Capital One Financial

(COF) - Get Report

amended its compensation agreement with Chairman and CEO Richard Fairbank, banning him from cashing out equity awards while the federal government owns a stake in the company.

The McLean, Va.-based company, which received $3.55 billion from the Treasury Department's Troubled Asset Relief Program in November, said in a filing Tuesday that as long as Fairbank remained CEO of the company, he would not be able to sell or transfer any shares of the equity awards granted to him until the company had repaid its TARP funding, or one year after his retirement.

Since 1997, Fairbank has received no salary or cash bonus. Instead, he has been compensated only with equity and options awards, which are dependent on Capital One's long-term performance.

In 2007, Fairbank received options awards with an estimated value of $17 million at the time they were granted.

The filing reiterated that the CEO's compensation plan was "entirely equity-based" and he would not receive "any salary, bonus or other form of cash compensation."

As part of the agreement, Fairbank would receive up to 200% of 95,239 shares of common stock based on Capital One's performance guidelines over the next three years (as related to total shareholder return compared to other banks in the S&P 500).

Fairbank was also granted 970,403 of nonstatutory stock options at an exercise price of $18.28 a share. The options will become fully exercisable on Jan. 29, 2012, but remain subject to whether Treasury still has a stake in the company, the filing said.

Capital One shares were falling 2% to $16.41 on Tuesday.

Fairbank also could be granted restricted stock at the end of 2009, based on the company's performance. Any restricted stock would have a vesting period of at least three years, the company said.

The criticism over executive compensation practices within financial services sector has intensified following shareholder outrage and scrutiny from regulators, as banks have doled out excessive bonuses even as the credit crisis worsened.

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The TARP program sets some restrictions on compensation practices and President Barack Obama has made reining in executive pay a priority as the new administration shapes the next phase of the bank bailout.

Goldman Sachs

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CEO Lloyd Blankfein and other top executives at the firm agreed to forego bonuses last year, which was followed by colleagues at other companies across the financial sector. But executives did not let go of potential paydays as easily in other places.

Merrill Lynch

accelerated the payment of bonuses by one month to the end of December, after CEO John Thain only grudgingly gave up a request for a bonus of his own.

Bank of America

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bought the brokerage firm on Jan. 1.

It was one of several reasons why Thain was forced out as head of BofA's global wealth management and investment banking businesses last month.

New York State Attorney General Andrew Cuomo said last week that he had opened an investigation into the bonuses paid and had subpoenaed Thain and other BofA executives.

"The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation," Cuomo said in a statement.

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