Sallie Mae Cuts Executive Pay
"The best thing we can say about 2008 is it is behind us," Sallie Mae chief executive Albert Lord says in this memo to managers:
To: All Management Incentive Program Participants
From: Albert L. Lord
Date: January 26, 2009
RE: 2008 Management Incentive Payouts
That 2008 was a challenging year for our economy and Sallie Mae is a colossal understatement. As you know Sallie Mae is a wholesale user of the capital markets and during 2008 and into 2009 those markets have been virtually closed. We met the challenges created by these market conditions with extraordinary effort, flexibility, an unwavering commitment to our student and school customers and a passion for winning.
Our philosophy at Sallie Mae has been to tie compensation to the financial success of the company. We generally pay for results and effort. We reported disappointing full-year earnings last week. Certainly factors well outside our control drove good numbers down and bad numbers up, nonetheless, we are responsible to our shareholders for the bottom line - and they have endured much pain this year.
Recently I met with your senior managers and informed them:
· Our MIP cash bonus pool for Vice Presidents and below will be slightly below 40 percent of last year's total. (The corresponding number for Senior Vice Presidents and above will be 20 percent.)
· The stock option pool will be about 60 percent of what it was a year ago.
· We will provide equity grants to top performers, but the pool available will be much smaller this year.
· No one earning over $50,000 in base salary will receive a merit increase in 2009. (Promotion recommendations will be treated separately.)
· Jack Remondi, Jack Hewes and I will take no cash performance bonus this year.
I recognize this is difficult news, particularly after a year where you likely worked harder than ever. I believe the compensation numbers are fair. I have asked the senior management team to make sure top performers are rewarded and recognized within these constraints.
The best thing we can say about 2008 is it is behind us. The new year will present additional challenges but because of 2008 accomplishments, it should be a better one for Sallie Mae. Certain of the financing programs announced by the federal government in the wake of the credit crisis are nearing implementation. I know this management team will continue to perform at the same extraordinarily high level as you did in 2008, and we will make this year a success for our customers, shareholders - and ourselves.
If effort were the sole compensation criteria you would all be eligible for 200% bonuses. I am proud of our management team - we managed the 2008 roller coaster and we are still lending to students at near record levels.
January 26, 2009; 4:25 PM ET
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