award Limits. Subject to adjustment as provided in Section 4.4 herein, the following limits (each an “Annual Award Limit,” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under the Plan:
4.4 Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, extraordinary cash dividend or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall appropriately substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.
The Committee shall also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such corporate events or transactions, changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding upon Participants, the Company, and all other interested persons.
Subject to the provisions of Article 17, without affecting the number of Shares reserved or available hereunder, the Committee may authorize under the Plan the issuance of Awards or the assumption of awards granted under plans of other entities in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with the ISO rules under Section 422 of the Code, where applicable, and any other applicable laws or stock exchange rules.
Article 5. Eligibility and Participation
5.1 Eligibility. Individuals eligible to participate in the Plan include all Associates and Directors. Third Party Service Providers are also eligible to participate in the Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals those to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.
5.3 Trusts and Other Funding Vehicles. Notwithstanding any other provision herein (including without limitation Section 20.11), in lieu of making Awards directly to Associates, Directors or Third Party Service Providers under the Plan, the Committee may make Awards under the Plan through or to a trust or other funding vehicle which in turn makes Awards to Participants or which issues interests in Awards held by it to Participants, in any case on such terms and conditions as may be determined by the Committee in its sole discretion.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Associates of the Company or of any parent or subsidiary corporation (as permitted by Code Section 422 and the regulations thereunder). Notwithstanding any other provision of the Plan, the Committee shall not grant Options containing, or amend Options previously granted to include, reload features providing for the automatic grant of Options with respect to the number of already owned Shares delivered by the Participant to exercise Options. Subject to the terms and provisions of the Plan, the Committee may grant Options in satisfaction of the Company’s obligation to issue stock options pursuant to stock options with reload features granted under the Prior Plans.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable (including the effect, if any, of a Change of Control, death, Disability or Retirement), the Date of Grant and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3 Option Price. The Option Price for each grant of an Option shall be as determined by the Committee and shall be specified in the Award Agreement. The Option Price may include (but not be limited to) an Option Price based on one hundred percent (100%) of the FMV of the Shares on the Date of Grant, an Option Price that is set at a premium to the FMV of the Shares on the Date of Grant, or is indexed to the FMV of the Shares on the Date of Grant, with the index determined by the Committee, in its discretion; provided, however, the Option Price must be at least equal to one hundred percent (100%) of the FMV of the Shares on the Date of Grant.
6.4 Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, that the Committee may extend the term of any Option that would otherwise expire at a time when the Participant is not permitted by applicable law or Company policy to exercise such Option; and provided, further, no Option shall be exercisable later than the tenth (10th) anniversary of its Date of Grant. Notwithstanding the foregoing, for Options granted to Participants outside the United States, the Committee has the authority to grant Options that have a term greater than ten (10) years.
6.5 Limitations on Grant of Incentive Stock Options.
6.6 Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.7 Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price; (c) by a combination of (a) and (b); (d) a cashless (broker-assisted) exercise in accordance with procedures approved by the Committee; or (e) any other method approved or accepted by the Committee in its sole discretion.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.8 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
6.9 Termination of Employment or Service. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services as a Director or Third Party Service Provider to the Company, its Affiliates and/or Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.10 Transferability of Options.
6.11 Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.
6.12. Substituting SARs. Regardless of the terms of any Award Agreement, the Committee shall have the right to substitute SARs for outstanding Options granted to any Participant, provided the substituted SARs call for settlement by the issuance of Shares, and the terms of the substituted SARs and economic benefit of such substituted SARs are at least equivalent to the terms and economic benefit of the Options being replaced.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. Any SAR granted in connection with an Option may be granted at the same time as its related Option is granted or at any time prior to the exercise, expiration or cancellation of its related Option.
The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The Grant Price may include (but not be limited to) a Grant Price based on one hundred percent (100%) of the FMV of the Shares on the Date of Grant, a Grant Price that is set at a premium to the FMV of the Shares on the Date of Grant, or is indexed to the FMV of the Shares on the Date of Grant, with the index determined by the Committee, in its discretion; provided, however, the Grant Price must be at least equal to one hundred percent (100%) of the FMV of the Shares on the Date of Grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2 SAR Agreement. Each SAR shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine (including the effect, if any, of a Change of Control, death, Disability or Retirement).
7.3 Term of SAR. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that the Committee may extend the term of any SAR that would otherwise expire at a time when the Participant is not permitted by applicable law or Company policy to exercise such SAR; provided, further, except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary of its Date of Grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant SARs that have a term greater than ten (10) years.
7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes, including a requirement that a Freestanding SAR be exercised only at the same time as a related Option.
7.5. Exercise of Tandem SARs. Tandem SARs may be exercised with respect to all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6 Payment of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR; provided, however, that the Committee may reserve the right to determine the form of such payout at any time subsequent to the grant, at which time it will give notice to the Participant.
7.7 Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services as a Director or Third Party Service Provider to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
7.8 Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement or otherwise at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except
as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another person, references in the Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
7.9 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of an SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
Article 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the Date of Grant.
8.2 Restricted Stock or Restricted Stock Unit Agreement. Each grant of Restricted Stock and/or Restricted Stock Unit shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, the Date of Grant, and such other provisions as the Committee shall determine (including the effect, if any, of a Change of Control, death, Disability or Retirement).
8.3 Transferability. Except as provided in the Plan or an Award Agreement, the Shares of Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement (and in the case of Restricted Stock Units until the date of delivery of Shares or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Award Agreement or otherwise determined at any time by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant, except as otherwise provided in an Award Agreement or at any time by the Committee.
8.4 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, service-based restrictions on vesting following the attainment of the performance goals, service-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, if such certificates are issued at the time of grant, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be settled in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
8.5 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.4, if certificates are issued at the time of grant, each such certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion.
The sale or transfer of shares of common stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions as set forth in the Capital One Financial Corporation 2004 Stock Incentive Plan, and in the associated Award Agreement. A copy of the Plan and such Award Agreement may be obtained from Capital One Financial Corporation.
8.6 Voting and Dividend Rights.Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder shall be granted the right to exercise full voting rights, and to receive all dividends and other distributions paid, with respect to those Shares during the Period of Restriction. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, any such dividend shall be paid in cash within a reasonable time after dividends are paid to the Company’s other stockholders. With respect to any Restricted Stock Units granted hereunder, a Participant shall have no such voting or dividend rights during the Period of Restriction, unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement.
8.7 Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services as a Director or Third Party Service Provider to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
8.8 Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making (or otherwise give the Participant the choice of making) an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units and Performance Shares. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
9.2 Value of Performance Units and Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Date of Grant. In addition to any other non-performance terms included in the Award Agreement (including the effect, if any, of a Change of Control, death, Disability or Retirement), the Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units or Performance Shares, as the case may be, that will be paid out to the Participant. The Committee may, but is not obligated to, set such performance goals by reference to the Performance Measures set forth in Section 11.1.
9.3 Earning of Performance Units and Performance Shares. Subject to the terms of the Plan, after the applicable Performance Period has ended, the holder of Performance Units or Performance Shares, as the case may be, shall be entitled to receive payout on the value and number of the applicable Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved and any other non-performance terms met.
9.4 Form and Timing of Payment of Performance Units and Performance Shares. Payment of earned Performance Units and Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units and Performance Shares in the form of cash, in Shares or other Awards (or in a combination thereof) equal to the value of the earned Performance Units or Performance Shares, as the case may be, at the
close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
9.5 Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services as a Director or Third Party Service Provider to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
9.6 Nontransferability. Except as otherwise provided in a Participant’s Award Agreement or otherwise at any time by the Committee, Performance Units and Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, a Participant’s rights under the Plan shall be exercisable during his or her lifetime only by such Participant.
Article 10. Cash-Based Awards and Other Stock-Based Awards
10.1 Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.
10.2 Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. In addition to any other non-performance terms included in the Award Agreement (including the effect, if any, of a Change of Control, death, Disability or Retirement), the Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals (and any other non-performance terms) are met.
10.4 Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, Shares or a combination of both, as the Committee determines.
10.5 Termination of Employment or Service. The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards and Other Stock-Based Awards or to have such Awards vest or pay out, as applicable, following termination of the Participant’s employment with or provision of services as a Director or Third Party Service Provider to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
10.6 Nontransferability. Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant’s rights under the Plan, if exercisable, shall be exercisable during his or her lifetime only by such Participant. With respect to those Cash-Based Awards or Other Stock-Based Awards, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
Article 11. Performance Measures
11.1 Performance Measures. Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the grant, payment or vesting of an Award to a Covered Employee (other than an Annual Incentive Pool Award awarded or credited pursuant to Article 12) that is intended to qualify as Performance-Based Compensation shall be limited to goals set by reference to the following Performance Measures, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary or Affiliate or any combination thereof, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee:
The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 11. The Committee also has the authority to use any other performance measures in connection with Awards under the Plan that are not intended to qualify as Performance-Based Compensation.
11.2 Evaluation of Performance.The Committee will determine whether, with respect to a performance period, the applicable performance goals have been met with respect to a given participant and, if they have, to so certify and ascertain the amount of the applicable Award. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles or regulations, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) Extraordinary Items for the applicable year, (f) mergers, acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they may be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
11.3 Committee Discretion. In the event that the requirements of Section 162(m) and the regulations thereunder change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation and/or to amend previously granted Awards in a way that would disqualify them as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and may base vesting on Performance Measures other than those set forth in Section 11.1 and/or make such amendments.
Article 12. Annual Incentive Pool Awards
12.1 Establishment of Incentive Pool.The Committee may designate Associates, including but not limited to Covered Employees, who are eligible to receive a monetary payment in any Plan Year based on a percentage of an incentive pool equal to the greater of: (i) three percent (3%) of the Company’s Consolidated Operating Earnings for the Plan Year, (ii) twenty percent (20%) of the Company’s Operating Cash Flow for the Plan Year, or (iii) five percent (5%) of the Company’s Net Income for the Plan Year. At the beginning of the Plan Year, the Committee shall allocate an incentive pool percentage to each participating Associate for each Plan Year. In no event may (1) the incentive pool percentage for any one participating Associate exceed fifty percent (50%) of the total pool, (2) the sum of the incentive pool percentages for all participating Associates exceed one hundred percent (100%) of the total pool or (3) the monetary payment for any one participating Associate exceed $10 million.
12.2 Determination of Participating Associates’ Portions. As soon as possible after the determination of the incentive pool for a Plan Year, the Committee shall calculate each participating Associate’s allocated portion of the incentive pool based upon the percentage established at the beginning of the Plan Year. Each participating Associate’s Annual Incentive Pool Award then shall be determined by the Committee based on the participating Associate’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way, including as a result of the reduction of any other participating Associate’s allocated portion. The Committee shall retain the discretion to adjust all such Annual Incentive Pool Awards downward and provide for such other terms as it feels necessary or appropriate (including the effect, if any, of a Change of Control, death, Disability or Retirement).
Article 13. Dividend Equivalents
In the discretion of the Committee, any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award during the period between
the date the Award is granted and the date the Award is exercised, vests, pays out or expires. Such dividend equivalents may be awarded or paid in the form of cash, Shares, Restricted Stock, or Restricted Stock Units, or a combination, and shall be determined by such formula and at such time and subject to such accrual, forfeiture, or payout restrictions or limitations as determined by the Committee in its sole discretion. In no event shall dividend equivalents be granted with respect to Options or SARs. In addition, dividend equivalents granted with respect to Performance Shares or Performance Units shall not be distributed during the Performance Period or to the extent any such Award is otherwise unearned.
Article 14. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
Article 15. Deferrals
The Committee may permit or require (including without limitation, for purposes of deductibility under Section 162(m) of the Code) a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units, or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash-Based Awards, Other Stock-Based Awards and Annual Incentive Pool Awards. If any such deferral is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment or Share delivery deferrals and any notional earnings to be credited on such deferred amounts, provided that in the case of any Award intended to qualify as Performance-Based Compensation such earnings shall be in compliance with Code Section 162(m).
Article 16. Rights of Participants
16.1 Employment; Services. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service as a Director or Third Party Service Provider at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his or her employment or service as a Director or Third Party Service Provider for any specified period of time.
Neither an Award nor any rights arising under the Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 17, the Plan and any Award hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.
16.2 Participation. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to be selected to receive a future Award.
16.3 Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 17. Amendment, Modification, Suspension, and Termination
17.1 Amendment, Modification, Suspension, and Termination; No Repricings. Subject to Section 17.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Award Agreement in whole or in part; provided, however, that no amendment of the Plan or an Award shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule. Furthermore, other than in connection with a change in the Company’s capitalization (as described in Section 4.4), the Committee shall not, without stockholder approval, reduce the Option Price or Grant Price of a previously awarded Option or Stock Appreciation Right and, at any time when the Option Price or Grant Price of
the previously awarded Option or Stock Appreciation Right is above the Fair Market Value of a Share, the Committee shall not, without stockholder approval, cancel and re-grant or exchange such Option or Stock Appreciation Right for cash or a new Award with a lower (or no) Option Price or Grant Price or take any other action that would be considered a repricing for purposes of US generally accepted accounting practices or any applicable stock exchange rule.
17.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the performance criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding upon Participants, the Company, and all other interested persons.
17.3 Awards Previously Granted.
Article 18. Withholding
18.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes or similar charges, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of or in connection with the Plan or any Award.
18.2 Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of or in connection with an Award granted hereunder, Participants may elect, subject to the approval of the Committee, or the Committee may require the Participant, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. Any and all such Participant elections to withhold shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. Any and all such Committee requirements to withhold shall either be set forth in the Award Agreement or otherwise communicated to the Participant by notice subsequent to the time of grant and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Article 19. Successors
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 20. General Provisions
20.1 Forfeiture Events.
20.2 Legend. The certificates or book entry for Shares may include any legend or coding, as applicable, which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
20.3 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
20.4 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
20.5 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
20.6 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
20.7 Inability to Obtain Authority. The inability of the Company (after reasonable efforts) to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and/or sale of any Awards or Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue and/or sell such Awards or Shares as to which such requisite authority shall not have been obtained.
20.8 Investment Representations. The Committee may require any person receiving Shares pursuant to an Award under the Plan to represent and warrant in writing that the person is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
20.9 Participants Based Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Associates, Directors or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
20.10 Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
20.11 Unfunded Plan. Except as provided in Section 5.3 herein: (a) Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, and/or Affiliates may make to aid it in meeting its obligations under the Plan; (b) nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person; (c) to the extent that any person acquires a right to receive payments from the Company, its Subsidiaries, and/or Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be; and (d) all payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended.
20.12 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
20.13 Retirement and Welfare Plans. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards will be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit or except as the Committee may otherwise determine in its discretion.
20.16 Nonexclusivity of the Plan. Neither the adoption of the Plan nor the grant of any Award shall be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
20.17 No Constraint on Corporate Action. Nothing in the Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (b) limit the right or power of the Company, a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
20.18 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
APPENDIX B – PROPOSED AMENDMENTS TO CAPITAL ONE FINANCIAL CORPORATION’SONE’S RESTATED CERTIFICATE OF INCORPORATION TO REMOVE SUPERMAJORITY VOTING STANDARDS APPLICABLEALLOW STOCKHOLDERS TO CERTAIN ACTIONSREQUEST SPECIAL MEETINGS OF STOCKHOLDERS
Set forth below is the text of the Company’s Restated Certificate of Incorporation proposed to be amended by Items 5(a)-(c).Item 4. Proposed additions are indicated by double underlining, and proposed deletions are indicated by strike-through.strike-outs.
Item 5(a): Remove Supermajority Voting Standards for FutureProposed Amendments to Article IV:
(A) Authorized Stock. The Corporation shall be authorized to issue 1,050,000,000 shares of capital stock, of which 1,000,000,000 shares shall be shares of Common Stock, $.01 par value (“Common Stock”), and 50,000,000 shares shall be shares of Preferred Stock, $.01 par value (“Preferred Stock”).
(B) Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to create and provide for the Bylawsissuance of shares of Preferred Stock in series and, by filing a certificate pursuant to the applicable law of the State of Delaware (hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences and rights of the shares of each such series and the Certificatequalifications, limitations or restrictions thereof.
Proposed AmendmentThe authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(i) The designation of the series, which may be by distinguishing number, letter or title.
(ii) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding).
(iii) Whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series.
(iv) Dates at which dividends, if any, shall be payable.
(v) The redemption rights and price or prices, if any, for shares of the series.
(vi) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.
(vii) The amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.
(viii) Whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series of such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible and all other terms and conditions upon which such conversion may be made.
(ix) Restrictions on the issuance of shares of the same series or of any other class or series.
(x) The voting rights, if any, of the holders of shares of the series.
(xi) Such other powers, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions thereof as the Board of Directors shall determine.
Pursuant to the authority conferred by this Article V:IV, Paragraph (B),athe followingseries of Preferred Stock has been designated as Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series B, and is attached as Exhibit 1 hereto and incorporated herein by reference.series of Preferred Stock are hereby
Notwithstanding anything contained
provided for, with the number of shares to be included in each such series, and the designation, powers, preference and rights, and qualifications, limitations or restrictions thereof fixed as stated and expressed with respect to each such series in the respective exhibits specified below, which exhibits are attached hereto and incorporated herein by reference:
Exhibit 1 Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series B
Exhibit 2 Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series C
Exhibit 3 Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series D
(C) The Common Stock. The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. Each share of Common Stock shall have the right to cast one vote for each share for the election of Directors and on all other matters upon which stockholders are entitled to vote.
(D) Vote. Except as otherwise provided in this Certificate of Incorporation or in a Preferred Stock Designation, or as may be required by applicable law, the Common Stock shall have the exclusive right to vote for the contrary,election of directors and for all other purposes and holders of shares of Preferred Stock shall not be entitled to receive notice of any meeting of shareholders at which they are not entitled to vote. Each share of Common Stock shall have one vote, and the affirmativeCommon Stock shall vote of at least 80 percent of the voting power of the then outstanding Voting Stock (as defined below), voting together as a single class,class.
(E) Record Holders. The Corporation shall be requiredentitled to amendtreat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or repeal,other claim to, or adoptinterest in, such share on the part of any provisions inconsistent, with this Article V. For the purposes of this Certificate of Incorporation, “Voting Stock” shall mean the outstanding shares of capital stock ofother person, whether or not the Corporation entitled to vote generally in the election of Directors.shall have notice thereof, except as expressly provided by applicable law.
Proposed AmendmentAmendments to Article VI, Paragraph (C):VI:
(C) For purposes of this Certificate of Incorporation, “Voting Stock” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors.
Proposed Amendment to Article VI, Paragraph (B):
(B) The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by law.Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, subparagraph (i) of paragraph (A) of this Article VI.
Proposed Amendment to Article VII:
Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specific circumstances or to consent to specific actions taken by the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing in lieu of a meeting of such stockholders.Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Article VII.
Proposed Amendment to Article VIII, Paragraph (E):
(E) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Article VIII.
Proposed Amendment to Article VI, Paragraph (A)(i):Section 2.2. Special Meeting.
(A) In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered:
(i) to adopt, amend or repeal the Bylaws of the Corporation,provided,however, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be altered, amended or
repealed by the Board of Directors or by the stockholders having voting power with respect thereto,provided further than in the case of amendments by stockholders, the affirmative vote of the holders of at leasta majority of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to alter, amend or repeal, the Bylaws; and 80 percent
(ii) from time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to inspection of stockholders; and, except as so determined, or as expressly provided in this Certificate of Incorporation or in any Preferred Stock Designation, no stockholder shall have any right to inspect any account, book or document of the Corporation other than such rights as may be conferred by law.
(B) The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by law.
(C) A special meeting of the stockholders of the Corporation: (a) may be called at any time by the Chair of the Board of Directors or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies; and (b) shall be called by the Chair of the Board of Directors or the Secretary of the Corporation upon the written request of one or more stockholders of record that (i) Own, or who are acting on behalf of persons who Own, shares representing 25% or more of the voting power of the then outstanding Voting
Stock entitled to vote on the matter or matters to be brought before the proposed special meeting, (ii) provide the information regarding such stockholder(s) (and the persons for whom the stockholders are acting, as applicable) and the proposed special meeting and comply with such procedures as shall be set forth in the Bylaws of the Corporation from time to time, (iii) continue to Own, or are acting on behalf of persons who continue to Own, shares representing 25% or more of the voting power of the then outstanding Voting Stock entitled to vote on the matter or matters to be brought before the proposed special meeting for such period as shall be set forth in the Bylaws, as amended from time to time, and (iv) satisfy such additional terms, conditions and limitations as may be set forth in the Bylaws of the Corporation from time to time. Except as provided for in the preceding sentence of this Article VI(C) or in the terms of any series of Preferred Stock, special meetings of the stockholders of the Corporation may not be called by any other person or persons. For purposes of this Article VI(C), a person shall be deemed to “Own” only those shares of outstanding Voting Stock as to which the person possesses both (i) full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares, which terms may be further defined in the Bylaws of the Corporation adopted from time to time. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting (or, in the case of nominations for directors to be elected at a special meeting, if such nominations are brought in accordance with the procedures set forth in the Bylaws from time to time).
(C)(D) For purposes of this Certificate of Incorporation, “Voting Stock” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors.
APPENDIX B – PROPOSED AMENDMENTS TO CAPITAL ONE’S AMENDED AND RESTATED BYLAWS TO ALLOW STOCKHOLDERS TO REQUEST SPECIAL MEETINGS OF STOCKHOLDERS
Set forth below is the text of the Company’s Amended and Restated Bylaws proposed to be amended by Item 5(b): Remove Supermajority Voting Standard for Removing Any Director from Office4. Proposed additions are indicated by double underlining, and proposed deletions are indicated by strike-outs.
Proposed AmendmentAmendments to Article VIII, Paragraph (D):II:
Section 2.1. Annual Meeting. The annual meetings of stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and set forth in the notice of the meeting. If the Board of Directors fails so to determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the Corporation’s principal executive offices on the first Tuesday in May. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day.
Section 2.2. Special Meeting.
(A)Subject to the rights of the holders of any series of preferred stock, par value $.01 per share, of the Corporation (the “Preferred Stock”) to elect additional directors under specified circumstances,aspecial meetings of the stockholdersof the Corporation: (i) may be called only by the Chair of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies (the “Whole Board”) and shall be held at such place, on such date, and at such time as the Chair of the Board or Board of Directors pursuant to a resolution adopted by a majority of the Whole Board, as the case may be, shall fix.; and (ii) shall be called by the Chair of the Board of Directors or the Secretary of the Corporation upon the written request of one or more stockholders of record that at the time a request is delivered, Own, or who are acting on behalf of persons who Own, shares representing 25% (the “Requisite Percent”) or more of the voting power of the then outstanding Voting Stock entitled to vote on the matter or matters to be brought before the proposed special meeting, provided that a special meeting called at the request of one or more stockholders (a “Stockholder Requested Special Meeting”) shall be called by the Chair of the Board or the Secretary of the Corporation only if the stockholder(s) requesting such meeting provide the information regarding such stockholder(s) (and regarding the persons for whom such stockholders are acting, as applicable) and the proposed special meeting and comply with such procedures set forth in Section 2.2(B) of these Bylaws. For the purposes of this Section 2.2 of these Bylaw, a person shall be deemed to “Own” only those shares of outstanding Voting Stock as to which the person possesses both (a) full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (a) and (b) shall not include any shares (x) sold by such person or any of its affiliates in any transaction that has not been settled or closed, (y) borrowed by such person or any of its affiliates for any purposes or purchased by such person or any of its affiliates pursuant to an agreement to resell or (z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such person or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding Voting Stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such person’s or affiliates’ full right to vote or direct the voting of any such shares, and/or (2) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such shares by such person or affiliate. A person shall “own” shares held in the name of a nominee or other intermediary so long as the person retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A person’s ownership of shares shall be deemed to continue during any period in which the person has loaned such shares provided that the person has the power to recall such loaned shares on less than three (3) business days’ notice and during any period in which the person has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the person. The determination of the extent to which a person “Owns” any shares of Voting Stock for these purposes shall be made in good faith by the Board of Directors, which determination shall be conclusive and binding on the Corporation and the stockholders.
(B) In order for a Stockholder Requested Special Meeting to be called by the Chair of the Board or the Secretary of the Corporation, one or more written requests for a special meeting (individually or collectively, a “Special Meeting Request”) signed and dated by the stockholders of record that Own, or who are acting on behalf of persons who Own, the Requisite Percent of Voting Stock of the Corporation (or their duly authorized agents), must be delivered to the Secretary at the principal executive offices of the Corporation and must be accompanied by:
(1) in the case of any Stockholder Requested Special Meeting at which director nominations are proposed to be presented, the information required by Section 2.7(A)(4) and (5), including as to the person(s) seeking to propose such nominations at such meeting, the information required under Section 2.7(A)(4)(b), which notice shall be further updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct, as provided in the last sentence of Section 2.7(A)(2); and/or
(2) in the case of any Stockholder Requested Special Meeting at which any business other than nominations of persons for election to the Corporation’s Board of Directors is proposed to be presented, the information required by Section 2.7(B)(3) (which shall be in addition to the information required by Section 2.2(B)(1) if director nominations also are proposed to be considered), including as to the person(s) seeking to propose such business at such meeting, the information required under Section 2.7(B)(3)(d), which notice shall be further updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct, as provided in the last sentence of Section 2.7(B)(2); and
(3) as to each stockholder of the Corporation signing such request, or if such stockholder is a nominee or custodian, the beneficial owner(s) on whose behalf such request is signed, (i) an affidavit by each such person stating the number of shares of Voting Stock of the Corporation that it Owns (as defined in Section 2.2(A)) as of the date such request was signed and agreeing to continue to Own such number of shares of Voting Stock through the date of the Stockholder Requested Special Meeting and an agreement by such person to update and supplement such affidavit, if necessary, so that the information provided in such affidavit regarding the number of shares of Voting Stock of the Corporation that such person Owns shall be true and correct as of the record date for the Stockholder Requested Special Meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof; provided that in the event of any decrease in the number of shares of Voting Stock of the Corporation Owned by such person at any time before the Stockholder Requested Special Meeting, such person’s Special Meeting Request shall be deemed to have been revoked with respect to such shares of Voting Stock of the Corporation comprising such reduction and shall not be counted towards the calculation of the Requisite Percent, and (ii) as to the stockholder seeking to call the special meeting (or the person on whose behalf the stockholder is acting, as applicable) or any stockholder or beneficial owner who has solicited other stockholders to request the special meeting, the information as to such stockholder or beneficial owner required under Section 2.7(A)(4)(b).
One or more written requests for a special meeting delivered to the Secretary shall constitute a valid Special Meeting Request only if each such written request satisfies the requirements set forth above and has been dated and delivered to the Secretary within sixty (60) days of the earliest dated of such requests. If the record holder is not the signatory to the Special Meeting Request, such Special Meeting Request will not be valid unless documentary evidence from the record holder is supplied to the Secretary at the time of delivery of such Special Meeting Request (or within ten (10) business days thereafter) of such signatory’s authority to execute the Special Meeting Request on behalf of the record holder. The determination of the validity of a Special Meeting Request
shall be made in good faith by the Board of Directors, which determination shall be conclusive and binding on the Corporation, and the stockholders and the date of such determination is referred to herein as the “Request Receipt Date.” A Special Meeting Request shall not be valid if: (i) such Special Meeting Request relates to an item of business that is not a matter on which stockholders are authorized to act under, or that involves a violation of, applicable law, or (ii) such Special Meeting Request relates to an item of business that is the same or substantially similar to any item of business that was voted on at a meeting of stockholders occurring within ninety (90) days preceding the earliest dated request for a special meeting, or (iii) the Request Receipt Date occurs during the period commencing ninety (90) days prior to the first anniversary of the date of the most recent annual meeting of stockholders and ending on the date of the next annual meeting of stockholders.
(C) Any special meeting of stockholders shall be held at such date and time as may be fixed by the Board of Directors in accordance with these Bylaws; provided, however, that a Stockholder Requested Special Meeting shall be called for a date not later than the date that is (i) ninety (90) days after the Request Receipt Date (or, in the case of any litigation related to the validity of the requests for a Stockholder Requested Special Meeting, ninety (90) days after the resolution of such litigation), or (ii) fifty (50) days after the date the Corporation files definitive soliciting materials with respect to such meeting pursuant to Schedule 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whichever is latest.
(D) Business transacted at a Stockholder Requested Special Meeting shall be limited to (i) the business stated in the valid Special Meeting Request(s) received from the Requisite Percent of stockholders, (ii) any additional business that the Board of Directors determines to include in the Corporation’s notice of meeting. and (iii) in the case of nominees for director nominated by a stockholder who has not delivered, and has not directed the delivery of, a Special Meeting Request with respect to the Stockholder Requested Special Meeting, in accordance with Section 2.7(C). If none of the stockholders who submitted the Special Meeting Request(s) (or their qualified representatives, as defined in Section 2.7(D)(1)) appears at the Stockholder Requested Special Meeting to present the matter or matters to be brought before the special meeting that were specified in the Special Meeting Request(s), the Corporation need not present the matter or matters for a vote at the meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(E) The stockholder seeking to call the special meeting may revoke a Special Meeting Request by written revocation delivered to, or mailed and received by, the Secretary at any time prior to the special meeting and any stockholder signing a Special Meeting Request may revoke such request as to the shares that such person Owns (or Owned by the person on whose behalf the stockholder is acting, as applicable) and shall be deemed to revoke a Special Meeting Request as and to the extent provided in Section 2.2(B)(3); provided that if as a result of such revocation(s), there no longer are valid unrevoked Special Meeting Request(s) from stockholders who Own the Requisite Percent of the voting power of the then outstanding Voting Stock entitled to vote on the matter or matters to be brought before the proposed special meeting, there shall be no requirement to call a special meeting or to hold a special meeting regardless of whether notice of such special meeting has been sent and/or proxies solicited for such special meeting. Further, in the event that the stockholder requesting the Stockholder Requested Special Meeting withdraws such Special Meeting Request, there shall be no requirement to call or hold such special meeting.
Section 2.3. Place of Meeting. The Board of Directors or the Chair of the Board, as the case may be, may designate the place of meeting for any meeting of the stockholders. If no designation is so made, the place of meeting shall be the Corporation’s principal executive offices.
Section 2.4. Notice of Meeting. Written or printed notice, stating the place, day and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be prepared and delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally, or by mail, or otherwise sent electronically as permitted by law, including via electronic mail or the Internet to each stockholder of record entitled to vote at such meeting.In the case of a special meeting, the purpose or purposes for which the meeting is called also shall be set forth in the notice.If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at such stockholder’s address as it appears
on the stock transfer books of the Corporation. If sent electronically, such notice shall be deemed to be delivered at the times provided in the General Corporation Law of the State of Delaware. Such further notice shall be given as may be required by law. Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived by those not present. Any previously scheduled meeting of the stockholders may be postponed, and any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors or by the Chair of the Board (in the case of a special meeting called by the Chair), in each case upon public notice given prior to the time previously scheduled for such meeting of stockholders.
Section 2.5. Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series voting as a class, the holders of a majority of the voting power of the shares of such class or series shall constitute a quorum for the transaction of such business. The chair of the meeting or a majority of the shares of Voting Stock so represented may adjourn the meeting from time to time, whether or not there is such a quorum (or, in the case of specified business to be voted on by a class or series, the chair or a majority of the shares of such class or series so represented may adjourn the meeting with respect to such specified business). No notice of the time and place of adjourned meetings need be given except as required by law. The Voting Stock (or, in the case of specified business to be voted on by a class or series, the shares of such class or series) present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
Section 2.6. Proxies. At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as may be permitted by law, or by his or her duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or his or her representative at or before the time of the meeting.
Section 2.7. Notice of Stockholder Business and Nominations.
(A)Notice of Director Nominations atAnnualMeetings of Stockholders.
(1) At any annual meeting or Stockholder Requested Special Meeting of the stockholders, only such nominations of persons for election to the Board of Directors shall be made as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, nominations must be (a) specified in the Corporation’s notice of meeting given by or at the direction of the Board of Directors delivered pursuant to Section 2.4 of these Bylaws, (b) otherwiseproperlymade at the annual meeting by or at the direction of the Chair of the Board or the Board of Directors or (c) otherwise properly requested to be brought before the annual meeting by any stockholder of the Corporation in accordance with this Section 2.7(A) of these Bylaws.For nominations to be properly made at a Stockholder Requested Special Meeting, nominations must be (a) specified in the Corporation’s notice of meeting given by or at the direction of the Board of Directors delivered pursuant to Section 2.4 of these Bylaws, (b) otherwise made at the special meeting by or at the direction of the Chair of the Board or the Board of Directors or (c) otherwise have been properly requested to be brought before the special meeting by the stockholder in accordance with this Section 2.2(B)(1) of these Bylaws or Section 2.7(C) of these Bylaws.For nominations of persons for election to the Board of Directors to be properly requested by a stockholder to be made at an annual meeting of stockholders, a stockholder must (i) be entitled to vote at the meeting, (ii) comply with the notice and other procedures set forth in this Bylaw as to such nomination and (iii) be a stockholder of record at the time such stockholder’s notice pursuant to this Bylaw is delivered to the Secretary of the Corporation and at the time of the annual meeting. The immediately preceding sentence shall be the exclusive means for a stockholder to make nominations before an annual meeting of stockholders.
(2) For nominations of persons for election to the Board of Directors of the Corporation to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation (including the completed and signed questionnaire, representation and agreement required
by paragraph (A)(5) of this Bylaw), and timely updates and supplements thereof as required by this Bylaw, in writing to the Secretary. To be timely, a stockholder’s notice (including the questionnaire, representation and agreement) shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting;provided, however, that in the event that the date of an annual meeting is more than thirty(30) days before or more than sixty (60) days after such first anniversary date of the previous year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the one hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. In addition, to be considered timely, a stockholder’s notice (including the questionnaire, representation and agreement) shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice (including the questionnaire, representation and agreement) shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased by the Board of Directors and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
(4) To be in proper form, a stockholder’s notice to the Secretary with respect to the nomination of directors (whether given pursuant to paragraph (A)(1) of this Bylaw with respect to an annual meeting, or Section 2.2(B)(1) of these Bylaws or paragraph (C) of this Bylaw with respect to a special meeting) shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election, in each case pursuant to Regulation 14A under theSecuritiesExchange Act of 1934, as amended (the “Exchange Act”), including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected, (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner on whose behalf the nomination is made, if any, and their respective affiliates or associates or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K of the Exchange Act if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; (b) as to
the stockholder giving the notice and any beneficial owner of the Corporation’scommon stockVoting Stock on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, and of any such beneficial owner, as they appear on the Corporation’s books and of their respective affiliates or associates or others acting in concert therewith, (ii) the class and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder, any such beneficial owner and any of their respective affiliates or associates or others acting in concert therewith, (iii) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class of shares of the Corporation or with a value derived in whole or in part from the value of any class of shares of the Corporation and any other derivative positions or synthetic arrangements (including any position resulting from hedging, swap, securities lending or other similar transaction relating to the Corporation’s capital stock), whether or not such instrument or right shall be subject to settlement in the underlying class of capital stock of the Corporation or otherwise, (any of the foregoing, a “Derivative Position”) held or beneficially held by the stockholder, any such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, including a description of the substantive terms thereof including the amount, value and/or number so held and the extent to which any such Derivative Position is intended to or has the effect of increasing or decreasing the actual or apparent voting power of such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith with respect to the Corporation’s securities, (iv) any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith has the sole or shared right to vote any class of shares of the Corporation, (v) any short interest in any security of the Corporation (for purposes of this Bylaw, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from, or avoid, mitigate or offset in whole or in part any loss related to, any decrease in the value of the subject security), (a “Short Interest”) held by such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, (vi) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (vii) any proportionate interest in securities of the Corporation or Derivative Positions held, directly or indirectly, by a general or limited partnership in which such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is a general partner, or directly or indirectly, beneficially owns an interest in a general partner, (viii) any performance-related fees (other than an asset-based fee) that such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of securities of the Corporation or Derivative Positions, if any, including without limitation any such interests held by members of such person’s immediate family sharing the same household, and (ix) any other information relating to such stockholder, beneficial owner and their respective affiliates or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement and form or proxy or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Regulation 14(A) of the Exchange Act.
(5) A stockholder’s notice to the Secretary with respect to the nomination of directors (whether given pursuant to paragraph (A)(1) of this Bylaw with respect to an annual meeting, or Section 2.2(B)(1) of these Bylaws or paragraph (C) of this Bylaw with respect to a special meeting) must also include a completed and signed written response to a questionnaire with respect to the background and qualification of the nominee for director and the background of any other person or entity on whose behalf the nomination is being made or who is reasonably expected to participate in the solicitation of proxies with respect to the election of such person (which questionnaire shall be provided by the Secretary of the Corporation upon written request) and a signed written representation and agreement
(in the form provided by the Secretary of the Corporation upon written request) that such nominee for director (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosedtherein,to the Corporation,and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.
(6) For nominations of persons for election to the Board of Directors of the Corporation pursuant to Section 2.7(A)(1)(a) or (b) of this Bylaw or paragraph (C) of this Bylaw with respect to a special meeting, the nominee must also provide a completed and signed questionnaire, representation and agreement with the same information, and delivered in accordance with the same time period that applies to nominations to be brought by a stockholder of the Corporation, required by Section 2.7(A)(5) of this Bylaw.
(B)Notice of Other Business atAnnual Meetings of Stockholders.
(1) At any annual meeting or Stockholder Requested Special Meeting of the stockholders, only such business to be considered by the stockholders, other than nominations of persons for election to the Corporation’s Board of Directors which is addressed by paragraph (A) of this Bylaw, (“Other Business”) shall be made at such annual meeting of stockholders as shall have been properly brought before the meeting. For proposals of Other Business to be properly brought before an annual meeting, proposals of Other Business must be: (a) specified in the Corporation’s notice of meeting given by or at the direction of the Board of Directors delivered pursuant to Section 2.4 of these Bylaws, (b) otherwise properly made at the annual meeting, by or at the direction of the Chair of the Board or the Board of Directors or (c) otherwise properly requested to be brought before the annual meeting by any stockholder of the Corporation in accordance with Section 2.7(B) of these Bylaws.For proposals of Other Business to be properly brought before a Stockholder Requested Special Meeting, proposals of Other Business must be: (a) specified in the Corporation’s notice of meeting given by or at the direction of the Board of Directors delivered pursuant to Section 2.4 of these Bylaws, (b) otherwise properly made at the Stockholder Requested Special Meeting, by or at the direction of the Chair of the Board or the Board of Directors or (c) otherwise have been properly requested to be brought before the Stockholder Requested Special Meeting by the stockholder in accordance with this Section 2.2(B)(2) of these Bylaws.For proposals of Other Business to be properly requested by a stockholder to be made at an annual meeting of stockholders, a stockholder must (i) be entitled to vote at the meeting, (ii) comply with the notice procedures and other procedures set forth in this Bylaw as to such proposal and (iii) be a stockholder of record at the time such stockholder’s notice pursuant to this Bylaw is delivered to the Secretary of the Corporation and at the time of the annual meeting. The immediately preceding sentence shall be the exclusive means for a stockholder to submit proposals for Other Business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting) to be considered at an annual meeting of stockholders.
(2) For a proposal of Other Business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (B)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such Other Business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting;provided, however, that in the event that the date of an annual meeting is more than thirty(30) days before or more than sixty (60) days after such first anniversary date of the previous year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the one hundred twentieth (120th) day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to the date of such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. In addition, to be considered timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.
(3)Such stockholder’s noticeTo be in proper form, a stockholder’s notice to the Secretary with respect to the Other Business (whether given pursuant to paragraph (B)(1) of this Bylaw with respect to an annual meeting, or Section 2.2(B)(2) of these Bylaws with respect to a special meeting) shall set forth (a) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and any beneficial owner on whose behalf the proposal is made; (b) the text of the proposal of business (including the text of any resolutions proposed for consideration and, in the event that such proposal or business includes a proposal to amend the Bylaws, the text of the proposed amendment), (c) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any of their respective affiliates or associates or others acting in concert therewith and (d) as to the stockholder giving the notice and any beneficial owner of the Corporation’scapital stockVoting Stock on whose behalf the proposal is made (i) the name and address of such stockholder, and of such beneficial owner, as they appear on the Corporation’s books and of any of their respective affiliates or associates or others acting in concert therewith, (ii) the class and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder, any such beneficial owner and any of their respective affiliates or associates or others acting in concert therewith, (iii) any Derivative Position held or beneficially held by the stockholder, any such beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, including a description of the substantive terms thereof including the amount, value and/or number so held and the extent to which any such Derivative Position is intended to or has the effect of increasing or decreasing the actual or apparent voting power of such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith with respect to the Corporation’s securities, (iv) any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith has the sole or shared right to vote any class of shares of the Corporation, (v) any Short Interest held by such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith, (vi) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder, beneficial owner or any of their respective
affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (vii) any proportionate interest in securities of the Corporation or Derivative Positions held, directly or indirectly, by a general or limited partnership in which such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is a general partner, or directly or indirectly, beneficially owns an interest in a general partner, (viii) any performance-related fees (other than an asset-based fee) that such stockholder, beneficial owner or any of their respective affiliates or associates or others acting in concert therewith is entitled to based on any increase or decrease in the value of securities of the Corporation or Derivative Positions, if any, including without limitation any such interests held by members of such stockholder’s immediate family sharing the same household, and (ix) any other information relating to such stockholder, beneficial owner and any of their respective affiliates or associates or others acting in concert therewith, if any, that would be required to be disclosed in a proxy statement and form or proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal pursuant to Regulation 14(A) of the Exchange Act.
(C)Special Meetings of Stockholders. At any special meeting of the stockholders, only such business shall be conducted or considered as shall have been properly brought before the meetingby the Board of Directorspursuant to the Corporation’s notice of meeting pursuant to Section 2.4 of these Bylaws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at whichthe Board of Directors has determined thatdirectors are to be elected, as reflected in the Corporation’s notice of meeting pursuant to Section 2.4 of these Bylaws, (a) by or at the direction of the Board of Directors or (b) in the case of a special meeting other than a Stockholder Requested Special Meeting, or in the case of a special meeting that is a Stockholder Requested Special Meeting and the person wishing to make such nominations did not deliver, and did not otherwise direct the delivery of, a Special Meeting Request with request to such meeting,by any stockholder of the Corporation who (i) is entitled to vote at the meeting, (ii) complies with the notice and other procedures set forth in this Bylaw as to such nomination and (iii) is a stockholder of record at the time such stockholder’s notice is delivered pursuant to this Bylaw to the Secretary of the Corporation and at the time of the special meeting. The immediately preceding sentence shall be or (c) in theexclusive means forcase ofaStockholder Requested Special Meeting, by anystockholderof the Corporation pursuanttomake nominations before a special meeting of stockholdersSection 2.2.
(1)For any nominations of persons for election to the Board of Directors ofIn the event the Corporationto be properly brought beforecalls a special meetingbyof stockholders for the purpose of electing one or more directors to the Board of Directors, any stockholder entitled to vote in such election of directors (other thana stockholderpursuantwho has delivered, or who is acting on behalf of a person who directed the delivery of, a written request with respect toparagraph (C) of this Bylaw,such special meeting, in the case of a Stockholder Requested Special Meeting (an “Excluded Stockholder”)) may nominate a person or persons, as the case may be, for election to the Board of Directors of the Corporation as specified in the Corporation’s notice of meeting, by delivering the stockholder’s notice in the form required by paragraphs (A)(4) and (A)(5) of this Bylaw (including the completed and signed questionnaire, representation and agreement required by paragraph (A)(56) of this Bylaw), and timely updates and supplements thereof as required by this Bylaw,shall be deliveredto the Secretary at the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. In addition, to be considered timely, a stockholder’s notice (including the questionnaire, representation and agreement) shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice (including the questionnaire, representation and agreement) shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof,
and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight (8) business days prior to the date for the meeting, or any adjournment or postponement thereof in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof.Notwithstanding any other provision of these Bylaws, in the case of a Stockholder Requested Special Meeting, no Excluded Stockholder may nominate a person for election to the Board of Directors at the meeting, except pursuant to the written request(s) delivered for such special meeting pursuant to Section 2.2(A). Notwithstanding any other provision of these Bylaws, in the case of a Stockholder Requested Special Meeting, no stockholder may propose any other business to be considered at the meeting, except pursuant to the written request(s) delivered for such special meeting pursuant to Section 2.2(A).
(D)General.
(1)OnlyExcept as otherwise required by law, only such persons who are nominated in accordance with the procedures set forth in this Bylaw and Section 2.2 (as applicable) shall be eligible to serve as director and only such Other Business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylawand Section 2.2 (as applicable). Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chair of the meeting shall have the power and duty to determine whether a nomination or any Other Business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or Other Business is not in compliance with this Bylaw, to declare that such defective proposal or nomination shall be disregarded.Notwithstanding the foregoing provisions of this Section 2.7, unless otherwise required by law, if the stockholder does not provide the information required under Section 2.2(B) and/or this Section 2.7 to the Corporation within the time frames specified herein, or if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or Other Business, such nomination shall be disregarded and such Other Business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of Section 2.2(B) and this Section 2.7, to be considered a qualified representative of a stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or authorized by a writing executed by such stockholder (or a reliable reproduction or electronic transmission of the writing) delivered to the Corporation prior to the making of such nomination or proposal at such meeting by such stockholder stating that such person is authorized to act for such stockholder as proxy at the meeting of stockholders.
(2) For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw;provided,however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the separate and additional requirements set forth in these Bylaws with respect to nominations or proposals as to any Other Business to be considered pursuant to this Bylaw.
(4) Nothing in this Bylaw shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock if and to the extent provided for under law, the Certificate of Incorporation or these Bylaws. Subject to Rule 14a-8 under the Exchange Act, nothing in these Bylaws shall be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any Other Business proposal.
Section 2.8. Procedures; Required Vote.
(A)Procedures and Required Vote for Election of Directors. Election of directors at all meetings of stockholders at which directors are to be elected shall be by written ballot, and, except as otherwise set forth in the Certificate of Incorporation with respect to the right of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, each director shall be elected by a majority of the votes cast at any meeting for the election of directors at which a quorum is present with respect to such director’s election in elections of directors in which the number of nominees is equal to the number of positions available;provided, however, that directors shall be elected by a plurality of the votes cast at any meeting of stockholders for the election of directors at which a quorum is present for which (i) the Secretary of the Corporation receives a notice that a stockholder has or expects to nominate a person for election to the Board of Directors in compliance with the requirements set forth in Section 2.7 of these Bylaws, and (ii) such nomination has not been withdrawn by such stockholder on or prior to the business day next preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality vote, stockholders shall be provided with the option to withhold votes with respect to a nominee in lieu of the option to cast a vote against such nominee. The Board of Directors shall establish such procedures as it deems appropriate and advisable for the submission and consideration of resignations from the Board by incumbent directors who do not receive a majority of the votes cast for such director at any meeting of stockholders at which directors are to be elected and the number of nominees is equal to the number of positions available.
(B)Required Vote for Other Business. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all matters submitted to the stockholders at any meeting other than election of directors (which is addressed in paragraph (A) of this Bylaw) shall be decided by a majority of the votes cast with respect thereto.
Section 2.9. Inspectors of Elections; Opening and Closing the Polls; Rules of Conduct.
(A) The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act at a meeting of stockholders, the chair of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware.
(B) The chair of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.
(C) The Board of Directors and the chair of the meeting each shall have the authority to adopt and enforce such rules or regulations for the conduct of meetings of stockholders as they shall deem necessary or appropriate.
Section 2.10. No Stockholder Action by Written Consent. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specific circumstances, (i) any director serving in a classaction required or permitted to be taken by the stockholders of directors elected for a term expiringthe Corporation must be effected at the thirdan annual or special meeting of stockholders following the election of such class shall be removable only for cause and all other directors shall be removable either for or without cause, and (ii) the removal of any director, whether for or without cause, requires the affirmative vote of the holders of at least80 percenta majority of the voting power of the then outstanding Voting Stock, voting together as a single class.
Item 5(c): Remove Supermajority Voting Standards Related to Certain Business Combinations
Proposed Amendment to Article IX, Section 1, Paragraph (A):
(A) Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or this Certificate of Incorporation and except as otherwise expressly provided in Section 2 of this Article IX:
(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined) or (b) any other corporation (whether orand may not itself an Interested Stockholder) which is, or after such merger or consolidation would be an Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder, including all Affiliates of the Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $10,000,000 or more; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder, including all Affiliates of the Interested Stockholder, in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $10,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliates of an Interested Stockholder; or
(v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not an Interested Stockholder is a party thereto) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which are directly or indirectly ownedaffected by any Interested Stockholder or one or more Affiliates of the Interested Stockholder;
shall require the affirmative vote of the holders of at least75%a majority of the voting power of the then outstanding Voting Stock, voting together as a single class, including the affirmative vote of the holders of at least75%a majority of the voting power of the then outstanding Voting Stock not owned directly or indirectlyconsent in writing by any Interested Stockholder or any Affiliate of any Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be permitted by law or in any agreement with any national securities exchange or otherwise.such stockholders.
Proposed Amendment to Article IX, Section 6:
Section 6. Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be permitted by law, this Certificate of Incorporation or the Bylaws of the Corporation), but in addition to any affirmative vote of the holders of any particular class of Voting Stock required by law or this Certificate of Incorporation, the affirmative vote of the holders of80%a majority of the voting power of the shares of the then outstanding Voting Stock voting together as a single class, including the affirmative vote of the holders of80%a majority of the voting power of the then outstanding Voting Stock not owned directly or indirectly by any Interested Stockholder or any Affiliate of any Interested Stockholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article IX of this Certificate of Incorporation.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date CAPITAL ONE FINANCIAL CORPORATION 1680 CAPITAL ONE DR.
MCLEAN, VA 22102-3491
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cAPITAl ONE FINANCIAL CORPORATION 1680 CAPITAL ONE DR. MCLEAN, VA 22102-3491 M68081-P45408-Z62110 CAPITAL ONE FINANCIAL CORPORATION FINANcIAl cORPORATION
The Board of Directors recommends you vote FOR the following:
1. Election of Directors
Nominees: For Against Abstain
The Board of Directors recommends you vote FOR
1a. Richard D. Fairbank proposals 2, 3 and 4, and FOR each item of proposal 5. Abstain Against4. For Against Abstain For
1b. Patrick W. Gross 2. Ratification of selection of Ernst & Young LLP as
independent auditors of Capital One for 2014. 1a. Richard D. Fairbank 2015.
3. Approval of Capital One’s Third Amended and Restated 2004 Stock Incentive Plan. 1b. Patrick W. Gross 4. Advisory approval of Capital One’s 20132014 Named Executive Officer compensation.
1c. Ann Fritz Hackett 1d. Lewis Hay, III 5.Of?cer compensation.
4. Approval of amendments to Capital One’s Restated Certificate
1d. Lewis Hay, III Certi?cate of Incorporation to remove supermajority voting standards applicableallow stockholders to
request special meetings of the following actions: stockholders.
1e. Benjamin P. Jenkins III 5a. Future amendments to the Amended and Restated Bylaws and the Restated Certificate of Incorporation 1f. Pierre E. Leroy 1g. Peter E. Raskind 5b. Removing any director from office 5c. Certain business combinations 1h. Mayo A. Shattuck III The Board of Directors recommends you vote AGAINST For Against Abstain
proposal 6. 1i. Bradford H. Warner 1j. Catherine G. West 6.5.
1f. Pierre E. Leroy 5. Stockholder proposal regarding an independent board chairman,special meetings of the
stockholders, if presented at the meeting.
1g. Peter E. Raskind NOTE: Such other business as may properly come before the
meeting or any adjournment or postponement thereof.
1h. Mayo A. Shattuck III
1i. Bradford H. Warner ! ! !
1j. Catherine G. West
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,?duciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.of?cer.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:Meeting to be Held on April 30, 2015:
The Notice and& Proxy Statement and Annual Report on Form Report/10-K are available at www.proxyvote.com. M68082-P45408-Z62110 CAPITAL
M83953-P60101-Z64838
cAPITAl ONE FINANCIAL CORPORATION FINANcIAl cORPORATION
Annual Stockholder Meeting
Thursday, May 1, 2014April 30, 2015 10:00 a.m. Capital
capital One’s Headquarters
1680 Capitalcapital One Drive McLean,
Mclean, Virginia 22102
THIS PROXY IS SOLICITEDSOlIcITED ON BEHALFBEHAlF OF THE BOARD OF DIRECTORS DIREcTORS
The undersigned hereby appoints Richard D. Fairbank and John G. Finneran, Jr., and either of them, proxies of the
undersigned, with full power of substitution, to vote all the shares of Common Stock of Capital One Financial Corporation,
a Delaware corporation, held of record by the undersigned on March 6, 2014,5, 2015, at the Annual Stockholder Meeting to be
held onMay 1, 2014on April 30, 2015 and at any postponement or adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILLPROPERlY EXEcuTED, WIll BE VOTED AS SPECIFIEDSPEcIFIED BY THE UNDERSIGNED STOCKHOLDER. uNDERSIGNED STOcKHOlDER.
IF NO CHOICEcHOIcE IS SPECIFIEDSPEcIFIED BY THE STOCKHOLDER,STOcKHOlDER, THIS PROXY WILLWIll BE VOTED “FOR” ALLAll PORTIONS OF
ITEMS (1), (2), (3), AND (4) AND (5), “AGAINST” ITEM (6)(5), AND IN THE PROXIES’ DISCRETIONDIScRETION ON ANY OTHER MATTERS COMING
cOMING BEFORE THE MEETING. Continued
continued and to be signed on reverse side