ITT Educational Services Inc. still will pay bonuses to its top executives, but the awards no longer will be tied to school enrollment, the Carmel-based for-profit educator said in its annual proxy statement.
The decision stems from new regulations by the Department of Education, which are designed to slow the growth of for-profit schools and boost graduation rates. The regulations were in response to concerns schools were placing too much emphasis on enrollment growth vs. the success former students had in finding employment.
Rules require that at least 45 percent of former students be actively paying down their loans after leaving a for-profit school. If former students fail to achieve that threshold, the government will not allow a for-profit education program to accept federal student-loan funding. And, if repayment rates fall below 35 percent, the government will cut off student-loan funding entirely for any new students.
“As a result of the prohibition on basing any portion of the executives’ compensation on performance, the Compensation Committee did not establish a bonus program for 2011,” ITT said in its proxy filed on Tuesday.
Still, ITT CEO Kevin M. Modany is slated this year to earn a $1.1 million bonus, according to the proxy, though the amount is no longer based on performance metrics, such as enrollment growth.
While ITT said it no longer can base compensation on performance, the company said it still will strive to offer pay packages that “reflect the competitive marketplace in order for us to attract, retain and motivate talented executives.” ITT said it also will include stock-based compensation in the packages “in order to align the executives’ interests with those of our shareholders.”
Daniel M. Fitzpatrick, ITT’s chief financial officer, is set to receive a $324,000 bonus, and three other executives should receive additional compensation ranging from $263,000 to $319,000.
Modany earned a total of $6.7 million in 2010, 11.5 percent less than the previous year. Much of the decline was in performance pay—$1.4 million in 2009 compared with $480,625 last year. He received nearly the same amount of stock option awards, valued at $5.4 million, both years.
ITT’s CEO earned a base pay of $769,000 in 2010 and is expected to receive a 2.5-percent raise this year, pushing his annual base salary to $788,250 in 2011.
CFO Fitzpatrick earned $1.4 million in total compensation last year, 20 percent less than in 2009. He also will receive a 2.5-percent increase this year in base salary, which will climb to $332,000.
Total pay in 2010 for other ITT top executives:
— Chief Administrative and Legal Officer Clark D. Elwood earned $1.4 million, down 21.9 percent.
— Technical Institute Division President Eugene Feichtner earned $1.3 million, down 17.1 percent.
— Online Division President June M. McCormack earned $1.2 million, down 18 percent.
ITT currently enrolls about 80,000 students.
For 2010, ITT grew profit by nearly 25 percent over the previous year, to $374.2 million. Revenue surged 21 percent, to nearly $1.6 billion.
Company shares were trading mid-morning at $57.03 each, down from a 52-week high of $64 reached in January.