Discover Financial Services Inc. has sharply raised the base salaries of CEO David Nelms and other senior management as it contends with bonus restrictions imposed by the federal Troubled Asset Relief Program.
But the Riverwoods, Illinois -based credit card company is making most of the increases in the form of company stock rather than cash.
Mr. Nelms, paid a base salary of $1 million in 2009, will receive $4.55 million in 2010, according to the company proxy statement, filed Monday. He will continue to receive $1 million in cash, with the remaining $3.55 million in stock.
In 2009, Mr. Nelms’ total compensation was $5.68 million, down from $8.30 million in 2008.
His top lieutenants will receive increases in the cash components of their base salaries while also getting part of the increase in the form of stock. For example, Chief Financial Officer Roy Guthrie will get $750,000 in cash (up from $625,000 in 2009) and $1.15 million in stock, while Chief Operating Officer Roger Hochschild will get $800,000 in cash (up from $725,000 in 2009) and $2.1 million in stock.
In its proxy, Discover said more of its compensation for senior executives now is fixed rather than variable bonuses tied to specific goals. Stock that’s paid as part of executive salaries can’t be sold immediately and instead is subject to staggered holding periods ranging between 18 months and three years.
Like other credit card companies, Discover is vying with substantial loan losses. It managed to turn a profit in 2009, with most of the earnings coming from its settlement with the Visa network over litigation alleging anticompetitive tactics.
In March 2009, Discover sold $1.22 billion in preferred shares to the Treasury Department under the TARP program.
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