Discover CEO's 2009 compensation rises 79 percent
NEW YORK -- David Nelms, the chairman and CEO of Discover Financial Services, took home nearly 79 percent more in compensation in fiscal 2009 than he did the prior year.
Nelms, 49, received about $4.3 million in compensation, in a year when consumers struggled to pay their credit card bills as unemployment skyrocketed. That was up from the $2.4 million in total compensation Nelms got in 2008.
The increase in 2009 outpaced the gains in the company's stock. Shares of Discover gained more than 50 percent in 2009, and have fallen about 7 percent since the start of the year.
The primary reason for Nelms' rise in compensation was the granting of restricted stock units awarded for the company's 2008 performance. Nelms received $3.3 million in stock-based compensation in fiscal 2009, after receiving none in fiscal 2008.
His base salary remained $1 million, the same as in 2008.
Nelms got no cash bonus for 2009, after receiving a $1.4 million bonus a year earlier. The bonus elimination reflected restrictions under rules set by the U.S. Treasury for companies that received bailout funds. Discover Financial got $1.2 billion in March through Treasury's capital purchase program. Unlike many large financial companies, though, Discover has yet to pay back the government.
Nelms also received a $17,150 contribution to his 401(k) plan, up from $6,100 the prior year.
The Associated Press calculations of total pay include executives' salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission.
Like other credit card lenders, Discover Financial dealt in 2009 with mounting write-offs tied to late payments and defaults, as consumers struggled through the spike in unemployment. Defaults typically mirror the unemployment rate, which topped 10 percent in July.
The company, which is based in Riverwoods, Ill., said during its fiscal fourth quarter, which ended Nov. 30, that profit fell 19 percent to $352.1 million, as the rate of bad loans increased. The percentage of loans the company expected not to be repaid rose to 8.43 percent from 5.48 percent. The rate of loans 30 days or more past due also rose.
For the full fiscal year, Discover earned $1.24 billion, or $2.42 per share, compared with $927.8 million, or $2.20 per share, in the previous year.