Capital One 1998 Annual Report Download - page 7

5
our service to expand their choices. America One opens a
major avenue of diversification for us and has the poten-
tial to produce a large and profitable annuity-like stream
of income.
In July 1998, we also entered the auto lending busi-
ness with the acquisition of Summit Acceptance
Corporation of Dallas, Texas. Summit gives us a testing
platform in a financial sector we believe is well suited to
our Information-Based Strategy and ready for fundamen-
tal change.
The broad applicability of our strategy puts Capital
One in an excellent position to capitalize on macrotrends
that have been reshaping the world for the last decade
and will continue to shape it in the next:
■Direct marketing, which opens up the opportunity to
test and customize, to capture information and to roll out
innovations quickly and inexpensively.
■The Internet, the ultimate direct marketing channel
which brings our Information-Based Strategy into
real time.
■Information technology, as continuing advances in the
ability to collect, process, store and use information
are accelerating the opportunities for technology-based
marketing.
■Globalization, which gives rise to marketing opportuni-
ties all over the world.
■Excellent product growth trends. The credit card is
steadily replacing cash and checks as the preferred medi-
um of exchange. Wireless
phones are becoming a
mass consumer product
as the cost of service
becomes more affordable.
With the information-based company we’ve built, and
the broad, rapid innovation it supports, we see an out-
standing future for Capital One. We are aligned to ride
the macrotrends. And we’re moving toward our vision of
a company that is not dependent on the fortunes of a sin-
gle industry or geography.
Our confidence in the company’s long-term success
is so strong that the two of us continue to forgo
current compensation in exchange for the possi-
bility of greater rewards in the future. In June 1998,
having already given up our salaries and bonuses, we
traded vested stock options, valued at $8.8 million, for
new options that will not vest unless Capital One’s stock
price reaches $175 by June 11, 2001. (This represents
a compound annual increase of 20% for three years.) Our
options are part of a compensation plan that, in 1998,
allowed 273 senior managers to forgo up to half their
annual cash bonuses for options. An overwhelming major-
ity (82%) chose to participate.
More than 40% of our associates take part in the com-
pany’s stock purchase plan, one of the highest participa-
tion levels in corporate America. Last spring, to foster
the entrepreneurial spirit that goes hand in hand with
ownership, we once again granted stock options to
all associates (excluding senior executives). The option
and compensation plans are described on pages 47–49.
Knowing the success of our strategy depends entirely
on the caliber of our people, we have always seen recruit-
ing as our most important business. We are deeply
committed to finding and
empowering world-class
talent. To attract the best
of the best, we’ve created
a company that offers
associates unusually broad opportunities to pursue
their entrepreneurial dreams, develop their leadership
Knowing the success of our strategy
depends entirely on the caliber of our
people, we have always seen recruiting as
our most important business.