For 12 long years, one of the monthly checks I wrote each month was to the fine folks at Sallie Mae, now known as SLM. The number is forever etched in my memory: $121.33, which was the $10,000 that I borrowed to pay for my Economics degree from Brandeis University plus another $7,500 in interest. Like a lot of 18 year-old kids who signed similar papers (and still do), I had no idea who Sallie Mae was. It was only later (see this summary of a 60 Minutes piece from 2006 for example) that I began to have a better understanding of just how profitable those $121.33 a month checks were. Of course, stories about CEO Albert Lord building his own golf course didn’t help.
I thought about this as I read this 8-K that SLM filed yesterday. The company had previously announced last November that Lord, who also had the title of Vice Chairman (a job I first skewered in this Slate piece nearly a decade ago) planned to retire at the end of 2013 and two days ago, moved up Lord’s retirement to May 29, combining it with the news that the company planned to split itself in two.
After reading the most recent 8-K, the only real question is why the company waited an extra day to file it, instead of trying to bury it with the May 29 news. That’s because Lord is walking away with a passel of money. First, there’s the $6.7 million in severance, which is nearly 7 times Lord’s $1 million annual salary. Then there’s another $3.2 million in a bonus, 24 months of health insurance coverage, and, the real pièce de résistance are the 1.2 million options that become fully vested.
To get a sense of how much those options are worth, you need to do some digging through the proxy statement that SLM filed last month. While around half of those options — 530,000 according to the proxy — are just barely in the money at $22.28 a share, the other half are at prices ranging from $10 to $15 a share, which at yesterday’s closing price adds another $6 million to Lord’s retirement pot.
To be fair, Lord has been at the company for a very long time and took the reigns of CEO back following the failed attempt to sell the company to private equity funds. We should also mention that the payments to Lord don’t include gross-ups — something that we’ve seen all too often.
Still, given that SLM is not exactly a beloved company — just Google “I hate Sallie Mae” for plenty of evidence — it does seem like a bad PR move.
We have no idea if Elizabeth Warren (or perhaps someone on her staff) reads 8-Ks, but we can’t help but wonder what she might have to say about Lord’s rich departure.