Discover Financial’s CEO leaves amid compliance problems

Discover Financial Services witnessed a nearly 10% drop in its stock value as CEO Roger Hochschild resigned abruptly due to compliance concerns. Hochschild, a veteran of the company, stepped down immediately from his roles as CEO, President, and board member. John Owen, a retired bank executive on the Discover board, was named interim CEO and President while the company searches for a permanent replacement.

The company disclosed an issue with credit card “misclassification” that led to higher charges for certain merchants and merchant acquirers. Discover added a $365 million liability to its financial statements to cover refunds for the misclassification and is discussing governance and risk management with regulators, possibly facing penalties.

Hochschild, who started at Discover in 1998, will serve as an adviser to the board until December 31, with his base salary continuing during the transition. He won’t participate in the fiscal 2023 incentive program, will not receive additional equity grants, or get severance. Owen, the interim CEO, retired as COO of Regions Financial Corp and joined the Discover board in 2022. He will receive an annual base pay of $950,000 and a $500,000 stock award upon a permanent successor’s appointment.

Discover, known for its credit card, offers other financial services like private student loans, personal loans, home loans, and deposits.