Sallie Mae CEO Gets Raise Despite Record Losses

April 9, 2009

Remember the outrage when we we all learned that A.I.G., a recipient of huge federal bailout dollars, was handing out bonuses to executives who had been in charge of financial operations that lost buckets of money? Well Sallie Mae, the nation’s largest private student loan lender, apparently likes what it saw.

Despite losing $213 million in 2008, Sallie Mae’s CEO Albert L. Lord got a multimillion dollar raise as his reward. He received $4.7 million in total compensation for 2008, a raise of $3 million over his 2007 compensation.  Overall, Lord’s collected almost a quarter billion dollars from selling loans to struggling college students during his time at Sallie Mae.

His pay raise became public three months after Lord told managers in a January 26, 2009 memo published by the Washington Post that he was cutting the bonus pool and that no one earning more than $50,000 in base salary will receive a merit increase in 2009. Lord didn’t receive a bonus.

“Our philosophy at Sallie Mae has been to tie compensation to the financial success of the company,” Lord wrote. “We generally pay for results and effort. We reported disappointing full-year earnings last week. Certainly factors well outside our control drove good numbers down and bad numbers up, nonetheless, we are responsible to our shareholders for the bottom line — and they have endured much pain this year.”

Lord added: “The best thing we can say about 2008 is it is behind us.”

Was Lord’s pay for “a job well done?”  How was it tied to performance?

In October, Sallie Mae sold $1 billion in student loans back to the U.S. Department of Education as part of a student loan bailout program called the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA).

Now, Sallie Mae’s fighting to win a loan servicing contract from the U.S. Department of Education that will pay an estimated $200 million a year in fees.

What’s next? TARP money and another raise?