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Sallie Mae Execs' Handsome Payday

Fitzpatrick stands to make as much as $257 million in the company's sale; Lord could make even more.

The chief executive of taxpayer-aided student loan company

Sallie Mae

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could make as much as $257 million from its sale.

Tim Fitzpatrick's windfall will come as a result of the $25 billion takeover that he negotiated with

Bank of America

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JP Morgan Chase

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and two private-equity firms. The deal was announced over the weekend.

His predecessor and current chairman Albert Lord may make even more than Fitzpatrick. Details were unclear Tuesday night. Sallie Mae could not be reached for comment.

Fitzpatrick was hired as president and chief operating officer in 1998 and stepped up to become CEO just two years ago. Public filings show that as of Feb. 28 he had already accumulated 2,036,447 million shares in the company, including certain "restricted stock units." At the takeover price of $60, each of those will be worth $122.2 million in total. Public filings also show 5.8 million options with exercise prices from around $21 to around $56. At $60 a share, they could be worth another $135 million.

As with most companies, Sallie Mae has adopted a disclosure policy that effectively obscures the bottom line behind a blizzard of ambiguous tables and footnotes. The company could not be reached Tuesday for further clarification.

Fitzpatrick's windfall, of course, is in addition to the mere cash he gets. He received $2.25 million in salary and bonus last year. In addition, Fitzpatrick gets 2 million options.

He is not alone. Directors and the top five executives hold 5 million shares in the company among them, worth just over $300 million thanks to the deal. And they own another 14.9 million vested share options. The value is unknown as exercise prices are not disclosed. As of Feb. 28, Albert Lord owned 1 million shares, worth $60 million in the deal, plus another 7 million options. Exercise prices were unknown.

The beauty of it all is that thanks to the deal, shares and options vest immediately so the executives don't have to wait for years. Further details of executive compensation will surely emerge in the days ahead.

The takeover rescues Fitzpatrick and his fellow executives from the uncertainty and scrutiny of life in a public market. Until news of the takeover came last week, Sallie Mae's shares had declined by a quarter over the past year as the company faced growing troubles on several fronts. States including New York and Connecticut are currently investigating whether student loan companies have been paying universities to steer students their way.

And Washington, D.C. has been taking a sharp look at the industry. President Bush recently proposed cutting subsidies to student lenders.

Sallie Mae was launched by the federal government in 1972 to give students access to cheap college loans. Its business depends on taxpayer support. As much as 85% of the loans it makes are federally guaranteed.

In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.