MBA Profile: Richard D Fairbank

The head of Capital One hasn't received a salary from his company since 1997, and he's still the highest-paid CEO in the country. See how this business leader used his MBA to succeed.

Rich Fairbank had never worked at a large company. So, he built one.

The Fortune 500 list wasn’t always on Rich Fairbank’s mind. He graduated from Stanford with a B.A. in Economics in 1972, and took seven years away from school before returning for his MBA. Between degrees, Fairbank kept himself busy with small business ventures, founding a training school for professional swimmers and working locally in his community. Fairbanks dreamed of bigger things, and knew an MBA would give him necessary practical knowledge.

An Unlikely Resume

Before he returned to Stanford in 1979, Fairbank sued his future school for eminent domain over Stanford-owned playing fields, opening the area up for public use by the neighborhood. On his application to the famous MBA program, he proudly noted his greatest achievement in business to date: “Suing Stanford.”

Fairbank graduated at the head of his MBA class in 1981 and landed a job at a consulting firm. Then , he went on to jobs that had him analyzing oil companies in Canada and financial services ventures in Virginia—all drawing on his degree experience with international business, business law, and financial policy. As he got closer to the banking world, Fairbank realized some major flaws in existing credit card companies. Suddenly, the small-business MBA graduate had an idea.

Reinventing the Credit Card

When Fairbank and his partner, Nigel Morris, landed a job supplying credit cards to a large New York Bank, they realized that the one-size-fits-all credit card model didn’t work for everyone. “We’d been there just one day,” Fairbank told Stanford Business Magazine, “and it struck us like an epiphany.”

Using the skills MBA candidates now acquire in product management courses, Fairbank and Morris realized that they could customize the rates and benefits of credit card to fit individuals. Instead of one interest rate and one payment plan, the credit card diversified into something more accessible for every level of credit. From there, knowledge in corporate finance and strong marketing skill turned their plans into entrepreneurial reality.

In the world of business, a good idea goes a long way, and the credit card plan that would be the cornerstone of Capital One took off with businesses and individuals alike. “Out of nowhere, we had a home run on our hands,” Fairbank recalled in an interview with Washington Business Forward. When Fairbank opened Capital One’s doors in 1996, he was armed with a new-business model, and ready to take one of the biggest risks of his life.

Risk and Reward

Most young CEOs of a successful new business might sit back, collect the paycheck, and relax. But in 1997, when Fairbank’s fledgling business was only one year old, he decided to trade in his salary and bonus package in exchange for performance-based stock options. If the company failed, Fairbank might have ended the year empty-handed—a risky move for any CEO. Fairbanks had to draw on his knowledge of investment management as well as his confidence with his product to take that calculated risk.

In the past ten years, his risk has paid off in a major way. In 2005, Fairbank traded in 3.6 million accumulated stock options for a record $250 million payday. From small business to big business, Fairbank’s MBA allowed him to be flexible with the many challenges along the way. For Rich Fairbank, his substantial payday is just another reward for thinking big.

About the Author

Amelia Gray is a teacher and freelance writer in San Marcos, TX. Amelia earned a Bachelor’s Degree in English Literature from Arizona State University.

Sources

• “Credit Card Revolutionary,” by Mike McNamee for Stanford Business Magazine
• “The Secret CEO,” by Jeremy M. Brosowsky for Washington Business Forward

Posted on October 17, 2006 at 9:46 AM

Share this article: