Discover CEO's 2008 compensation falls 89 percent
David Nelms, the chairman and chief executive of Riverwoods-based Discover Financial Services, took home 89 percent less in compensation in 2008 than he did the prior year.
Nelms received about $2.4 million in compensation in a year in which the credit crisis exploded, hitting nearly all financial services firms hard. That is down from the $21.8 million in total compensation that Nelms got in 2007.
The pay decline in 2008 outpaced the slump in the company's stock. Shares of Discover Financial lost 37 percent of their value of 2008, and are down another 40 percent during the first two months of 2009.
The primary reason for Nelms' dwindling compensation was a lack of stock options and restricted stock awarded in 2008. Nelms received no stock compensation in 2008, after being awarded $18.1 million in stock options in 2007.
His base salary increased 11 percent in 2008 to $1 million from $900,000 in 2007. Nelms' cash bonus fell 48 percent to $1.4 million from about $2.8 million a year earlier. He also received a $6,100 contribution to his 401(k) plan for the second straight 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 is facing mounting losses tied to rising delinquencies and defaults as customers fall further behind on payments amid the ongoing credit crisis and recession.
During its fiscal fourth quarter, which ended Nov. 30, Discover Financial's provision for loan losses increased $521 million, or 89 percent, to $714.2 million.
Discover's charge-off rate grew to 5.48 percent of total loans from 3.85 percent a year ago and 5.2 percent during the third quarter. The charge-off rate measures the amount of loans written off as not being repaid compared to the total size of the loan portfolio.
Analysts widely expect credit card charge-offs to continue to climb in 2009. At the time it announced the fourth-quarter results, Discover Financial said it expects the charge-off rate to rise above 6 percent in the first quarter.