EXECUTIVE COMPENSATION
We ask that you approve on an advisory basis the compensation of our named executive officers. The named executive officers are those executive officers listed in the Summary Compensation Table. The
advisory approval of named executive officer compensation is required by federal law, and while the vote is not binding, the Compensation Committee considers the vote as part of its evaluation of executive compensation programs.
2015 Executive Compensation Highlights
In 2015, our management team continued to execute on its strategy of providing our clients individual investors, registered investment advisors and employers with advice and services to help
them achieve their financial goals. This Through Clients Eyes strategy, combined with ongoing expense discipline, resulted in core net new assets of $134.7 billion (the fourth consecutive year in excess of $100 billion), total
client assets of $2.51 trillion, a pre-tax profit margin of 35.7% and revenue growth of 5%. Earnings per share (EPS) was $1.03 (up 8% over the prior year), and return on common equity (ROCE) was 12%.
The companys compensation programs are designed to link pay to the long-term performance of the company. Key elements of 2015 compensation
included:
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Element
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Form
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Terms
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Objectives
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Base Salary
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·
Cash
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Reviewed annually
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Attract, motivate and
retain executives
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Annual Incentives
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·
Cash
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Subject to satisfaction of
performance criteria
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·
Attract, motivate and
retain executives
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Reward executives for
individual
performance
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Link pay with company
financial performance
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Long-Term Incentives
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·
Performance-based restricted stock
units
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Stock options
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Restricted stock units vest
one-sixth per year in the
first two years and two-
thirds in the third
year,
subject to satisfaction of
performance criteria
·
Stock options generally
vest 25% per year and
have a ten-year term
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·
Attract, motivate and
retain executives
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Reward executives for
individual
performance
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Link pay with company
financial performance
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Align with long-term
interests of stockholders
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Execution on the companys strategy led to solid financial performance in 2015, and the Compensation Committee
approved funding at 99.04% of the target award for the named executive officers for annual cash incentives. The performance goal for performance-based restricted stock units (PBRSUs) granted in 2015 was based on ROCE divided by cost of equity
capital (COE) to align the executives incentives with the long-term interests of stockholders. The PBRSUs were designed to transition to a three-year performance period and vesting schedule, with one-sixth vesting per year in the first two
years and two-thirds in the third year.
Summary compensation information for the named executive officers, including an additional individual
who served as an executive officer for a portion of 2015, is contained in the following table. As discussed in the proxy statement, these amounts are presented in accordance with accounting assumptions and Securities and Exchange Commission rules,
and the amount that the executive actually receives may vary substantially from what is reported in the equity columns of the table.
iv
2015 SUMMARY COMPENSATION
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Name and Principal Position
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Salary
($)
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Stock
Awards
($)
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Option
Awards
($)
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Non-Equity
Incentive Plan
Compensation
($)
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All Other
Compensation
($)
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Total
($)
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Walter W. Bettinger II
President and Chief
Executive Officer
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1,000,000
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3,750,000
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3,750,000
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3,714,000
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123,373
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12,337,373
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Joseph R. Martinetto
Senior Executive Vice President
and Chief Financial Officer
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610,417
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1,125,000
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1,125,000
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1,209,113
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38,762
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4,108,292
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Charles R. Schwab
Chairman
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500,000
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1,500,000
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1,500,000
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1,238,000
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62,269
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4,800,269
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Marie A. Chandoha
President and Chief Executive Officer,
Charles Schwab Investment Management, Inc.
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560,000
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750,000
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750,000
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970,592
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36,828
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3,067,420
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Terri R. Kallsen
Executive Vice President
Investor Services
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450,000
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625,000
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625,000
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668,520
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603,876
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2,972,396
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James D. McCool
Executive Vice President
Corporate Initiatives
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550,000
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750,000
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750,000
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953,260
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38,233
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3,041,493
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STOCKHOLDER PROPOSALS
There are stockholder proposals to vote on that are described in the proxy statement.
v
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N
OTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS
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Date:
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Tuesday, May 17, 2016
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Time:
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2:00 p.m., Pacific Time
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Location:
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www.schwabevents.com/corporation,
or
211 Main Street, San Francisco, California
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Agenda:
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elect five directors for
three-year terms,
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vote to ratify the selection of independent auditors,
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vote for the approval, on an
advisory basis, of compensation of named executive officers,
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vote on two stockholder proposals, if properly presented, and
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consider any other business properly coming before the meeting.
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Stockholders who owned shares of our common stock at the close of business on March 18, 2016 are entitled to attend
and vote at the meeting and any adjournment or postponement of the meeting. A complete list of registered stockholders will be available prior to the meeting at our principal executive offices at 211 Main Street, San Francisco, California 94105.
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By Order of the Board of Directors,
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DAVID R. GARFIELD
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EXECUTIVE VICE PRESIDENT,
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GENERAL COUNSEL AND
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CORPORATE SECRETARY
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be Held on May 17, 2016. The proxy statement and annual report to
security holders are available in the Investor Relations section of our website at
www.aboutschwab.com
.
vi
PROXY STATEMENT
The Board of Directors is sending these proxy materials to you on or about March 30, 2016. Stockholders who owned the companys common stock at
the close of business on March 18, 2016 may attend and vote at the annual meeting. Each share is entitled to one vote. There were 1,321,396,131 shares of common stock outstanding on March 18, 2016.
VOTING YOUR SHARES
Please vote as promptly as possible by following the instructions on your proxy card or voting instruction form. You may vote by internet, telephone or mail in advance of the meeting by following the
instructions on your proxy card or voting instruction form.
If you do not vote in advance and plan to submit your vote at the annual meeting,
you will need a legal proxy to vote your shares if your shares are held in street name (e.g., through a bank or broker). You may obtain a legal proxy from your bank or broker. If you plan to vote at the virtual meeting, please send your
legal proxy to our transfer agent, Wells Fargo Bank, N.A., by fax to (651) 450-4026 or email to wfssproxyteam@wellsfargo.com. If you plan to vote at the in-person meeting, please bring the legal proxy with you. If you hold shares registered in
your name (e.g., in certificate form), you will not need a legal proxy to vote your shares at the annual meeting.
ATTENDING THE ANNUAL MEETING
You must register in advance to attend the annual meeting virtually via the internet or in person. To
register, please go to:
www.schwabevents.com/corporation.
You will be asked to provide your name, mailing address, email address and proof that you own Schwab shares (such as the Schwab account number in which you hold the shares, or the name of the broker and
number of shares that you hold in an account outside of Schwab). You also may write the Assistant Corporate Secretary at the address in the Corporate Governance Information section of this proxy statement or call the Assistant Corporate
Secretary at (415) 667-9979 if you plan to attend the in-person meeting.
If you register in advance to attend the virtual annual
meeting, we will email you information on how to access the area of
www.schwabevents.com
where you will be able to submit questions and vote. While you may watch the webcast without registering in advance, you will not be able to access the
area of the website where you can ask questions and vote.
If you plan to attend the in-person meeting, in accordance with our security
procedures, you will be asked to present picture identification to enter the meeting. Attendance at the annual meeting is limited to stockholders or one named representative of a stockholder. Seating is limited and, therefore, admission to the
in-person annual meeting is on a first-come, first-served basis. If you will be naming a representative to attend the meeting on your behalf, the name, address and telephone number of that individual also must be provided.
1
PROPOSAL ONE:
ELECTION OF DIRECTORS
Nominees for directors this year are:
Each
nominee is presently a director of the company and has consented to serve a three-year term. Biographical information about each of the companys directors, including the director nominees, is contained in the following section.
MEMBERS OF THE BOARD OF DIRECTORS
JOHN K. ADAMS, JR.
DIRECTOR SINCE 2015
Mr. Adams, age 60, served as managing director in the Financial Institutions Group at UBS Investment Bank, a financial services firm, from 2002 until
2013. Prior to joining UBS, Mr. Adams was with Credit Suisses Financial Institutions Group from 1985 until 2002. He currently serves on the board of directors of Charles Schwab Bank and Navient Corporation, a loan management,
servicing and asset recovery company. Mr. Adams is a nominee for election this year.
Mr. Adams has significant experience with
respect to the financial services industry, investment banking, capital markets and mergers and acquisitions, having served as head of UBS North American banks practice and in Credit Suisses Financial Institutions Group.
NANCY H. BECHTLE
DIRECTOR SINCE 1992
Ms. Bechtle, age 78,
served as President and Chief Executive Officer of the San Francisco Symphony from 1987 until 2001 and has served as a member of the San Francisco Symphony Board of Governors since 1984. She was a director and Chief Financial Officer of J.R.
Bechtle & Co., an international consulting firm, from 1979 to 1998. Ms. Bechtle has served as Chairman and a director of Sugar Bowl Corporation, a ski resort operator, since 1998. She was appointed a director of the Presidio Trust in
2008 and served as its Chairman through 2015. She also served as a director of the National Park Foundation from 2002 until 2008 and was its Vice Chairman from 2005 until 2008. Ms. Bechtles term expires in 2018.
Ms. Bechtle brings leadership skills and financial experience to the board, having served as Chief Financial Officer of J.R. Bechtle & Co.,
Chair of Sugar Bowl Corporation and Chief Executive Officer of the San Francisco Symphony. She has deep knowledge of the company and its business, having served on the board since 1992.
2
WALTER W. BETTINGER II
DIRECTOR SINCE 2008
Mr. Bettinger, age 55, has served as President and Chief Executive
Officer of The Charles Schwab Corporation and a member of the Board of Directors since 2008. He also serves as a member of the Board of Directors of Charles Schwab Bank and Charles Schwab & Co., Inc., and as Chairman and trustee of The
Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust, Laudus Institutional Trust, and Schwab Strategic Trust, all registered investment companies. Prior to assuming his current role, he
served as President and Chief Operating Officer of the company. He also served as Executive Vice President and President Schwab Investor Services from 2005 until 2007, Executive Vice President and Chief Operating Officer Individual
Investor Enterprise from 2004 until 2005, Executive Vice President and President Corporate Services from 2002 until 2004 and Executive Vice President and President Retirement Plan Services from 2000 until 2002.
Mr. Bettinger joined the company in 1995 as part of the acquisition of The Hampton Company, which he founded in 1983. Mr. Bettingers term expires in 2018.
Mr. Bettinger has significant financial services experience, having served in a senior executive role overseeing sales, service, marketing and operations. As Chief Executive Officer of the
company, Mr. Bettinger works closely with the board in evaluating and enhancing the strategic position of the company.
C. PRESTON BUTCHER
DIRECTOR SINCE 1988
Mr. Butcher, age 77,
has been Chairman and Chief Executive Officer of Legacy Partners (formerly Lincoln Property Company N.C., Inc.), a real estate development and management firm, since 1998 and Chairman of the Board, Chief Executive Officer and Director of KBS Legacy
Partners Apartment REIT, Inc., a real estate investment trust, since 2009. Mr. Butcher served as President, Chief Executive Officer and Regional Partner of Lincoln Property Company N.C., Inc. from 1967 until 1998. He served as a director of
Northstar Realty Finance Corp until September 2014. Mr. Butchers term expires in 2018.
Mr. Butcher brings leadership skills
and experience in complex financial transactions to the board as Chairman and Chief Executive Officer of Legacy Partners. He has deep knowledge of the company and its business, having served on the board since 1988.
CHRISTOPHER V. DODDS
DIRECTOR SINCE 2014
Mr. Dodds, age 56, has
served as a senior advisor at The Carlyle Group, a private equity firm, since 2008. He also serves on the board of directors of Charles Schwab Bank, Avalon Advisors, LLC, a wealth management firm, and Conifer Financial Services, a fund
administration firm. From 1986 to 2007, Mr. Dodds held several key positions at The Charles Schwab Corporation, including Executive Vice President and Chief Financial Officer. Mr. Dodds term expires in 2018.
Mr. Dodds brings leadership skills, knowledge of the financial services industry, and financial and accounting experience. He has deep
knowledge of the company and its business, having served as its Chief Financial Officer from 1999 until 2007, and as a director of Charles Schwab Bank since 2007.
3
STEPHEN A. ELLIS
DIRECTOR SINCE 2012
Mr. Ellis, age 53, is a Managing Partner of TPG Capital, a private
equity and alternative investment firm. Prior to joining TPG Capital in 2015, Mr. Ellis served as Chief Executive Officer of Asurion, LLC, a provider of consumer technology protection services, from 2012 through 2014 and continues to serve
on its Board of Directors. Prior to Asurion, Mr. Ellis served as Worldwide Managing Director of Bain & Company, a management consulting firm, from 2005 until 2012, and as Managing Partner for Bains West Coast offices from
1999 through 2004. Mr. Ellis joined Bain in 1993. Mr. Ellis is a nominee for election this year.
Mr. Ellis brings
leadership skills, operating management experience and deep knowledge of global industry trends through his experience at TPG Capital and having served as Worldwide Managing Director of Bain & Company and Chief Executive Officer of Asurion,
LLC.
MARK A. GOLDFARB
DIRECTOR SINCE 2012
Mr. Goldfarb, age 64, has served as managing partner of BDO USA, LLP, an
accounting and consulting firm, since January 2015. He was a founder of SS&G, Inc. (SS&G), an accounting and business consulting firm, and served as managing partner of SS&G from 1987 until 2012, and as senior managing director of
SS&G from 2012 until January 2015, at which time SS&G merged with BDO USA, LLP. Mr. Goldfarb served on the Board of Trustees and as Chairman of the Audit Committee of Schwab Strategic Trust, a registered investment company, from 2009
until 2012. He is also a past president of Cascade Capital Corporation. Mr. Goldfarbs term expires in 2018.
Mr. Goldfarb
brings financial and operational leadership experience to the board, having served as a founder and senior managing director of SS&G and a managing partner with BDO USA, LLP. His financial expertise is critical for his role as
Audit Committee Chairman.
WILLIAM S. HARAF
DIRECTOR SINCE 2015
Mr. Haraf, age 67, serves as a special advisor for Promontory Financial
Group, a financial consulting firm. He was a managing director of Promontory Financial Group from 2012 until 2014. Mr. Haraf serves as a member of the Board of Directors of Charles Schwab Bank. From 2008 until 2012, he served as Commissioner of
the California Department of Financial Institutions. Mr. Haraf served as a member of the Financial Stability Oversight Council from 2010 until 2012, as managing director of Banc of America Securities from 1999 until 2003 and as Senior Vice
President of Strategic Policy Development and Planning at Bank of America from 1994 until 1999. Mr. Harafs term expires in 2017.
Mr. Haraf brings substantial financial services and regulatory experience to the board, having served as managing director of Promontory Financial
Group, Commissioner of the California Department of Financial Institutions and a member of the Financial Stability Oversight Council.
4
FRANK C. HERRINGER
DIRECTOR SINCE 1996
Mr. Herringer, age 73, is the retired Chairman of the Board and Chief
Executive Officer of Transamerica Corporation, a financial services company. He served as Chairman of the Board of Transamerica from 1996 until 2015, Chief Executive Officer from 1991 until 1999 and President from 1986 until 1999, when Transamerica
was acquired by AEGON N.V. From the date of the acquisition until 2000, Mr. Herringer served on the Executive Board of AEGON N.V. and as Chairman of the Board of AEGON USA, Inc. Mr. Herringer is a director of Transamerica Corporation, the
holding company for AEGON N.V.s operations in the United States, and Amgen Inc., a biotechnology company. Mr. Herringers term expires in 2017.
Mr. Herringer brings public company knowledge and leadership experience to the board, having served as Chairman and Chief Executive Officer of Transamerica, and his service at Transamerica and AEGON
contribute to his knowledge of the financial services industry. Mr. Herringer brings insights to the board from his service on other public company boards.
STEPHEN T. McLIN
DIRECTOR SINCE 1988
Mr. McLin, age 69, has been Chairman and Chief Executive Officer of STM Holdings LLC, which offers merger and acquisition advice, since 1998. He
serves as a member of the Board of Directors of Charles Schwab Bank. From 1987 until 1998, he was President and Chief Executive Officer of America First Financial Corporation, a finance and investment banking firm, and parent of EurekaBank. Before
that, he was an Executive Vice President of Bank of America. Mr. McLins term expires in 2017.
Mr. McLin brings leadership
experience to the board, having served as Chief Executive Officer of America First Financial Corporation, and financial services experience, having extensive knowledge of the financial services industry through his experience at STM Holdings LLC,
America First Financial Corporation and Bank of America.
ARUN SARIN
DIRECTOR SINCE 2009
Mr. Sarin, age 61,
served as Chief Executive Officer of Vodafone Group Plc, a mobile telecommunications company, from 2003 until his retirement in 2008. Beginning in 1984, he held a variety of management positions with Pacific Telesis Group, a telecommunications
company, and AirTouch Communications, Inc., a wireless telecommunications company, which was spun off from Pacific Telesis Group in 1994. He was appointed President and Chief Operating Officer of AirTouch in 1997. In 1999, Mr. Sarin was
appointed Chief Executive Officer of Vodafones US/AsiaPacific region. He left Vodafone in 2000 to become Chief Executive Officer of Infospace, Inc., an information technology company. From 2002 until 2003, he served as Chief Executive Officer
of Accel-KKR Telecom, a private equity firm. He served as a non-executive director of the Court of the Bank of England from 2005 until 2009. Mr. Sarin is a director of Accenture PLC, a consulting and information technology services company,
Cisco Systems, Inc., a networking and communications technology company, and Blackhawk Network Holdings, Inc., a pre-paid and payments network. Mr. Sarin is a nominee for election this year.
Mr. Sarin brings public company knowledge and leadership experience to the board, having served as President and Chief Operating Officer of AirTouch
Communications, Inc. and Chief Executive Officer of Vodafone Group Plc. He brings insights to the board from his service on other public company boards.
5
CHARLES R. SCHWAB
DIRECTOR SINCE 1986
Mr. Schwab, age 78, has been Chairman and a director of The Charles
Schwab Corporation since its incorporation in 1986. Mr. Schwab served as Chief Executive Officer of the company from 1986 to 1997 and from 2004 until 2008. He served as Co-Chief Executive Officer of the company from 1998 to 2003.
Mr. Schwab was a founder of Charles Schwab & Co., Inc. in 1971, has been its Chairman since 1978, and served as its Chief Executive Officer from 2004 until 2008. Mr. Schwab is Chairman of Charles Schwab Bank. He served as Chairman
and trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Laudus Institutional Trust, all registered investment companies, through December 31, 2015. Mr. Schwab
is a nominee for election this year.
Mr. Schwab is the founder of the company, was the Chief Executive Officer of the company, and has
been the Chairman since its inception. His vision continues to drive the companys growth.
PAULA A. SNEED
DIRECTOR SINCE 2002
Ms. Sneed, age 68, is Chairman and Chief Executive Officer of Phelps Prescott Group, LLC, a strategy and management consulting firm. She served as
Executive Vice President, Global Marketing Resources and Initiatives, of Kraft Foods, Inc., a global food and beverage company, from 2005 until her retirement in 2006; Senior Vice President, Global Marketing Resources and Initiatives from 2004 to
2005; and Group Vice President and President of E-Commerce and Marketing Services for Kraft Foods North America, part of Kraft Foods, Inc., from 2000 until 2004. She joined General Foods Corporation (which later merged with Kraft Foods) in 1977 and
held a variety of senior executive positions, including Chief Marketing Officer, Executive Vice President and President eCommerce division, Executive Vice President and President Desserts division, and Senior Vice President and President Food
Service division. Ms. Sneed is a director of Airgas, Inc., a national distributor of industrial, medical and specialty gases and related equipment, and TE Connectivity, Ltd., a manufacturer of engineered electronic components, network
solutions, wireless systems and telecommunications systems. Ms. Sneed is a nominee for election this year.
Ms. Sneed brings
marketing skills and general management and executive leadership experience to the board, having served in a variety of senior executive positions at Kraft Foods, and as Chairman and Chief Executive Officer of Phelps Prescott Group. She
brings insights to the board through her service on other public company boards.
ROGER O. WALTHER
DIRECTOR SINCE 1989
Mr. Walther, age 80,
has served as Chairman and Chief Executive Officer of Tusker Corporation, a real estate and business management company, since 1997. He served as Chairman and Chief Executive Officer of ELS Educational Services, Inc., a provider in the United States
and internationally of courses in English as a second language, between 1992 and 1997. Mr. Walther was President, Chief Executive Officer and a director of AIFS, Inc., which designs and markets educational and cultural programs internationally,
from 1964 until 1993. Mr. Walther served as Chairman and a director of First Republic Bank from 1985 until 2007. Mr. Walthers term expires in 2017.
Mr. Walther brings public company knowledge, leadership, and financial services industry experience to the board, having served as Chairman and Chief Executive Officer of Tusker Corporation, Chairman
and a director of First Republic Bank, Chief Executive Officer of ELS Educational Services, Inc. and Chief Executive Officer of AIFS, Inc.
6
ROBERT N. WILSON
DIRECTOR SINCE 2003
Mr. Wilson, age 75, is Chairman of Mevion Medical Systems, Inc.
(formerly Still River Systems), a medical device company. Mr. Wilson was Chairman of Caxton Health Holdings, LLC, a healthcare-focused investment firm, from 2004 through 2007, and was Vice Chairman of the board of directors of
Johnson & Johnson, a manufacturer of health care products, from 1989 until 2003. Mr. Wilson joined Johnson & Johnson in 1964. Mr. Wilson is a director of Hess Corporation, an integrated oil and gas company, and Synta
Pharmaceuticals Corporation, a bio-pharmaceutical company. Mr. Wilsons term expires in 2017.
Mr. Wilson brings public company
knowledge and leadership experience to the board, having served as Vice Chairman of Johnson & Johnson, Chairman of Mevion Medical Systems, and Chairman of Caxton Health Holdings. He brings insights to the board as a director of other public
company boards.
DIRECTOR INDEPENDENCE
We have considered the independence of each member of the board in accordance with New York Stock Exchange corporate governance standards. To assist us in
our determination, we also adopted general guidelines for independence. The guidelines for independence are available on the companys website at
www.aboutschwab.com/governance
.
Based on our guidelines and New York Stock Exchange corporate governance standards, we have determined that the following directors are independent: John K. Adams, Jr., Nancy H. Bechtle, C. Preston
Butcher, Christopher V. Dodds, Stephen A. Ellis, Mark A. Goldfarb, William S. Haraf, Frank C. Herringer, Stephen T. McLin, Arun Sarin, Paula A. Sneed, Roger O. Walther, and Robert N. Wilson.
In determining independence, the Board of Directors considers broadly all relevant facts and circumstances regarding a directors relationships with the company. All non-employee directors receive
compensation from the company for their service as a director, as disclosed in the section Director Compensation, and are entitled to receive reimbursement for their expenses in traveling to and participating in board and committee
meetings. As disclosed in the Transactions with Related Persons section of this proxy statement, some directors and entities with which they are affiliated have credit transactions with the companys banking and brokerage
subsidiaries, such as mortgage loans, revolving lines of credit, or other extensions of credit. These transactions with directors and their affiliates are made in the ordinary course of business and as permitted by the Sarbanes-Oxley Act of 2002.
Such transactions are on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the lender and do not involve more than the normal risk of
collectability or present other unfavorable features. As disclosed in the Transactions with Related Persons section of the proxy statement, director Stephen T. McLins son is employed by the company in a non-executive officer,
non-managerial capacity.
In addition to the relationships outlined above, the board considered the following types of relationships for the
following directors:
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Nancy H. Bechtle: The director serves as a director of a nonprofit organization to which the company, its affiliates or its charitable foundation have
made donations.
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C. Preston Butcher: The directors spouse serves as a director of a nonprofit organization to which the company, its affiliates or its charitable
foundation have made donations.
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·
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Mark A. Goldfarb: The director serves as managing partner of a firm which the company has engaged. The director serves as a director of a nonprofit
organization to which the company, its affiliates or its charitable foundation have made donations.
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7
·
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William S. Haraf: The director serves as a special advisor of a consulting firm which the company has engaged.
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·
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Frank C. Herringer: The directors spouse serves as a director of a nonprofit organization to which the company, its affiliates or its charitable
foundation have made donations.
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CORPORATE GOVERNANCE INFORMATION
Board Leadership
The Chairman of the Board is Charles R. Schwab. The Chairman and Chief Executive Officer roles are split, and Mr. Bettinger serves as Chief Executive Officer. The Chairman of the Board approves the
agenda for board meetings and leads the board in its discussions. Mr. Schwab and Mr. Bettinger, as the only two management directors, do not participate in sessions of non-management directors. As provided in our Corporate Governance
Guidelines, non-management directors meet regularly in executive session without management. The Chairman of the Nominating and Corporate Governance Committee presides over the executive sessions of non-management directors. Mr. Herringer, as
Chairman of the Nominating and Corporate Governance Committee, leads the non-management directors in executive session.
The board has four
standing committees (Audit, Compensation, Nominating and Corporate Governance, and Risk) that are composed entirely of independent directors and are chaired by independent directors. Given the role and scope of authority of these committees, and
that over 85% of the board is composed of independent directors, the board believes that its leadership structure, with the Chairman of the Board leading board discussions, and the Chairman of the Nominating and Corporate Governance Committee
leading non-management executive sessions, is appropriate.
Risk Oversight
As part of its oversight functions, the Board of Directors is responsible for oversight of risk management at the company. The board has a Risk Committee,
which assists the board in fulfilling its oversight responsibilities with respect to the companys risk management program and provides reports to the board and the Audit Committee. The Audit Committee reviews reports from management and the
Risk Committee concerning the companys risk assessment and major risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee, as described in the Compensation Discussion and Analysis,
separately reviews the compensation program with respect to the potential impact of risk-taking by employees. For further discussion of risk management at the company, please see Part II, Item 7, Managements Discussion and Analysis
of Financial Condition and Results of Operations Risk Management of the companys Form 10-K for the period ended December 31, 2015.
Board Structure and Committees
The authorized number of directors
is currently fifteen and the company has fifteen directors. Five directors are nominees for election this year and ten directors will continue to serve the terms described in their biographies.
Directors currently serve staggered terms. Each director who is elected at an annual meeting of stockholders serves a three-year term, and the directors
are divided into three classes.
The board held seven meetings in 2015. Each director attended at least 75% of all applicable board and
committee meetings during 2015. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. In 2015, fourteen of the fifteen directors attended the annual meeting.
8
We have an Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Risk
Committee. Each of these committees is composed entirely of independent directors as determined by the Board of Directors in accordance with its independence guidelines and New York Stock Exchange corporate governance standards. In
addition to those standing committees, the board may from time to time establish
ad hoc
committees to assist in various matters.
The
Audit Committee held twelve meetings in 2015 and is composed of the following members: Mark A. Goldfarb (Chairman), John K. Adams, Jr., C. Preston Butcher, Christopher V. Dodds, William S. Haraf and Arun Sarin. None of the directors on the Audit
Committee is or, during the past three years, has been an employee of The Charles Schwab Corporation or any of its subsidiaries. None of the Audit Committee members simultaneously serves on the audit committees of more than three public companies,
including ours. The board has determined that all of the members of the Audit Committee are financially literate in accordance with New York Stock Exchange listing standards and that Mark A. Goldfarb, Christopher V. Dodds and William S. Haraf are
Audit Committee financial experts in accordance with Securities and Exchange Commission rules. The Audit Committee:
·
|
|
reviews and discusses with management and the independent auditors the companys annual and quarterly financial statements and the integrity of
the financial reporting process,
|
·
|
|
reviews the qualifications, independence and performance of the independent auditors,
|
·
|
|
reviews the activities and performance of the internal auditors,
|
·
|
|
reviews reports from management and the Risk Committee regarding major risk exposures and steps management has taken to address such exposures, and
|
·
|
|
reviews compliance with legal and regulatory requirements.
|
The Compensation Committee held six meetings in 2015 and is composed of the following members: Roger O. Walther (Chairman), Nancy H. Bechtle, Frank C. Herringer, Paula A. Sneed, and Robert N. Wilson. The
Compensation Committee:
·
|
|
annually reviews and approves corporate goals and objectives relating to compensation of executive officers and other senior officers,
|
·
|
|
evaluates the performance of executive officers and other senior officers and determines their compensation levels,
|
·
|
|
reviews and approves compensatory arrangements for executive officers and other senior officers, and
|
·
|
|
approves long-term awards for executive officers and other senior officers.
|
The Nominating and Corporate Governance Committee held one meeting in 2015 and is composed of the following members: Frank C. Herringer (Chairman), John K. Adams, Jr., Nancy H. Bechtle, C. Preston
Butcher, Christopher V. Dodds, Stephen A. Ellis, Mark A. Goldfarb, William S. Haraf, Stephen T. McLin, Arun Sarin, Paula A. Sneed, Roger O. Walther and Robert N. Wilson. The Nominating and Corporate Governance Committee:
·
|
|
identifies and evaluates individuals qualified to serve on the board,
|
·
|
|
recommends nominees to fill vacancies on the board and each board committee and recommends a slate of nominees for election or re-election as directors
by the stockholders,
|
·
|
|
makes recommendations regarding succession planning for the Chief Executive Officer and executive management, and
|
·
|
|
assesses the performance of the board and its committees and recommends corporate governance principles for adoption by the board.
|
9
The Risk Committee held five meetings in 2015 and is composed of the following members: Christopher V. Dodds
(Chairman), John K. Adams, Jr., Stephen A. Ellis, William S. Haraf, Stephen T. McLin and Robert N. Wilson. The Risk Committee:
·
|
|
reviews and approves the companys risk governance structure to identify, measure, monitor and mitigate risks,
|
·
|
|
reviews and approves the companys enterprise-wide risk management framework,
|
·
|
|
reviews the performance and activities of the companys risk management organization, and
|
·
|
|
reviews and approves key policies with respect to oversight of specific risks, including credit, operational, capital and liquidity risk.
|
The Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Risk Committee have written
charters. You may find a copy of these charters, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics, on the companys website at
www.aboutschwab.com/governance
. You also may obtain a paper copy of
these items, without charge, from:
Assistant Corporate Secretary
The Charles Schwab Corporation
Mailstop SF211MN-05
211 Main Street
San Francisco, California 94105
DIRECTOR COMPENSATION
Mr. Schwab and
Mr. Bettinger, who are employed by the company, receive no additional compensation for their service as directors. In 2015, non-employee directors received the following cash retainers and equity grants:
Cash Retainers
Each non-employee director received an annual cash retainer in the amount of $100,000. In addition, the Chairs of the Audit Committee and Risk Committee
received an annual cash retainer of $25,000, and each other member of the Audit Committee and Risk Committee received an annual cash retainer of $10,000. The Chairs of the Compensation Committee and Nominating and Corporate Governance Committee
received an annual cash retainer of $15,000, and each other member of the Compensation Committee and Nominating and Corporate Governance Committee received an annual cash retainer of $5,000.
There are no fees for attendance at board or committee meetings, but the board retains the discretion to establish special committees and to pay a special retainer to the Chair and the members of any
special committee.
Equity Grants
Each non-employee director received an annual equity grant under the 2013 Stock Incentive Plan with an aggregate value of $140,000. Non-employee directors received this equity grant 50% in stock options
and 50% in restricted stock units (RSUs).
Terms and Conditions
Non-employee directors receive the annual grants of options and RSUs on the second business day after the annual meeting of stockholders. In the event a
new non-employee director is elected to the board during the year, a pro-rata
10
amount of cash retainers and equity awards is granted to that individual for the first calendar year in lieu of the full amount. The non-employee director equity grants are subject to the
following terms and conditions:
·
|
|
The annual grants of options and RSUs vest over the three-year period following the grant date, with 25% vesting on each of the first and second
anniversary of the grant date and the remaining 50% on the third anniversary of the grant date. The options and RSUs become 100% vested in the event of the non-employee directors death, disability or retirement.
|
·
|
|
The number of RSUs for the annual grant is determined by dividing 50% of the aggregate value of the annual equity grant by the average of the high and
low market price of the companys common stock on the grant date.
|
·
|
|
The number of options for the annual grant of stock options is determined by dividing 50% of the aggregate value of the annual equity grant by the fair
value of an option on the grant date.
|
·
|
|
Each stock option is designated as a nonqualified stock option and has an exercise price equal to the fair market value of common stock on the grant
date.
|
·
|
|
Each stock option expires on the earliest of (1) the date ten years after the grant date, (2) the date three months after termination of
service for any reason other than death, disability or retirement, or (3) the date one year after termination of service because of death or disability.
|
The company also has stock ownership guidelines for non-employee directors. Under our guidelines, each non-employee director should own company stock with a fair market value equal to or exceeding
$250,000. A new director should reach this target level upon completing five years of service. Once this target level is reached, the director is deemed to meet this target so long as he or she continues to hold an equivalent number of shares as on
the date the target level was met. Shares owned outright, deferred shares and RSUs are counted in determining the threshold under our stock ownership guidelines, but stock options are not.
Directors Deferred Compensation Plan
Non-employee directors
also may participate in the Directors Deferred Compensation Plan II. This plan allows them to defer receipt of all or a portion of their cash retainers and, at their election, either to:
(1)
|
|
receive stock options that:
|
·
|
|
have a fair value equal to the amounts deferred (as determined under the valuation method used by the company to value stock options at the time of the
deferral),
|
·
|
|
have an option exercise price equal to the closing price of common stock on the date the deferred amount would have been paid, and
|
·
|
|
vest immediately upon grant and generally expire ten years after the grant date,
|
or
(2)
|
|
receive RSUs that are funded by an equivalent number of shares of common stock to be held in a rabbi trust and distributed to the director when he or she
ceases to be a director.
|
11
The company does not provide any non-equity incentive plans, defined benefit and actuarial pension plans, or
other defined contribution retirement plans for non-employee directors. The company does not offer above-market or preferential earnings under its nonqualified deferred compensation plans for directors. The following table shows compensation paid to
each of our non-employee directors during 2015.
2015 Director Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or Paid in Cash ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
1
($)
|
|
|
Deferred into
Restricted
Stock
Units or Options
2, 6
($)
|
|
|
Stock
Awards
3, 6
($)
|
|
|
Option
Awards
4, 6
($)
|
|
|
All
Other
Compen-
sation
5
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
John K. Adams, Jr.
|
|
|
198,222
|
|
|
|
|
|
|
|
100,834
|
|
|
|
64,167
|
|
|
|
385
|
|
|
|
363,608
|
|
|
|
|
|
|
|
|
Nancy H. Bechtle
|
|
|
110,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
251,706
|
|
|
|
|
|
|
|
|
C. Preston Butcher
|
|
|
|
|
|
|
115,000
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
256,706
|
|
|
|
|
|
|
|
|
Christopher V. Dodds
|
|
|
223,333
|
|
|
|
|
|
|
|
110,000
|
|
|
|
70,000
|
|
|
|
1,105
|
|
|
|
404,438
|
|
|
|
|
|
|
|
|
Stephen A. Ellis
|
|
|
57,500
|
|
|
|
57,500
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,497
|
|
|
|
256,497
|
|
|
|
|
|
|
|
|
Mark A. Goldfarb
|
|
|
130,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,451
|
|
|
|
271,451
|
|
|
|
|
|
|
|
|
William S. Haraf
|
|
|
183,889
|
|
|
|
|
|
|
|
100,834
|
|
|
|
64,167
|
|
|
|
385
|
|
|
|
349,275
|
|
|
|
|
|
|
|
|
Frank C. Herringer
|
|
|
|
|
|
|
120,000
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
261,706
|
|
|
|
|
|
|
|
|
Stephen T. McLin
|
|
|
71,250
|
|
|
|
115,000
|
|
|
|
110,000
|
|
|
|
70,000
|
|
|
|
2,449
|
|
|
|
368,699
|
|
|
|
|
|
|
|
|
Arun Sarin
|
|
|
115,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
256,706
|
|
|
|
|
|
|
|
|
Paula A. Sneed
|
|
|
110,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
251,706
|
|
|
|
|
|
|
|
|
Roger O. Walther
|
|
|
120,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
261,706
|
|
|
|
|
|
|
|
|
Robert N. Wilson
|
|
|
120,000
|
|
|
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
1,706
|
|
|
|
261,706
|
|
(1)
|
|
This column shows amounts earned or paid in cash for retainers. For Mr. Adams, Mr. Dodds, Mr. Haraf and Mr. McLin, the amount in this column
includes their cash retainer and meeting fees for service on the Charles Schwab Bank board of directors.
|
(2)
|
|
This column shows the dollar amount of retainers and meeting fees deferred into stock options or RSUs under the Directors Deferred Compensation Plan II. The
corresponding stock options or RSUs were as follows: 15,919 stock options for each of Mr. Butcher and Mr. McLin, 7,960 stock options for Mr. Ellis and 3,953 RSUs for Mr. Herringer.
|
(3)
|
|
The amounts shown in this column represent the grant date fair value of the RSU award. In 2015, non-employee directors who served the full year received an automatic
grant of RSUs with a grant date fair value of $70,000. Mr. Adams and Mr. Harafs awards were prorated from the time they joined the board on January 29, 2015.
|
|
|
In addition, Mr. Dodds and Mr. McLin received a grant of RSUs with a grant date fair value of $40,000 for their full year of service on the Charles Schwab
Bank board. Mr. Adams and Mr. Harafs awards were prorated from the time they joined the Bank board on January 28, 2015.
|
(4)
|
|
The amounts shown in this column represent the grant date fair value of the stock option award. In 2015, non-employee directors who served the full year received an
automatic grant of stock options with a grant date fair value of $70,000. The amounts for Mr. Adams and Mr. Haraf represent the grant date fair value of the stock option award, prorated from the time they joined the board on
January 29, 2015.
|
12
(5)
|
|
This column shows the dollar amount of dividend equivalents on unvested RSUs.
|
(6)
|
|
The following table shows the aggregate number of outstanding stock option and RSU awards held by the non-employee directors as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Stock Option
Awards
|
|
|
Restricted Stock
Unit Awards
|
|
|
|
|
John K. Adams, Jr.
|
|
|
7,835
|
|
|
|
3,209
|
|
|
|
|
Nancy H. Bechtle
|
|
|
101,230
|
|
|
|
6,741
|
|
|
|
|
C. Preston Butcher
|
|
|
292,876
|
|
|
|
34,893
|
|
|
|
|
Christopher V. Dodds
|
|
|
9,994
|
|
|
|
5,524
|
|
|
|
|
Stephen A. Ellis
|
|
|
52,700
|
|
|
|
12,289
|
|
|
|
|
Mark A. Goldfarb
|
|
|
34,747
|
|
|
|
6,163
|
|
|
|
|
William S. Haraf
|
|
|
7,835
|
|
|
|
3,209
|
|
|
|
|
Frank C. Herringer
|
|
|
101,230
|
|
|
|
114,507
|
|
|
|
|
Stephen T. McLin
|
|
|
238,359
|
|
|
|
40,437
|
|
|
|
|
Arun Sarin
|
|
|
73,895
|
|
|
|
6,163
|
|
|
|
|
Paula A. Sneed
|
|
|
101,230
|
|
|
|
51,920
|
|
|
|
|
Roger O. Walther
|
|
|
95,986
|
|
|
|
35,065
|
|
|
|
|
Robert N. Wilson
|
|
|
105,163
|
|
|
|
309,459
|
|
Changes to Committee Chair and Committee Member Compensation in 2016
In 2015, the Compensation Committee conducted a review of non-employee director compensation with input from its outside consultant, Semler Brossy
Consulting Group LLC (Semler Brossy). This review included a comparison to the companys peer group. Based on this review, the board approved, effective January 1, 2016, an annual cash retainer of $35,000 for the Chairs of the
Audit Committee and Risk Committee, an annual cash retainer of $30,000 for the Chair of the Compensation Committee, an annual cash retainer of $25,000 for the Chair of the Nominating and Corporate Governance Committee, annual cash retainers of
$15,000 for each other member of the Audit Committee and Risk Committee, and annual cash retainers of $10,000 for each other member of the Compensation Committee and the Nominating and Corporate Governance Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is or has been an officer or employee of the company or any of its subsidiaries. There were no Compensation
Committee interlocks as defined under Securities and Exchange Commission rules during 2015.
DIRECTOR NOMINATIONS
The Nominating and Corporate Governance Committee recommended all of the nominees for election included in this years proxy statement. The Board of Directors appointed Mr. Adams as a director
effective January 29, 2015, and this is the first time he is standing for election since his appointment. Mr. Adams was originally recommended to the Nominating and Corporate Governance Committee as a potential director by the Chief
Executive Officer and
13
other executive management. The Nominating and Corporate Governance Committee, comprised of independent directors, recommended Mr. Adams nomination as a candidate.
The Nominating and Corporate Governance Committee has a policy to consider candidates recommended by stockholders. The policy provides that stockholder
recommendations must be in writing and include the following information: (i) the name, address and contact information of the recommending stockholder; (ii) proof of the stockholders share ownership; (iii) a resume or statement
of the candidates qualifications; and (iv) a statement of the stockholders relationship with the proposed candidate or interest in the proposed candidacy. The written recommendation must be addressed to the Assistant Corporate
Secretary at the address provided in the Corporate Governance Information section of this proxy statement.
Diversity
When
identifying director nominees, the board considers the qualifications and skills represented on the board. As discussed in the Director Qualifications section below, one of the considerations evaluated by the board is the diversity of
experience and background of directors. This consideration is broad, is consistent with our companys non-discrimination policies, and includes diversity of skill sets and experience as well as background, including race and gender.
The Nominating and Corporate Governance Committee annually reviews the structure and size of the board to assure that the proper skills are represented
on the board. This assessment includes the effectiveness of board composition, including the qualifications, skills, and diversity represented on the board.
Director Qualifications
The qualifications for directors are
described in our Corporate Governance Guidelines, which are available on the companys website at
www.aboutschwab.com/governance
. In addition, the Nominating and Corporate Governance Committee believes that the following specific,
minimum qualifications must be met by a nominee for the position of director:
·
|
|
the ability to work together with other directors, with full and open discussion and debate as an effective group,
|
·
|
|
current knowledge and experience in the companys business or operations, or contacts in the community in which the company does business and in
the industries relevant to the companys business, or substantial business, financial or industry-related experience, and
|
·
|
|
the willingness and ability to devote adequate time to the companys business.
|
The committee also considers the following qualities and skills when making its determination whether a nominee is qualified for the position of
director:
·
|
|
relationships that may affect the independence of the director or conflicts of interest that may affect the directors ability to discharge his or
her duties,
|
·
|
|
diversity of experience and background, including the need for financial, business, academic, public sector and other expertise on the board or board
committees, and
|
·
|
|
the fit of the individuals skills and experience with those of the other directors and potential directors in comparison to the needs of the
company.
|
When evaluating a candidate for nomination, the committee does not assign specific weight to any of these factors
or believe that all of the criteria necessarily apply to every candidate.
14
Identifying and Evaluating Candidates for Director
The Nominating and Corporate Governance Committee reviews the appropriate skills and characteristics required of board members in the context of the
current composition of the board. Candidates considered for nomination to the Board of Directors may come from several sources, including current and former directors, professional search firms and stockholder recommendations. Nominees for director
are evaluated, in consultation with the companys Chairman, by the committee, which may retain the services of a professional search firm to assist it in identifying or evaluating potential candidates.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
If you wish to communicate with the board, the Chairman of the Nominating and Corporate Governance Committee, or with the independent directors as a group, you may send your communication in writing to
the Assistant Corporate Secretary at the address provided in the Corporate Governance Information section of this proxy statement. You must include your name and address in the written communication and indicate whether you are a
stockholder of the company.
The Assistant Corporate Secretary will compile all communications, summarize lengthy, repetitive or duplicative
communications and forward them to the appropriate director or directors. The Assistant Corporate Secretary will not forward
non-substantive
communications or communications that pertain to personal
grievances, but instead will forward them to the appropriate department within the company for resolution. In such cases, the Assistant Corporate Secretary will retain a copy of such communication for review by any director upon his or her request.
15
PROPOSAL TWO:
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has the sole authority to hire, retain and terminate the independent auditors. The independent auditors report directly to the Audit Committee, and the Audit Committee is directly
responsible for oversight of the work of the independent auditors. The Audit Committee oversees fees paid to the independent auditors and pre-approves all audit, internal control-related and permitted non-audit services to be performed by the
independent auditors. The Audit Committee evaluates the qualifications, performance and independence of the independent auditors, including the rotation and selection of the lead audit partner and whether it is appropriate to rotate the audit firm
itself.
The Audit Committee has selected Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu (collectively
referred to as Deloitte) as the companys independent registered public accounting firm for the 2016 fiscal year. Deloitte has served in this capacity since the companys inception. The Audit Committee and the Board of
Directors believe that the retention of Deloitte for the 2016 fiscal year is in the best interests of the company and its stockholders. Although we are not required to submit the selection of the independent auditors to stockholders, we are asking
for your ratification as part of the Audit Committees evaluation process of the independent registered public accounting firm for the next fiscal year.
We expect representatives of Deloitte to attend the annual meeting of stockholders, where they will respond to appropriate questions from stockholders and have the opportunity to make a statement.
A
UDITOR FEES
Fees for services provided by Deloitte in the last two fiscal years were:
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
(amounts in millions)
|
|
|
|
|
Audit Fees
1
|
|
$
|
6.6
|
|
|
$
|
7.6
|
|
|
|
|
Audit-Related Fees
2
|
|
|
2.6
|
|
|
|
2.3
|
|
|
|
|
Tax Fees
3
|
|
|
None
|
|
|
|
0.1
|
|
|
|
|
All Other Fees
4
|
|
|
None
|
|
|
|
None
|
|
|
|
|
Total
|
|
$
|
9.2
|
|
|
$
|
10.0
|
|
(1)
|
|
Audit fees are the aggregate fees for professional services billed by Deloitte in connection with their audits of the consolidated annual financial statements and
managements assessment of the effectiveness of internal control over financial reporting, and reviews of the consolidated financial statements included in quarterly reports on Form 10-Q.
|
(2)
|
|
Audit-Related fees include assurance and related services, such as reports on internal controls, review of Securities and Exchange Commission filings, merger and
acquisition due diligence and related services.
|
(3)
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|
Tax fees are limited by the Audit Committee to services by Deloitte for tax return review, preparation and compliance.
|
(4)
|
|
All other fees represent fees not included in audit fees, audit-related fees, and tax fees.
|
In addition to the services listed above, Deloitte provides audit services to certain unconsolidated affiliated mutual funds and foundations. The fees
for such audit services are included in the expenses of the mutual funds and foundations and borne by the stockholders of the funds and foundations. Amounts billed by Deloitte for these services were $0.2 million in 2015 and 2014. These amounts are
not included in the expenses of The Charles Schwab Corporation.
16
Non-Audit Services Policies and Procedures
The Audit Committee has adopted a policy regarding non-audit services performed by Deloitte. The Audit Committees policy prohibits engaging Deloitte
to perform the following services:
·
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|
any contingent fee arrangement,
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·
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bookkeeping or other services relating to accounting records or financial statements of the audit client,
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·
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broker-dealer services,
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·
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management and human resource functions (including executive search services),
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·
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legal services and expert services unrelated to the audit,
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·
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appraisal and valuation services, fairness opinions or contribution-in-kind reports,
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·
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internal audit outsourcing,
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·
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financial information systems design and implementation,
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·
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tax consulting or advice or a tax opinion on an aggressive tax position or on a listed transaction or a confidential
transaction as defined by U.S. Department of Treasury regulations, and
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·
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tax services to employees who have a financial reporting oversight role.
|
The policy requires the pre-approval of the Audit Committee for other non-audit services performed by Deloitte. The policy divides non-audit services into three separate categories, which the Audit
Committee has pre-approved subject to an annual aggregate dollar limit for each category. Once the dollar limit in each of these three categories is reached, the Audit Committee will decide whether to establish an additional spending limit for the
category or specifically pre-approve each additional service in the category for the remainder of the year. The three categories are:
·
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accounting theory consultation (includes services such as guidance on the application of Generally Accepted Accounting Principles to various
transactions and guidance on the effects of new accounting pronouncements),
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·
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assurance and due diligence (includes services such as certain reports on internal controls, review of Securities and Exchange Commission filings,
merger and acquisition due diligence, employee benefit plan audits, and foreign statutory audits and regulatory reports), and
|
·
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tax return review, preparation and compliance.
|
Services not subject to pre-approval limits in one of the three categories above require specific pre-approval from the Audit Committee. Fees related to services requiring specific pre-approval are
limited, on an annual basis, to 50% of the combination of audit fees, audit-related fees and tax fees.
The policy permits the Audit Committee
to delegate pre-approval authority to one or more members of the Audit Committee, provided that the member or members report to the entire Audit Committee pre-approval actions taken since the last Audit Committee meeting. The policy expressly
prohibits delegation of pre-approval authority to management.
In fiscal years 2015 and 2014, the Audit Committee pre-approved 100% of the
services performed by Deloitte relating to audit-related fees and tax fees.
17
|
AUDIT COMMITTEE
REPORT
The Audit Committee has met and held discussions with
management and the companys independent registered public accounting firm. As part of this process, the committee has:
·
reviewed and discussed the audited
financial statements with management,
·
discussed with the independent registered public accounting firm the matters required to be discussed
pertaining to Public Company Accounting Oversight Board AS 16 (Communications with Audit Committees), and
·
received the written disclosures
and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the audit committee concerning
independence, and has discussed with the independent registered public accounting firm its independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2015, for filing with the SEC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Mark A. Goldfarb, Chairman
John K. Adams, Jr.
C. Preston Butcher
Christopher V. Dodds
William S. Haraf
Arun Sarin
|
18
PROPOSAL THREE:
ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
This proxy statement contains detailed information in the Compensation Discussion and Analysis and executive compensation tables regarding compensation of the named executive officers. The named
executive officers are those executive officers who are listed in the Summary Compensation Table. We ask that you provide an advisory vote to approve the following, non-binding resolution on named executive officer compensation:
RESOLVED, that the stockholders of The Charles Schwab Corporation approve the compensation paid to the named executive officers, as disclosed pursuant
to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related footnotes, and narrative disclosures.
The advisory approval of named executive officer compensation is required by federal law, and the company currently conducts annual advisory votes on that compensation. Although the vote is not binding on
the Board of Directors or the Compensation Committee, the Compensation Committee intends to consider the vote as part of its evaluation of executive compensation programs.
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
This Compensation Discussion and Analysis
describes the companys executive compensation program, policies and practices, which are designed to support the companys strategic objectives.
Key Business Results
Our business strategy focuses on providing our
clients individual investors, registered investment advisors and employers with advice and services to help them achieve their financial goals. By seeing our business through clients eyes and offering them a compelling
combination of personalized relationships, superior service and great value, the company seeks to build enduring client loyalty. Loyal clients bring us more business and refer their friends, colleagues and family to us. By operating the business in
a disciplined manner and leveraging shared processes and technology, we are able to invest in new products and services for clients and deliver a meaningful return to stockholders.
Schwabs Through Clients Eyes strategy remains the driver of our growth. Effective execution of this strategy helped us succeed with clients throughout 2015 as they faced a
generally difficult investing environment.
·
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|
Core net new assets of $134.7 billion were up 8% from 2014 and marked the fourth consecutive year in excess of $100 billion.
|
·
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|
We ended the year with 9.8 million active brokerage accounts and 1.0 million banking accounts, up 4% and 5%, respectively, over year-end
2014.
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·
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|
Clients entrusted $2.51 trillion in assets to us as of December 31, 2015, up 2% over year-end 2014. Of these assets, approximately half
($1.25 trillion) were receiving some form of ongoing advisory service, up 2%: $1,061 billion were under the guidance of an independent advisor and $193 billion in client assets were enrolled in one of our retail advisory solutions.
|
Our success with clients combined with our ongoing expense discipline in 2015 led to some of the strongest financial
results in the companys history.
·
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|
Net revenues of $6.4 billion were up 5% over year-end 2014, and net income of $1.4 billion was up 10% over year-end 2014 both amounts
are records for the firm.
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19
·
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|
Revenue growth of over 5% was 130 basis points higher than our 4% expense growth during the year.
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·
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Pre-tax profit margin of 35.7% was up 0.8 percentage points over the prior year.
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·
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Earnings per share (EPS) of $1.03 was up 8% over the prior year.
|
·
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Return on common equity was 12%.
|
Execution on our strategy produced solid financial results in 2015, including meaningful operating leverage, despite a tougher than expected environment.
A more thorough discussion of our business and business strategy is provided in our Annual Report on Form 10-K.
Our Executive Compensation Program
Our executive compensation program is intended to support our success by:
·
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|
attracting, motivating and retaining talented, highly capable executive officers,
|
·
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rewarding executives for individual performance,
|
·
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linking executive pay with the companys financial performance, and
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·
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aligning incentives for executive officers with the interests of the company and its stockholders by linking pay with longer-term performance.
|
Our compensation program uses three elements base salary, annual cash incentives and long-term incentive awards
(LTI) to achieve these objectives. As illustrated by the charts below, the majority of compensation is delivered through variable performance-based incentives. This approach maintains a strong link between executive pay and the companys
financial performance, only rewards executives when value has been created for stockholders, and drives long-term performance.
*
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|
Pay mix is based on amounts in the Summary Compensation Table.
|
20
Key Compensation Decisions
The companys commitment to disciplined execution of its business strategy has delivered solid financial results in the years since the onset of the financial crisis of 2008. In 2015, in an
environment of significant equity market volatility and continued low interest rates, the company drove strong business growth through its innovative, full-service model that continued to resonate with clients. Strong business growth and the
companys overall spending discipline led to solid financial performance that resulted in annual cash incentive payouts of 99.04% of the target set by the Compensation Committee.
The Compensation Committees decisions for 2015 aligned with this disciplined focus on financial results. In 2015, the Compensation Committee:
·
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|
Continued to use EPS as the performance criterion for the Corporate Executive Bonus Plan, because it measures profitability and focuses executive
officers on operating performance and decisions around capital structure.
|
·
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Set the target EPS goal for 100% payout upon achieving the companys financial plan approved by the board.
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·
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Set a threshold for payment of annual cash incentives at 50% of the target EPS.
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·
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Awarded performance-based restricted stock units (PBRSUs) designed to transition to a three-year performance period and vesting schedule.
|
·
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Continued to use return on common equity (ROCE) equaling or exceeding cost of equity (COE) as the performance goal for the 2015 PBRSUs, because it
reflects the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company.
|
·
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|
Modified the peer group used as a reference for assessing the competitiveness of executive and director pay for periods after 2015.
|
The Compensation Committee continuously reviews and evaluates the companys compensation program and policies and
considers stockholder views regarding executive compensation. For the 2016 program, the Compensation Committee made decisions that strengthen the relationship between compensation opportunity and the management teams success in executing on
the business strategy. For 2016, the Compensation Committee:
·
|
|
Awarded PBRSUs with cliff-vesting based on a three-year performance period to ensure continued focus on long-term performance and retention.
|
21
SUMMARY OF THE EXECUTIVE COMPENSATION PROGRAM
Our compensation program uses three key elements: base salary, annual cash incentives and long-term incentives. The table below identifies how each of
these elements supports the objectives articulated above.
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Objective
|
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Element of Compensation
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Base
Salary
|
|
Annual Cash
Incentives
|
|
Long-Term Incentives
|
|
|
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|
Attract, Motivate and Retain
|
|
ü
|
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ü
|
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ü
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Reward Executives for Individual Performance
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ü
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ü
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Link Pay with Company Financial Performance
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ü
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ü
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Align Incentives with Long-term Interests of Stockholders
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ü
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Performance Metric
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EPS measures profitability and reflects the annual impact of operational actions and decisions around capital structure.
|
|
PBRSUs: ROCE compared to COE measures earnings on stockholder equity and long-term profitability.
Stock options: reward share price appreciation by delivering compensation only when
the stock price appreciates above the fair market value exercise price.
|
COMPENSATION PLANNING AND THE DECISION-MAKING PROCESS
The Compensation Committee reviews and approves compensation for the Chairman, the Chief Executive Officer, executive officers, and other senior officers,
and it reviews and recommends to the Board of Directors compensation for the non-employee directors.
The Compensation Committee evaluates as
a committee, or together with the other independent directors and the Chairman, the performance and compensation of the Chief Executive Officer. The Compensation Committee also considers:
·
|
|
recommendations from the Chairman and the Chief Executive Officer regarding compensation for the other executive officers and performance criteria for
annual and long-term incentives, developed in consultation with the Executive Vice President Human Resources,
|
·
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recommendations from the Chief Financial Officer regarding performance criteria and goals for annual and long-term incentives,
|
·
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advice from the Executive Vice President Corporate Risk regarding the design and results of incentive compensation programs to ensure
consistency with the companys financial plan, strategic objectives and risk profile, and
|
·
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|
guidance and advice of its independent compensation consultant, Semler Brossy.
|
While the Compensation Committee considers the information provided by management and its independent, third-party advisor, it does not delegate
authority to management for executive compensation decisions.
The Compensation Committees review of executive compensation in January
2015 included consideration of:
·
|
|
the economic environment, market trends, and proposed regulations,
|
·
|
|
a competitive pay analysis of peer companies with data from proxy statements and the 2014 McLagan Top Management survey,
|
22
·
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each executives experience, responsibilities, individual performance, and pay relative to internal peers, and
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·
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reports prepared by the companys Human Resources Department on each executives pay history with:
|
|
·
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actual total compensation for 2011 to 2014,
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·
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projected 2015 compensation,
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|
·
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the value and vesting schedule of outstanding long-term awards,
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·
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each component of pay as a percentage of total compensation, and
|
|
·
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401(k) balances, deferred compensation balances, and other cash compensation (e.g., relocation benefits, company match for the 401(k) plan, and
wellness incentives).
|
The Compensation Committee does not use a formula or assign a weighting to various factors considered
in setting compensation. It does not target a specific percentage mix between cash compensation and long-term incentives or any specific percentage of total compensation for each compensation component.
The Compensation Committee uses a peer group as a source of market data to assess the competitiveness of compensation; however, the data is not used to
set compensation targets. Peers were selected considering the following factors:
·
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|
Quantitative: revenue, market capitalization, and number of employees; and
|
·
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Qualitative: business model, geographic coverage, and competition for customers and/or employees.
|
Because the company has few competitors comparable in terms of business model and geographic coverage, the peer group includes a mix of brokerage firms,
banking and asset management companies, as well as companies that process a significant daily volume of consumer financial transactions. The peer group of 21 companies used for compensation for 2015 was:
23
The Compensation Committee periodically reviews the peer group to ensure that it remains relevant as a
market reference tool and modifies it as necessary to reflect changes at the company, among peers or within the industry. For 2016, the Compensation Committee reviewed and updated the peer group by increasing the size of the banking peers to include
larger bank holding companies that are subject to the Federal Reserves Comprehensive Capital Analysis and Review requirements, given the heightened regulatory environment. In addition, the Compensation Committee renamed the high volume
consumer operations sector the custody and processing sector to more closely align with the companys business and increased the size of the custody and processing sector to include companies that Schwab competes with for talent. KeyCorp and
M&T Bank were removed from the banking sector, and BB&T Corporation, PNC Financial Services Group, Inc., Sun Trust Banks, Inc., and U.S. Bancorp were added. Fiserv and Western Union were removed from the custody and processing sector; Bank
of New York Mellon and State Street were moved from the asset management sector to the custody and processing sector; and Mastercard, Inc. and Visa, Inc. were added to this sector.
Compensation Consultant
Under its charter, the Compensation
Committee is authorized to retain compensation consultants and to approve the terms of the engagement. In 2015, the Compensation Committee engaged Semler Brossy to review pay trends across the financial services industry and in the peer group,
advise directly on Chief Executive Officer and Chairman compensation, review the companys long-term incentives as well as the long-term incentives used by companies in the peer group, and provide general advice and counsel with respect to
executive compensation programs, market practices and trends. Semler Brossy was engaged by the Compensation Committee directly and does not provide other services to the company. In 2015, the Compensation Committee reviewed information regarding
potential conflicts of interest with Semler Brossy, including: other services it might provide to the company, fees received from the company as a percentage of its total revenue, policies and procedures designed to prevent conflicts of interest,
any business and/or personal relationships with members of the Compensation Committee, company stock owned, and any business and/or personal relationships between Semler Brossy consultants and any executive officer of the company.
ELEMENTS OF COMPENSATION
Base salary, annual cash incentives and long-term incentives are the key compensation elements for achieving the companys objectives. The following adjustments were made to base salary, annual cash
incentives and long-term incentives of the named executive officers in 2015:
|
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|
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Executive
|
|
Compensation Adjustments
|
|
|
Base Salary
$ Increase
|
|
|
Increase in Bonus
Target (% of salary)
|
|
|
LTI $ Increase
|
|
|
|
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|
Walter W. Bettinger
|
|
|
|
|
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|
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$
|
1,000,000
|
|
|
|
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|
Joseph R. Martinetto
|
|
$
|
50,000
|
|
|
|
25
|
%
|
|
$
|
750,000
|
|
|
|
|
|
Marie A. Chandoha
|
|
|
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25
|
%
|
|
|
|
|
Base Salary
Base salaries are established at levels intended to attract, motivate and retain highly capable executive officers. As illustrated by the pay mix charts in the Executive Summary above, executive officers
receive a small percentage of their overall compensation in base salary.
24
In January 2015, the Compensation Committee increased Mr. Martinettos base salary by $25,000,
effective March 1, 2015, based on his individual performance, pay relative to internal peers, and pay relative to external compensation data. In April 2015, upon Mr. Martinettos promotion to Senior Executive Vice President, the
Compensation Committee increased Mr. Martinettos base salary by an additional $25,000, effective June 1, 2015.
Annual Cash Incentives
Annual cash incentive awards for the named executive officers were made pursuant to the Corporate Executive Bonus Plan. In the first quarter of 2015, the Compensation Committee established the performance
criterion, set performance goals and approved a target bonus award, expressed as a percentage of salary, for each named executive officer. For 2015, the Compensation Committee increased bonus targets for Mr. Martinetto to 200% of base salary
and for Ms. Chandoha to 175% of base salary in recognition of their individual performance, pay relative to internal peers, and pay relative to external compensation data.
EPS was established as the performance criterion for all named executive officers. The Compensation Committee believes EPS provides a comprehensive measure of the companys profitability and focuses
executive officers on operating performance and decisions around capital structure. For purposes of the Corporate Executive Bonus Plan, EPS is calculated as fully diluted EPS in accordance with U.S. Generally Accepted Accounting Principles, subject
to categories of adjustments and exclusions approved by the Compensation Committee at the time the performance criterion was established. EPS goals were summarized in a matrix with potential payouts ranging from 50% to 200% of the target bonus
award, with a 100% payout assigned to the EPS goal set by the Compensation Committee. Achieving EPS of less than 50% of the target EPS goal would result in no bonus payment; achieving EPS between 50% and 100% of the target EPS goal would result in a
payout of between 50% and 100% of the target bonus award; and achieving EPS of more than the target EPS goal would result in a payout of between 100% and 200% of the target bonus award. The threshold of 50% of target EPS was adopted to
establish the minimum level of achievement for a bonus payment and a cap on bonus payout was set at 200% of the target award. When determining whether the performance goals have been achieved, the Compensation Committee reviews unusual gains and
losses and whether results have been achieved in a manner consistent with the companys risk profile. Based on this review, the Compensation Committee may exercise discretion to reduce payouts.
25
In 2015, the target EPS goal was increased to $1.04; the maximum payment was 200% of the target bonus award
for EPS of $2.08 or higher; the minimum payment was 50% of the target bonus award for EPS of $0.52. The target EPS goal of $1.04 was set to result in a payout of 100% of the target bonus award for performance in line with the companys
financial plans approved by the board. For 2015, the Compensation Committee approved payouts based on EPS of $1.03. The Compensation Committee determined that the company achieved these results while maintaining a low credit risk profile and
remaining within its parameters for interest rate risk. The Compensation Committee did not reduce the cash incentive award for any individual named executive officer and approved funding at 99.04% of target for each of the named executive officers.
Long-Term Incentives
At its January 2015 meeting, the Compensation Committee approved equity awards to be granted on March 2, 2015 for the named executive officers pursuant to the 2013 Stock Incentive Plan. Of the total
target equity awards granted, 50% was granted in stock options and 50% was granted in PBRSUs to align the incentives of executives with the long-term interests of stockholders. This mix reflects a steady evolution over the past several years towards
PBRSUs, moving from 30% PBRSUs in 2009, 2010 and 2011 to 40% in 2012, and 50% in 2013, 2014 and 2015.
In January 2015, the Compensation
Committee increased the value of the awards granted to Mr. Bettinger by $1,000,000 and Mr. Martinetto by $250,000 in recognition of their individual and company performance, pay relative to internal peers, and pay relative to external
compensation data.
In April 2015, upon his promotion to Senior Executive Vice President, the Compensation Committee granted
Mr. Martinetto additional equity awards of $250,000 in stock options and $250,000 in time-based RSUs with a grant date of June 1, 2015, each award vesting 25% annually over four years.
Stock Options
The Compensation Committee approved stock options to be granted on March 2, 2015 vesting 25% annually over four years.
26
Performance-Based Restricted Stock Units
The Compensation Committee approved PBRSUs with the following features.
|
|
|
Feature
|
|
Comments
|
Grant Date
|
|
·
March 2, 2015
|
|
|
Vesting Schedule
|
|
·
16.7% vesting on the first anniversary
of the grant date
·
16.7% vesting on the second anniversary of the grant date
·
66.6% vesting on the third anniversary
of the grant date
All vesting is subject to Compensation Committee
certification that the performance goal for that period has been met
|
|
|
Performance Periods
|
|
·
16.7% based on performance from January
1, 2015 to December 31, 2015
·
16.7% based on performance from January 1, 2015 to December 31, 2016
·
66.6% based on performance from January
1, 2015 to December 31, 2017
|
|
|
Dividend Equivalent Payments
|
|
·
Dividend equivalent payments equal to
the dividends paid on a share of company stock will accumulate and be paid in cash when, and if, the underlying units vest
·
If the performance goals for the units
are not met, the dividend equivalent payments are forfeited
|
|
|
Payment
|
|
·
The number of shares of company stock
payable upon vesting will vary based upon performance
·
200% of the target award is the maximum number of shares of company stock payable for each unit that
vests
|
|
|
Performance Criteria
|
|
·
ROCE
·
COE
|
The Compensation Committee approved performance goals based on ROCE and COE with variable payouts where the number of
shares payable is determined by dividing ROCE by COE and multiplying the result times the funding levels summarized in a matrix. Shares are forfeited if the performance target is not met or paid in a range from 100% to 200% of the target award when
performance equals or exceeds target. A 100% payout of the target award is achieved when ROCE equals or exceeds COE. Achieving ROCE greater than 200% of COE would result in payment between 100% and 200% of the target award, but in no event would the
payment exceed 200% of the target award.
The Compensation Committee approved performance criteria as ROCE equaling or exceeding COE because
it reflects the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company. The opportunity for a payout up to 200% of the target award incents executives to exceed target
performance and directly links the magnitude of the payout to the companys performance up to a cap of 200%. If the Compensation Committee certifies that the goal has been met for each performance period, then the tranche of the award that is
due to vest for that performance period will vest. If the goal has not been met, then the PBRSUs and associated dividend equivalent payments will be forfeited with no second opportunity to be earned.
ROCE is calculated as net income available to common stockholders divided by average common stockholders equity, for the applicable performance
period, subject to categories of adjustments and exclusions approved by the Compensation Committee at the time the performance criteria were established.
COE is calculated using the Capital Asset Pricing Model (CAP-M), which is a commonly used financial metric that incorporates the risk-free interest rate (the company uses the six-month average of the
five-year Treasury rate), the
27
beta of the companys equity (a measure of the volatility of the companys common stock relative to the broader equity market), and a market equity risk premium (an estimate of the
expected excess return required for holding equities instead of a risk-free asset). At December 31, 2015, COE was 8.0%.
When
determining whether the performance goals have been achieved, the Compensation Committee may exclude losses from discontinued operations, extraordinary losses, unusual losses, the cumulative negative effects of changes in accounting principles and
laws, losses on acquisitions or divestitures, losses on foreign exchange transactions, and any unusual, non-recurring losses.
Vesting of Performance-Based Restricted Stock Units for One-Year Performance Periods Ending September 30, 2015 and
December 31, 2015
In 2015, the Compensation Committee granted performance-based equity awards with a transitional three-year
performance period, and vesting of one-sixth of the award is based on a one-year performance period from January 1, 2015 to December 31, 2015. In 2014, 2013 and 2012, the Compensation Committee granted performance-based equity awards with
four one-year performance periods and one-fourth of these awards had a one-year performance period ending on December 31, 2015. In 2011, the Compensation Committee granted performance-based equity awards that have four one-year performance
periods and one-fourth of these awards had a one-year performance period ending on September 30, 2015. These awards only vest if the Compensation Committee certifies that the applicable performance goals have been achieved.
When granting the PBRSUs each year, the Compensation Committee selects appropriate measures of performance given the companys business objectives
and the economic environment. The Compensation Committee chose ROCE compared to COE as criteria that reflects the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company. The
Compensation Committee interpreted return on equity as ROCE for the quarters following the issuance of non-cumulative preferred stock in January 2012 to maintain continuity throughout the performance period by measuring results with respect to
common equity. The achievement of the performance goals for the tranches of those awards with performance periods ending in 2015 were:
|
|
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|
|
|
|
|
|
|
|
|
|
Grant
Year
|
|
Performance Goal
|
|
ROCE
|
|
|
COE
|
|
|
Performance Goal
Met
|
2015
|
|
ROCE
³
COE
|
|
|
11.9%
|
|
|
|
8.0%
|
|
|
Yes
|
2014
|
|
|
|
11.9%
|
|
|
|
8.0%
|
|
|
Yes
|
2013
|
|
|
|
11.9%
|
|
|
|
8.0%
|
|
|
Yes
|
|
|
|
|
|
2012
|
|
Cumulative ROCE
>Cumulative COE
|
|
|
12.8%
|
|
|
|
8.0%
|
|
|
Yes
|
2011
|
|
|
|
11.8%
|
|
|
|
8.1%
|
|
|
Yes
|
Other Compensation
Executive Benefits and Perquisites
The company provides limited
executive perquisites. The Compensation Committee approved certain benefits for Mr. Bettinger in connection with his promotion to President and Chief Executive Officer in 2008, including a car service for commuting purposes, which he has
not used, parking, and use of fractionally owned aircraft consistent with company policies.
28
In connection with her promotion to Executive Vice President Investor Services, the Compensation
Committee approved certain benefits for Ms. Kallsen to assist with her relocation to the San Francisco Bay Area, including relocation benefits consistent with the companys relocation program for officers and a special, one-time cash
payment of $500,000.
For named executive officers, the company:
·
|
|
does not provide financial planning assistance,
|
·
|
|
does not gross up payments to cover executives personal tax liability,
|
·
|
|
does not offer executive retirement or medical plans, and
|
·
|
|
does not match contributions to the deferred compensation plan.
|
Employee Benefit Plans
The company offers no defined benefit plan,
special retirement plan for executives or other nonqualified excess plans to named executive officers. Executive officers may participate in the companys 401(k) plan and employee stock purchase plan available to all eligible employees
subject to Internal Revenue Service limits (except Mr. Schwab, who is excluded from the employee stock purchase plan because he owns more than 5% of the companys stock), and a deferred compensation plan available to officers and other key
employees.
Severance
All employees, including executive officers other than Mr. Schwab, are eligible to receive severance benefits under the companys Severance Pay Plan, which is described in the narrative
following the Termination and Change in Control Benefits Table. Benefits are available under this plan only in the event of termination of employment on account of job elimination. Under the severance program, executive officers are
eligible to receive 15 days of base salary for each year of service with a minimum of seven months and a maximum of 12 months of severance pay. Mr. Schwab is entitled to severance benefits pursuant to his employment agreement described in
the narrative to the Summary Compensation Table.
Compensation Policies
Stock Ownership Guidelines
The Board of Directors has adopted stock ownership guidelines to promote significant equity ownership by executives and further align their long-term financial interests with those of other
stockholders. Under the guidelines:
·
|
|
The Chief Executive Officer is expected to maintain an investment position in company stock equal to at least five times base salary.
|
·
|
|
All other executive officers are expected to maintain an investment position equal to at least three times base salary.
|
Shares owned directly, shares beneficially owned under company benefit plans, restricted stock, and restricted stock units are included in determining
ownership levels, but stock options are not. The stock ownership guidelines allow the Compensation Committee to take action if the target ownership levels are not met within five years. For 2015, all of the named executive officers had stock
ownership exceeding the guidelines, except one recently promoted named executive officer who is on track to meet the guidelines by the applicable deadline.
29
Prohibition on Speculative Trading in Company Stock
Speculative trading in the companys stock is prohibited. Prohibited speculative trading includes short-term trading, selling short, buying
options to open a position and selling uncovered options.
Guidelines for Equity Awards
The company has no program, plan or practice to time the grant of stock-based awards relative to the release of material non-public information or other
corporate events. All equity grants to directors and executive officers are approved by the Compensation Committee or the independent directors at regularly scheduled meetings or, in limited cases involving key recruits or promotions, by a
special meeting or unanimous written consent. The grant date is the meeting date or a fixed, future date specified at the time of the grant. Under the terms of the companys stock incentive plan, the exercise price of options cannot
be less than the closing price of company stock on the grant date.
Recoupment Policies
The company has a recoupment policy to recover incentive awards granted to executive officers in the event of a significant restatement of financial
results due to material noncompliance with financial reporting requirements due to misconduct.
In addition, in the event of certain
securities law violations, the Compensation Committee reserves the right to reduce or cancel equity awards or require executives to disgorge any profit realized from equity awards.
The company also reserves the right to cancel equity awards of employees who are terminated for cause.
Response to Advisory Vote on Say-on-Pay and Stockholder Engagement
The Compensation Committee considers the result of the stockholders advisory say-on-pay vote when reviewing and evaluating the executive
compensation program throughout the year. The Compensation Committee noted the strong support of the stockholders, who approved the companys advisory vote by approximately 98% of the votes at the 2015 Annual Meeting of Stockholders, and
believes this vote reflects broad support of our compensation program and policies.
The Compensation Committee continues to review and
evaluate the companys compensation program and policies in the context of our business, regulatory requirements, and evolving best practices. As part of this process, the Compensation Committee takes into consideration stockholder views
regarding executive compensation that the company receives from time to time.
Risk Assessment
The Compensation Committee reviewed a report by management on incentive compensation practices and policies throughout the company and the potential
impact on risk-taking by employees. The report assessed all employee incentive compensation programs with an emphasis on changes made in 2015, reviewed the bank product incentives, and summarized the incentive compensation risk management
program implemented under banking regulations. The report identified the following risk-mitigating factors currently in place:
·
|
|
approval of executive compensation by an independent board committee,
|
·
|
|
review of plan design and performance results for all executive incentive plans by the corporate risk officer,
|
30
·
|
|
performance-based long-term incentive awards,
|
·
|
|
a balanced suite of performance metrics with a strong link to stockholder value,
|
·
|
|
caps on annual incentive opportunities,
|
·
|
|
performance goals based on financial plans reviewed by the board,
|
·
|
|
a four-year vesting period for stock options with limited opportunities for accelerated vesting,
|
·
|
|
transitional three-year performance and vesting periods for performance-based RSUs with limited opportunities for accelerated vesting,
|
·
|
|
meaningful executive stock ownership guidelines,
|
·
|
|
annual review of incentive plan performance, along with centralized design and administration of all incentive plans, and
|
·
|
|
modest severance benefits.
|
In addition, when reviewing the design of and payments pursuant to incentive compensation programs, the Compensation Committee considers the review by
the Executive Vice President Corporate Risk regarding consistency with the companys financial plan, strategic objectives and risk profile.
Internal Revenue Code Section 162(m)
Generally, plans are structured so that
compensation is performance-based and deductible under Section 162(m) of the Internal Revenue Code; however, depending on business needs, the Compensation Committee may approve compensatory arrangements that are not deductible under
Section 162(m). In 2015, compensation of the named executive officers was deductible under Section 162(m) except for portions of compensation in excess of $1 million received by: a named executive officer due to the taxable, imputed value
of parking, spousal travel for a business event, and employer-provided life insurance; and a named executive officer due to a special, one-time cash payment made in connection with a promotion.
COMPENSATION DECISIONS MADE FOR 2016
2016 Compensation for the Chief Executive Officer
In January 2016,
the Compensation Committee approved a $50,000 increase in base salary and a $250,000 increase in long-term incentives for Mr. Bettinger to reward and recognize his accomplishments as CEO. The Compensation Committee believes that
Mr. Bettingers leadership has been a key factor in building the long-term strength of our franchise by focusing on serving our clients, operating in a disciplined manner and building a leadership team for the future.
2016 Annual Cash Incentives
In the first quarter of 2016, the Compensation Committee considered performance criteria for 2016 annual cash incentive awards under the Corporate Executive Bonus Plan. The Compensation Committee selected
overall corporate performance as measured by EPS and established a threshold for payment at 50% of target EPS.
31
2016 Long-Term Incentives
In the first quarter of 2016, the Compensation Committee approved long-term equity awards of 50% stock options and 50% PBRSUs under the 2013 Stock
Incentive Plan to align the long-term incentives of the executives with the long-term interests of the stockholders. These equity awards were approved to be granted on March 1, 2016. The stock options will vest 25% annually over four years. The
PBRSUs will have cliff-vesting based on the three-year performance period from January 1, 2016 to December 31, 2018. The main features of the 2016 PBRSUs are summarized below.
|
|
|
Feature
|
|
Comments
|
Grant Date
|
|
·
March 1, 2016
|
|
|
Vesting Schedule
|
|
·
100% vesting on the third anniversary of
the grant date
All vesting is subject to Compensation Committee
certification that the performance goal for that period has been met
|
Performance Periods
|
|
·
100% based on performance from January
1, 2016 to December 31, 2018
|
|
|
Dividend Equivalent Payments
|
|
·
Dividend equivalent payments equal to
the dividends paid on a share of company stock will accumulate and be paid in cash when, and if, the underlying units vest
·
If the performance goals for the units
are not met, the dividend equivalent payments are forfeited
|
Payment
|
|
·
The number of shares of company stock
payable upon vesting will vary based upon performance
·
200% of the target award is the maximum number of shares of company stock payable for each unit that
vests
|
|
|
Performance Criteria
|
|
·
ROCE
·
COE
|
|
|
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the
Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the companys annual report on Form 10-K for the fiscal year ended December 31, 2015 and the proxy statement on
Schedule 14A.
COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Roger O. Walther, Chairman
Nancy H. Bechtle
Frank C. Herringer
Paula A. Sneed
Robert N.
Wilson
|
32
EXECUTIVE COMPENSATION TABLES
The following tables show compensation information for the named executive officers: Walter W. Bettinger II, President and Chief Executive Officer, Joseph
R. Martinetto, Senior Executive Vice President and Chief Financial Officer, and the next three most highly compensated executive officers as of December 31, 2015. It also contains information for James D. McCool, who served as an executive
officer for a portion of 2015. No bonuses were paid to a named executive officer in the fiscal years shown, except as part of a non-equity incentive plan.
2015 Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Stock
Awards
1
($)
|
|
|
Option
Awards
2
($)
|
|
|
Non-Equity
Incentive
Plan
Compen-
sation
3
($)
|
|
|
All
Other
Compen-
sation
4
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
Walter W. Bettinger II
President and Chief
Executive Officer
|
|
|
2015
2014
2013
|
|
|
|
1,000,000
1,000,000
1,000,000
|
|
|
|
3,750,000
3,250,000
5,044,527
|
|
|
|
3,750,000
3,250,000
3,250,000
|
|
|
|
3,714,000
4,224,000
3,363,750
|
|
|
|
123,373
117,179
68,211
|
|
|
|
12,337,373
11,841,179
12,726,488
|
|
|
|
|
|
|
|
|
|
Joseph R. Martinetto
Senior Executive Vice President
and Chief Financial Officer
|
|
|
2015
2014
2013
|
|
|
|
610,417
575,000
575,000
|
|
|
|
1,125,000
750,000
1,244,116
|
|
|
|
1,125,000
750,000
870,000
|
|
|
|
1,209,113
1,133,440
902,606
|
|
|
|
38,762
36,302
25,665
|
|
|
|
4,108,292
3,244,742
3,617,387
|
|
|
|
|
|
|
|
|
|
Charles R.
Schwab
5
Chairman
|
|
|
2015
2014
2013
|
|
|
|
500,000
500,000
500,000
|
|
|
|
1,500,000
1,500,000
2,328,240
|
|
|
|
1,500,000
1,500,000
1,500,000
|
|
|
|
1,238,000
1,408,000
1,121,250
|
|
|
|
62,269
61,301
38,542
|
|
|
|
4,800,269
4,969,301
5,488,032
|
|
|
|
|
|
|
|
|
|
Marie A. Chandoha
President and Chief Executive Officer,
Charles Schwab Investment Management, Inc.
|
|
|
2015
|
|
|
|
560,000
|
|
|
|
750,000
|
|
|
|
750,000
|
|
|
|
970,592
|
|
|
|
36,828
|
|
|
|
3,067,420
|
|
|
|
|
|
|
|
|
|
Terri R. Kallsen
Executive Vice President
Investor Services
|
|
|
2015
|
|
|
|
450,000
|
|
|
|
625,000
|
|
|
|
625,000
|
|
|
|
668,520
|
|
|
|
603,876
|
|
|
|
2,972,396
|
|
|
|
|
|
|
|
|
|
James D. McCool
Executive Vice President
Corporate Initiatives
|
|
|
2015
2014
2013
|
|
|
|
550,000
550,000
550,000
|
|
|
|
750,000
750,000
1,164,116
|
|
|
|
750,000
750,000
750,000
|
|
|
|
953,260
1,084,160
863,362
|
|
|
|
38,233
37,010
25,586
|
|
|
|
3,041,493
3,171,170
3,353,064
|
|
(1)
|
|
The amounts shown in this column represent the aggregate grant date fair value of PBRSUs and RSUs and do not reflect the amounts ultimately realized by the named
executive officer. The values shown are as of the grant date determined in accordance with Statement of Financial Accounting Standards Board ASC Topic 718, which is the date on which all of the significant terms, including any performance criteria,
were established. The values represent the aggregate compensation cost expected at the grant date to be recognized over the service period and are not adjusted for the effect of any estimated forfeitures. The maximum value of the 2015 PBRSU grants
on the grant date, assuming the performance conditions are met at 200% of the target award, would be: $7,500,000 for Mr. Bettinger; $3,000,000 for Mr. Schwab; $1,750,000 for Mr. Martinetto; $1,500,000 for Ms. Chandoha and
Mr. McCool; and $1,250,000 for Ms. Kallsen.
|
|
|
PBRSUs awarded in 2015, 2014 and 2013 vest only upon satisfaction of the performance conditions of those awards. For the 2015 and 2014 PBRSUs, the date
the Compensation Committee granted the units and the date all significant terms of the award were finalized were the same. For the 2013 PBRSU grants, the Compensation Committee granted the units on January 30, 2013 and finalized performance
criteria for the first tranche on March 1, 2013 and for the second, third and fourth tranches on December 10, 2013. The accounting grant dates
|
33
|
for the 2013 PBRSUs are therefore March 1, 2013 for the first tranche and December 10, 2013 for the remaining tranches. The values reflected in the table for the grants are the number
of units granted multiplied by the average of the high and low market price of the companys common stock on the accounting grant date.
|
|
|
For further discussion of the companys accounting for its equity compensation plans, including key assumptions, see Part II Item 8
Financial Statements and Supplementary Data Notes to Consolidated Financial Statements Note 2. Summary of Significant Accounting Policies, and Note 20. Employee Incentive, Retirement, and Deferred Compensation
Plans from the companys Form 10-K for the period ended December 31, 2015.
|
(2)
|
|
The amounts shown in this column represent the aggregate grant date fair value of the stock option awards and not the amount ultimately realized by the named executive
officer. For further discussion of the companys accounting for its equity compensation plans, including key assumptions, see Part II Item 8 Financial Statements and Supplementary Data Notes to Consolidated
Financial Statements Note 2. Summary of Significant Accounting Policies, and Note 20. Employee Incentive, Retirement, and Deferred Compensation Plans from the companys Form 10-K for the period ended
December 31, 2015.
|
(3)
|
|
The amounts shown in this column include amounts earned under the Corporate Executive Bonus Plan.
|
(4)
|
|
The amounts shown in this column for 2015 include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Employer
Matching
Contributions
a
($)
|
|
|
Dividend
Equivalents
b
($)
|
|
|
Relocation
c
($)
|
|
|
|
|
|
Walter W. Bettinger II
|
|
|
13,500
|
|
|
|
104,600
|
|
|
|
|
|
|
|
|
|
Joseph R. Martinetto
|
|
|
13,500
|
|
|
|
24,006
|
|
|
|
|
|
|
|
|
|
Charles R. Schwab
|
|
|
13,500
|
|
|
|
48,277
|
|
|
|
|
|
|
|
|
|
Marie A. Chandoha
|
|
|
13,500
|
|
|
|
22,105
|
|
|
|
|
|
|
|
|
|
Terri R. Kallsen
|
|
|
13,500
|
|
|
|
4,023
|
|
|
|
580,451
|
|
|
|
|
|
James D. McCool
|
|
|
13,500
|
|
|
|
23,532
|
|
|
|
|
|
(a)
|
|
The amounts in this column are employer match payments under the companys defined contribution plan, the SchwabPlan Retirement Savings and Investment Plan, which
is a 401(k) plan available to all eligible employees.
|
(b)
|
|
The amounts in this column are dividend equivalent payments on vested PBRSUs and unvested RSUs. These amounts are not included in the fair market value of the stock on
the grant date shown in the Grants of Plan-Based Awards Table.
|
(c)
|
|
In connection with her promotion to Executive Vice President Investor Services in December 2014, the Compensation Committee approved certain benefits for
Ms. Kallsen to assist with her relocation to the San Francisco Bay Area, including a special one-time cash payment of $500,000 and relocation benefits consistent with the companys relocation program for officers. The amount in this column
is valued at its aggregate incremental cost to the company and includes the $500,000 cash payment and relocation expenses paid in 2015 based on the cost of relocation services invoiced to the company.
|
(5)
|
|
Mr. Schwab has had an employment contract with the company since 1987. His employment contract is described in the Narrative to Summary Compensation and Grants of
Plan-Based Awards Tables.
|
34
2015 Grants of Plan-Based Awards Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Date of
Action if
Not
Grant
Date
1
|
|
|
Estimated Possible
Payouts Under
Non-Equity Incentive
Plan
Awards
2
|
|
|
Estimated Future
Payouts Under
Equity Incentive
Plan
Awards
3
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
(#)
4
|
|
|
All Other
Option
Awards:
Number
of
Securities
Underlying
Options
5
(#)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
|
Grant
Date Fair
Value
of
Equity
Awards
($)
6
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Walter W. Bettinger II
|
|
|
1/29/2015
3/2/2015
3/2/2015
|
|
|
|
1/29/2015
1/29/2015
|
|
|
|
1,875,000
|
|
|
|
3,750,000
|
|
|
|
7,500,000
|
|
|
|
|
|
|
|
125,966
|
|
|
|
251,932
|
|
|
|
|
|
|
|
451,264
|
|
|
|
30.17
|
|
|
|
3,750,000
3,750,000
|
|
Joseph R. Martinetto
|
|
|
1/29/2015
3/2/2015
3/2/2015
6/1/2015
6/1/2015
|
|
|
|
1/29/2015
1/29/2015
4/22/2015
4/22/2015
|
|
|
|
610,417
|
|
|
|
1,220,833
|
|
|
|
2,441,666
|
|
|
|
|
|
|
|
29,393
|
|
|
|
58,786
|
|
|
|
7,934
|
|
|
|
105,295
30,121
|
|
|
|
30.17
31.44
|
|
|
|
875,000
875,000
250,000
250,000
|
|
Charles R. Schwab
|
|
|
1/29/2015
3/2/2015
3/2/2015
|
|
|
|
1/29/2015
1/29/2015
|
|
|
|
625,000
|
|
|
|
1,250,000
|
|
|
|
2,500,000
|
|
|
|
|
|
|
|
50,387
|
|
|
|
100,774
|
|
|
|
|
|
|
|
180,506
|
|
|
|
30.17
|
|
|
|
1,500,000
1,500,000
|
|
Maria A. Chandoha
|
|
|
1/29/2015
3/2/2015
3/2/2015
|
|
|
|
1/29/2015
1/29/2015
|
|
|
|
490,000
|
|
|
|
980,000
|
|
|
|
1,960,000
|
|
|
|
|
|
|
|
25,194
|
|
|
|
50,388
|
|
|
|
|
|
|
|
90,253
|
|
|
|
30.17
|
|
|
|
750,000
750,000
|
|
Terri R. Kallsen
|
|
|
1/29/2015
3/2/2015
3/2/2015
|
|
|
|
1/29/2015
1/29/2015
|
|
|
|
337,500
|
|
|
|
675,000
|
|
|
|
1,350,000
|
|
|
|
|
|
|
|
20,995
|
|
|
|
41,990
|
|
|
|
|
|
|
|
75,211
|
|
|
|
30.17
|
|
|
|
625,000
625,000
|
|
James D. McCool
|
|
|
1/29/2015
3/2/2015
3/2/2015
|
|
|
|
1/29/2015
1/29/2015
|
|
|
|
481,250
|
|
|
|
962,500
|
|
|
|
1,925,000
|
|
|
|
|
|
|
|
25,194
|
|
|
|
50,388
|
|
|
|
|
|
|
|
90,253
|
|
|
|
30.17
|
|
|
|
750,000
750,000
|
|
(1)
|
|
This column shows the date that the Compensation Committee or the independent directors took action with respect to the award if that date is different than the grant
date. If the grant date is not the meeting date, it is a fixed, future date specified at the time of the grant.
|
(2)
|
|
These columns show, for the January 29, 2015 grant date for each named executive officer, the range of possible payouts for annual cash incentive awards granted in
2015 under the Corporate Executive Bonus Plan. The actual annual cash incentive awards paid for 2015 performance under this plan are shown in the non-equity incentive plan compensation column to the Summary Compensation Table. The
threshold column shows the bonus payment for achieving 50% of the target EPS goal; achieving less than 50% of the target EPS goal would result in no bonus payment.
|
(3)
|
|
These PBRSU awards were granted under the 2013 Stock Incentive Plan and vest one-sixth on the first and second anniversary of the grant date and two-thirds on the third
anniversary of the grant date, provided that a target performance goal based on ROCE divided by COE for the one, two or three-year performance period preceding the vesting date is met. Shares are forfeited if the performance target is not met or
will be paid in a range from 100% to 200% of the target award when performance equals or exceeds target.
|
(4)
|
|
This RSU award to Mr. Martinetto approved on April 22, 2015 with a grant date of June 1, 2015 was granted under the 2013 Stock Incentive Plan and vests
in four equal annual installments beginning on the first anniversary of the grant date.
|
(5)
|
|
These stock option awards were granted under the 2013 Stock Incentive Plan, vest in four equal annual installments beginning on the first anniversary of the grant date
and expire on the tenth anniversary of the grant date.
|
35
(6)
|
|
For the option awards approved on January 29, 2015 with a grant date of March 2, 2015, the grant date fair value was determined by multiplying the number of
shares granted by the fair value of the option as determined by a binomial option pricing model. The fair value of the option determined by the binomial pricing model on March 2, 2015 was $8.31. For PBRSU awards, the grant date fair value was
determined by multiplying the number of units granted by the average of the high and low market price of the companys common stock on the grant date of March 2, 2015, which was $29.77.
|
|
|
For the option award to Mr. Martinetto approved on April 22, 2015 with a grant date of June 1, 2015, the grant date fair value was determined by
multiplying the number of shares granted by the fair value of the option as determined by a binomial option pricing model. The fair value of the option determined by the binomial pricing model on June 1, 2015 was $8.30. For the RSU award to
Mr. Martinetto, the grant date fair value was determined by multiplying the number of units granted by the average of the high and low market price of the common stock on the grant date of June 1, 2015, which was $31.51.
|
NARRATIVE TO SUMMARY COMPENSATION AND GRANTS OF PLAN-BASED AWARDS TABLES
Base Salaries
In 2015, the Compensation Committee increased the base salary for Mr. Martinetto by $50,000 (8.7%). The Compensation Committee made no other adjustments to base salary for the named executive
officers in 2015.
Annual Cash Incentives
In 2015, the Compensation Committee increased Mr. Martinettos annual cash incentive target from 175% to 200% of base salary and Ms. Chandohas annual cash incentive target from 150%
to 175% of base salary. The Compensation Committee made no other adjustments to annual cash incentive targets for the named executive officers in 2015.
Defined Benefits and Deferred Compensation
The company does not
offer defined benefit and actuarial pension plans, special retirement plans or other nonqualified excess plans for executives. The company does not offer above-market or preferential earnings under nonqualified deferred compensation plans or defined
contribution plans.
All Other Compensation
Dividend equivalent payments on vested PBRSUs and on unvested RSU awards are included in the all other compensation section of the Summary Compensation Table because these dividend equivalent
payments are not included in the fair value of the stock on the grant date as shown in the Grants of Plan-Based Awards Table.
Employment Agreement for Mr. Schwab
The company and Mr. Schwab entered into an amended employment agreement, effective March 31, 2003. Stockholders approved the amended employment agreement. The amended agreement has an initial
term of five years, and provides that as of each March 31, the term of the employment agreement is automatically extended by an additional year, under the same terms and conditions, unless beforehand either party provides notice to the other of
an intention not to extend it. To address potential penalty taxes on deferred compensation pursuant to Section 409A of the Internal Revenue Code and associated regulations, the Board of Directors and Mr. Schwab agreed to amendments
36
to his employment agreement in 2008 to specify the timing of payments, establish definitions of triggering events that are consistent with the Internal Revenue Services guidance under
Section 409A, and delay certain payments until six months after Mr. Schwab terminates employment, as required by Section 409A for certain employees. The amendments do not impact the amount of the payments.
The amended employment agreement provides for an annual base salary of $900,000, subject to annual review by the board, and provides that Mr. Schwab
will be entitled to participate in all compensation and fringe benefit programs made available to other executive officers, including stock-based incentive plans. Mr. Schwabs bonus is determined under the Corporate Executive Bonus Plan,
as described in the Compensation Discussion and Analysis.
The employment agreement also provides that certain compensation and benefits will
be paid or provided to Mr. Schwab (or his immediate family or estate) if his employment is terminated involuntarily, except for cause. Cause is defined as the commission of a felony, or willful and gross negligence, or misconduct
that results in material harm to the company. Involuntary termination includes a material change in Mr. Schwabs capacities or duties at the company.
If an involuntary termination is not due to death, disability or cause:
·
|
|
Mr. Schwab will be entitled to receive for a period of 36 months all compensation to which he would have been entitled had he not been terminated,
including his then current base salary and participation in all bonus, incentive and other compensation and benefits for which he was or would have been eligible (but excluding additional grants under stock incentive plans), and
|
·
|
|
all his outstanding, unvested shares and options under stock incentive plans will vest fully on the termination date.
|
If an involuntary termination is due to disability, Mr. Schwab will be entitled to receive:
·
|
|
his base salary and benefits, less any payments under the long-term disability plan, for a period of 36 months from the termination date, and
|
·
|
|
a prorated portion of any bonus or incentive payments for the year in which the disability occurs.
|
If an involuntary termination is due to death, a lump sum payment will be made to Mr. Schwabs estate equal to five times his then base salary.
If Mr. Schwab voluntarily resigns his employment within 24 months of a change in control of the company, he will be entitled to receive
his base salary up to the date of resignation, plus a prorated portion of any bonus or incentive payments payable for the year in which the resignation occurs. In addition, Mr. Schwab has the right (but not the obligation) to enter into a
consulting arrangement with the company if he voluntarily resigns his employment upon 6 months written notice to the company, or within 24 months of a change in control of the company if he voluntarily resigns or his employment is
involuntarily terminated. Under that arrangement, Mr. Schwab would provide certain consulting services to the company for a period of five years for an annual payment equal to $1 million or 75% of his then base salary, whichever is less.
For estimated termination and change in control payments and benefits to Mr. Schwab, please refer to the Termination and Change in
Control Benefits Table.
The employment agreement prohibits Mr. Schwab from becoming associated with any business competing with the
company during the term of the agreement and for a period of five years following a voluntary resignation of employment. (However, that restriction does not apply if Mr. Schwab resigns his employment within 24 months of a change in control of
the company.)
37
License Agreement for Mr. Schwab
The company and Charles Schwab & Co., Inc. also are parties to an assignment and license agreement with Mr. Schwab that was approved in July
1987 by the companys non-employee directors. Under the agreement, Mr. Schwab has assigned to the company all service mark, trademark, and trade name rights to Mr. Schwabs name (and variations on the name) and likeness. However,
Mr. Schwab has the perpetual, exclusive, irrevocable right to use his name and likeness for any activity other than the financial services business, so long as Mr. Schwabs use of his name does not cause confusion about whether the
company is involved with goods or services actually created, endorsed, marketed or sold by Mr. Schwab or by third parties unrelated to the company. The assignment and license agreement defines the financial services business as the
business in which Charles Schwab & Co., Inc. is currently engaged and any additional and related business in which that firm or the company is permitted to engage under rules and regulations of applicable regulatory agencies.
Beginning immediately after any termination of his employment, Mr. Schwab will be entitled to use his likeness in the financial services business
for some purposes (specifically, the sale, distribution, broadcast and promotion of books, videotapes, lectures, radio and television programs, and also any financial planning services that do not directly compete with any business in which the
company or its subsidiaries are then engaged or plan to enter within three months). Beginning two years after any termination of his employment, Mr. Schwab may use his likeness for all other purposes, including in the financial services
business, as long as that use does not cause confusion as described above.
No cash consideration is to be paid to Mr. Schwab for the
name assignment while he is employed by the company or, after his employment terminates, while he is receiving compensation under an employment agreement with the company. Beginning when all such compensation ceases, and continuing for a period of
15 years, Mr. Schwab or his estate will receive three-tenths of one percent (0.3%) of the aggregate net revenues of the company (on a consolidated basis) and those of its unconsolidated assignees and licensees that use the name or likeness.
These payments may not, however, exceed $2 million per year, adjusted up or down to reflect changes from the cost of living prevailing in the San Francisco Bay Area in May 1987, and they will terminate if the company and its subsidiaries cease using
Mr. Schwabs name and likeness. For estimated payments to Mr. Schwab under his license agreement, please refer to the Termination and Change in Control Benefits Table below.
The license agreement permits the company to continue using Mr. Schwabs name and likeness even after he is no longer affiliated with the company and, under most circumstances, limits
Mr. Schwabs separate use of his name and likeness in the financial services business. However, the companys ability to assign the license agreement, or to permit others to use Mr. Schwabs name and likeness, is limited
during Mr. Schwabs lifetime. Thus, without Mr. Schwabs consent, the company may not transfer the license, or any of the companys rights under the license, to a third party, including by means of mergers or reorganizations
in which the stockholders who held shares prior to the transaction do not retain the ability to elect the majority of the board immediately following such transaction (among other circumstances).
38
2015 Termination and Change in Control Benefits Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Event
1
|
|
Salary
and
Bonus
|
|
|
Early
Vesting
of Stock
Options
2
|
|
|
Early or
Continued
Vesting of
Restricted
Stock
Units
2
|
|
|
Vesting
of
Cash
LTIP
Awards
2
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Walter W. Bettinger II
|
|
Termination under Severance Plan
|
|
$
|
1,182,053
|
3
|
|
$
|
11,497,719
|
4
|
|
$
|
12,074,772
|
4
|
|
|
|
|
|
$
|
20,691
|
5
|
|
$
|
24,775,235
|
|
|
Change in control
|
|
|
|
|
|
|
11,497,719
|
6
|
|
|
12,074,772
|
6
|
|
$
|
4,000,000
|
7
|
|
|
|
|
|
|
27,572,491
|
|
|
Death or disability
|
|
|
|
|
|
|
11,497,719
|
6
|
|
|
12,074,772
|
6
|
|
|
4,740,000
|
8
|
|
|
|
|
|
|
28,312,491
|
|
|
Retirement or voluntary resignation
|
|
|
|
|
|
|
11,497,719
|
4
|
|
|
12,074,772
|
4
|
|
|
|
|
|
|
|
|
|
|
23,572,491
|
|
|
|
|
|
|
|
|
|
Joseph R. Martinetto
|
|
Termination under Severance Plan
|
|
|
738,780
|
3
|
|
|
2,290,190
|
9
|
|
|
2,044,459
|
9
|
|
|
|
|
|
|
20,961
|
5
|
|
|
5,094,390
|
|
|
Change in control
|
|
|
|
|
|
|
2,882,339
|
6
|
|
|
3,123,542
|
6
|
|
|
1,437,500
|
7
|
|
|
|
|
|
|
7,443,381
|
|
|
Death or disability
|
|
|
|
|
|
|
2,882,339
|
6
|
|
|
3,123,542
|
6
|
|
|
1,703,438
|
8
|
|
|
|
|
|
|
7,709,319
|
|
|
|
|
|
|
|
|
|
Charles R. Schwab
|
|
Termination without cause
|
|
|
5,214,000
|
10
|
|
|
5,230,024
|
11
|
|
|
5,317,767
|
4
|
|
|
|
|
|
|
66,957,122
|
12
|
|
|
82,718,913
|
|
|
Change in control
|
|
|
|
|
|
|
5,230,024
|
6
|
|
|
5,317,767
|
6
|
|
|
2,000,000
|
7
|
|
|
|
|
|
|
12,547,791
|
|
|
Death
|
|
|
2,500,000
|
13
|
|
|
5,230,024
|
6
|
|
|
5,317,767
|
6
|
|
|
2,370,000
|
8
|
|
|
66,074,610
|
14
|
|
|
81,492,401
|
|
|
Disability
|
|
|
1,500,000
|
15
|
|
|
5,230,024
|
6
|
|
|
5,317,767
|
6
|
|
|
2,370,000
|
8
|
|
|
66,074,610
|
14
|
|
|
80,492,401
|
|
|
Resignation following a change in control
|
|
|
1,875,000
|
16
|
|
|
5,230,024
|
6
|
|
|
5,317,767
|
6
|
|
|
2,000,000
|
7
|
|
|
66,074,610
|
14
|
|
|
80,497,401
|
|
|
Retirement or voluntary resignation
|
|
|
1,875,000
|
16
|
|
|
5,230,024
|
4
|
|
|
5,317,767
|
4
|
|
|
|
|
|
|
66,074,610
|
14
|
|
|
78,497,401
|
|
|
|
|
|
|
|
|
|
Marie A. Chandoha
|
|
Termination under Severance Plan
|
|
|
425,025
|
3
|
|
|
1,170,497
|
9
|
|
|
1,087,875
|
9
|
|
|
|
|
|
|
12,227
|
5
|
|
|
2,695,624
|
|
|
Change in control
|
|
|
|
|
|
|
2,544,526
|
6
|
|
|
2,635,289
|
6
|
|
|
1,362,500
|
7
|
|
|
|
|
|
|
6,542,315
|
|
|
Death or disability
|
|
|
|
|
|
|
2,544,526
|
6
|
|
|
2,635,289
|
6
|
|
|
1,614,563
|
8
|
|
|
|
|
|
|
6,794,378
|
|
|
|
|
|
|
|
|
|
Terri R. Kallsen
|
|
Termination under Severance Plan
|
|
|
341,543
|
3
|
|
|
120,237
|
9
|
|
|
149,206
|
9
|
|
|
|
|
|
|
12,227
|
5
|
|
|
623,213
|
|
|
Change in control
|
|
|
|
|
|
|
504,719
|
6
|
|
|
1,085,208
|
6
|
|
|
|
|
|
|
|
|
|
|
1,589,927
|
|
|
Death or disability
|
|
|
|
|
|
|
504,719
|
6
|
|
|
1,085,208
|
6
|
|
|
|
|
|
|
|
|
|
|
1,589,927
|
|
|
|
|
|
|
|
|
|
James D. McCool
|
|
Termination under Severance Plan
|
|
|
650,122
|
3
|
|
|
2,615,033
|
4
|
|
|
2,658,933
|
4
|
|
|
|
|
|
|
19,969
|
5
|
|
|
5,944,057
|
|
|
Change in control
|
|
|
|
|
|
|
2,615,033
|
6
|
|
|
2,658,933
|
6
|
|
|
1,375,000
|
7
|
|
|
|
|
|
|
6,648,966
|
|
|
Death or disability
|
|
|
|
|
|
|
2,615,033
|
6
|
|
|
2,658,933
|
6
|
|
|
1,629,375
|
8
|
|
|
|
|
|
|
6,903,341
|
|
|
Retirement or voluntary resignation
|
|
|
|
|
|
|
2,615,033
|
4
|
|
|
2,658,933
|
4
|
|
|
|
|
|
|
|
|
|
|
5,273,966
|
|
(1)
|
|
This table shows the amount of benefits due to termination or change in control to be paid to the named executive officers pursuant to existing agreements (assuming the
event triggering the termination or change in control took place as of December 31, 2015).
|
|
|
The benefits payable to Mr. Schwab are based on the terms of his employment, license, and equity incentive award agreements. The events triggering payments are
described more fully in the description of his employment and license agreements contained in the Narrative to Summary Compensation and Grants of Plan-Based Awards Tables.
|
39
|
|
Except for Mr. Schwab, all other named executive officers are eligible for benefits in the event of job elimination under the Charles Schwab Severance Pay Plan
(Severance Plan), and these benefits are included in amounts shown for termination under Severance Plan.
|
|
|
Stock option and RSU agreements may contain provisions for accelerated vesting due to a change in control, death or disability, or retirement, and these accelerated
amounts are included in amounts shown for change in control, death or disability, and retirement or voluntary resignation. As of December 31, 2015, Mr. Bettinger, Mr. McCool and Mr. Schwab met
the eligibility criteria for retirement under existing equity award agreements.
|
|
|
PBRSU award agreements may contain provisions for continued vesting following either termination under the Severance Plan or retirement, subject to achievement of
performance goals established at the time such awards were granted. The value of awards subject to these continued vesting and performance achievement provisions is included in amounts shown for termination under Severance Plan and
retirement or voluntary resignation as applicable.
|
Cash Long Term Incentive Plan (LTIP) award
agreements may contain provisions for accelerated vesting due to a change in control and provisions for continued pro rata vesting due to death or disability, subject to the achievement of performance goals established at the time such awards were
granted. The value of awards subject to these provisions is included in the amounts shown for change in control, and death or disability.
(2)
|
|
For stock options, the amounts are based on the spread between the exercise price and the closing price of a share of company common stock on December 31, 2015
($32.93), multiplied by the number of shares subject to accelerated vesting. For RSUs, the amounts are based on the closing price of a share of company common stock on December 31, 2015 ($32.93), multiplied by the number of shares subject to
accelerated vesting. For PBRSUs, the amounts are based on $32.93 multiplied by the target number of shares that would vest, to the extent not already forfeited, under accelerated vesting provisions (in the case of death, disability or change in
control), or the number of shares that will continue to vest, to the extent not already forfeited, under continued vesting provisions (in the case of retirement or severance under the Severance Plan) subject to achievement of performance goals
established at the time such awards were granted. For Cash LTIP awards, the amounts shown for accelerated vesting on change in control are the target value of the awards and the amounts shown for continued vesting on death or disability are prorated
amounts of the target awards assuming the death or disability took place on December 31, 2015.
|
(3)
|
|
Includes a base salary payable under the Severance Plan for the severance period and a 60-day notice period. Under the terms of the Severance Plan, an executive officer
is eligible to receive a lump-sum severance benefit equal to base salary (at December 31, 2015 rate) for a specified period (a minimum of seven months and a maximum of 12 months) based upon years of service. In addition, the Severance Plan
provides for base salary during the 60-day notice period. To receive the lump-sum severance benefit, an employee must execute a severance agreement that provides the company and its affiliates with a general release and waiver of claims.
|
(4)
|
|
Under equity award agreements, if the employee meets the eligibility criteria for retirement at the time of termination, stock options vest and PBRSUs continue to vest
based on the achievement of the related performance goals.
|
(5)
|
|
Under the Severance Plan, amounts represent a lump-sum payment to cover part of the cost of COBRA premiums based on group health plan COBRA rates for the severance
period.
|
(6)
|
|
Under equity award agreements, these awards fully vest in the event of a change in control of the company, death or disability.
|
(7)
|
|
Under the Cash LTIP award agreements, these awards fully vest and are paid at the target level of performance in the event of a change in control.
|
40
(8)
|
|
Under the Cash LTIP award agreements, a prorated portion of these awards vests based on the number of days served during the performance period in the event of death or
disability. Award payouts remain subject to achievement of performance goals. The amounts shown are based on accounting estimates regarding achievement of the performance goals and are prorated as of December 31, 2015.
|
(9)
|
|
Under the Severance Plan, amounts result from vesting of outstanding long-term awards that would have vested during the 60-day notice period, accelerated vesting of
outstanding stock options and RSU awards that would have vested upon termination, and continued vesting of PBRSU awards that may vest during the severance period after termination.
|
(10)
|
|
Under Mr. Schwabs employment agreement, includes 36 months of salary (at December 31, 2015 rate of $500,000) and bonus (at 2015 cash incentive of
$1,238,000), to be paid in 36 monthly installments.
|
(11)
|
|
Under Mr. Schwabs employment agreement, unvested stock options fully vest upon an involuntary separation from service other than for cause.
|
(12)
|
|
Under Mr. Schwabs employment and license agreements, includes: annual installments of $4,404,974 (which represents $2 million adjusted to the consumer price
index from 1987 as specified in his license agreement) for 15 years, and estimated cost of office space and secretarial support for 36 months of $882,512.
|
(13)
|
|
Under Mr. Schwabs employment agreement, represents a lump-sum death benefit payable to Mr. Schwabs estate in an amount equal to five times annual
salary (at December 31, 2015 rate of $500,000).
|
(14)
|
|
Under Mr. Schwabs license agreement, represents annual installments of $4,404,974 for 15 years payable to Mr. Schwab or his estate.
|
(15)
|
|
Under Mr. Schwabs employment agreement, represents 36 months of annual salary (at December 31, 2015 rate of $500,000), to be paid in monthly
installments. A prorated bonus is not included, as it is already included in the 2015 Summary Compensation Table and is not an additional expense to the company.
|
(16)
|
|
Under Mr. Schwabs employment agreement, represents $1,875,000 payable in 60 monthly installments of $31,250 in the event that Mr. Schwab elects to
provide consulting services following a voluntary resignation, or resignation or termination after a change in control. A prorated bonus is not included, as it is already included in the 2015 Summary Compensation Table and is not an additional
expense to the company.
|
Charles Schwab Severance Pay Plan
Employees other than Mr. Schwab are eligible for benefits under the Severance Plan in the event of job elimination, as defined in the plan.
Under the Severance Plan, an executive officer is eligible to receive a lump-sum severance pay benefit of base salary equal to 15 business
days multiplied by his or her full years of service, with a minimum of seven months and maximum of 12 months of the base salary that would have been payable to the executive officer. Prorated benefits will be provided for partial years of service.
The lump-sum amount is in addition to base salary for the 60-day notice period.
An executive officer who becomes entitled to severance
benefits under the plan is also eligible to receive a lump-sum payment to cover a portion of the cost of group health plan coverage. The amount of the payment is based upon the period of time for which he or she is eligible to receive severance pay
and current COBRA rates for group health plan coverage. In addition, the portion of the executive officers long-term awards, except PBRSUs or similar performance-based awards, which would have vested had the officer remained employed during
the severance period will vest following his or her termination date. Executive officers are treated as employees during their severance period for purposes of determining their vesting in PBRSUs to the extent performance goals are met or exceeded
for the period.
41
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or Units
of
Stock
That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares
or Units
of
Stock
That
Have Not
Vested
1
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
1
($)
|
|
Walter W. Bettinger II
|
|
|
685,241
243,446
281,909
287,248
274,759
320,649
359,400
201,447
254,569
243,750
131,154
84,110
78,050
38,580
36,500
33,770
|
|
|
|
67,149
84,857
81,250
131,155
84,110
78,050
115,741
109,502
101,310
451,264
|
2
3
4
5
6
7
8
9
10
11
|
|
|
17.38
18.25
15.00
15.43
18.66
15.05
11.75
13.91
12.45
13.64
16.40
22.67
23.12
25.86
27.45
28.44
30.17
|
|
|
|
11/2/2019
3/1/2020
8/2/2020
11/1/2020
3/1/2021
8/1/2021
11/1/2021
3/1/2022
8/1/2022
11/1/2022
3/1/2023
8/1/2023
11/1/2023
3/3/2024
8/1/2024
11/3/2024
3/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
366,680
14,15,16,17
|
|
|
|
12,074,772
|
|
|
|
|
|
|
|
|
|
|
Joseph R. Martinetto
|
|
|
122,920
126,507
44,944
52,045
53,031
54,952
64,130
21,880
43,389
54,831
52,500
14,085
30,266
19,410
18,012
8,903
8,423
7,793
|
|
|
|
14,463
18,277
17,500
14,085
30,267
19,410
18,012
26,710
25,270
23,380
105,295
30,121
|
2
3
4
12
5
6
7
8
9
10
11
13
|
|
|
19.36
17.38
18.25
15.00
15.43
18.66
15.05
11.75
13.91
12.45
13.64
15.08
16.40
22.67
23.12
25.86
27.45
28.44
30.17
31.44
|
|
|
|
11/3/2018
11/2/2019
3/1/2020
8/2/2020
11/1/2020
3/1/2021
8/1/2021
11/1/2021
3/1/2022
8/1/2022
11/1/2022
1/2/2023
3/1/2023
8/1/2023
11/1/2023
3/3/2024
8/1/2024
11/3/2024
3/2/2025
6/1/2025
|
|
|
|
10,628
18,19
|
|
|
|
349,980
|
|
|
|
94,854
14,15,16,17
|
|
|
|
3,123,542
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or Units
of
Stock
That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares
or Units
of
Stock
That
Have Not
Vested
1
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
1
($)
|
|
Charles R. Schwab
|
|
|
316,266
112,360
130,112
132,576
126,812
147,992
165,877
92,975
117,493
112,500
60,533
38,820
36,023
17,806
16,846
15,586
|
|
|
|
30,992
39,165
37,500
60,533
38,820
36,024
53,420
50,540
46,759
180,506
|
2
3
4
5
6
7
8
9
10
11
|
|
|
17.38
18.25
15.00
15.43
18.66
15.05
11.75
13.91
12.45
13.64
16.40
22.67
23.12
25.86
27.45
28.44
30.17
|
|
|
|
11/2/2019
3/1/2020
8/2/2020
11/1/2020
3/1/2021
8/1/2021
11/1/2021
3/1/2022
8/1/2022
11/1/2022
3/1/2023
8/1/2023
11/1/2023
3/3/2024
8/1/2024
11/3/2024
3/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
161,487
14,15,16,17
|
|
|
|
5,317,767
|
|
Marie A. Chandoha
|
|
|
17,279
16,847
17,500
9,006
4,452
4,212
7,793
|
|
|
|
14,463
18,277
17,500
30,267
19,410
18,012
26,710
25,270
23,380
90,253
|
2
3
4
5
6
7
8
9
10
11
|
|
|
11.75
13.91
12.45
13.64
16.40
22.67
23.12
25.86
27.45
28.44
30.17
|
|
|
|
11/1/2021
3/1/2022
8/1/2022
11/1/2022
3/1/2023
8/1/2023
11/1/2023
3/3/2024
8/1/2024
11/3/2024
3/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
80,027
14,15,16,17
|
|
|
|
2,635,289
|
|
|
|
|
|
|
|
|
|
|
Terri R. Kallsen
|
|
|
81
200
63
4,052
|
|
|
|
3,281
5,000
7,926
12,158
75,211
|
14
4
7
10
11
|
|
|
12.10
13.64
23.12
28.44
30.17
|
|
|
|
6/1/2022
11/1/2022
11/1/2023
11/3/2024
3/2/2025
|
|
|
|
11,960
20,21,22,23
|
|
|
|
393,843
|
|
|
|
20,995
17
|
|
|
|
691,365
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares
or Units
of
Stock
That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares
or Units
of
Stock
That
Have Not
Vested
1
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
1
($)
|
|
James D. McCool
|
|
|
64,041
23,981
73,591
52,435
60,719
46,402
59,179
51,797
19,353
30,992
39,164
56,250
30,266
19,410
18,012
8,903
8,423
7,793
|
|
|
|
15,496
19,583
18,750
30,267
19,410
18,012
26,710
25,270
23,380
90,253
|
2
3
4
5
6
7
8
9
10
11
|
|
|
19.36
18.49
17.38
18.25
15.00
15.43
18.66
15.05
11.75
13.91
12.45
13.64
16.40
22.67
23.12
25.86
27.45
28.44
30.17
|
|
|
|
11/3/2018
12/10/2018
11/2/2019
3/1/2020
8/2/2020
11/1/2020
3/1/2021
8/1/2021
11/1/2021
3/1/2022
8/1/2022
11/1/2022
3/1/2023
8/1/2023
11/1/2023
3/3/2024
8/1/2024
11/3/2024
3/2/2025
|
|
|
|
|
|
|
|
|
|
|
|
80,745
14,15,16,17
|
|
|
|
2,658,933
|
|
(1)
|
|
Represents the market value of unvested RSUs or PBRSUs held as of December 31, 2015 based on the closing price of a share of common stock of $32.93 on
December 31, 2015.
|
(2)
|
|
These nonqualified stock options were approved on January 22, 2012 under the 2004 Stock Incentive Plan with a grant date of March 1, 2012 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(3)
|
|
These nonqualified stock options were approved on January 22, 2012 under the 2004 Stock Incentive Plan with a grant date of August 1, 2012 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(4)
|
|
These nonqualified stock options were approved on January 22, 2012 under the 2004 Stock Incentive Plan with a grant date of November 1, 2012 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(5)
|
|
These nonqualified stock options were approved on January 24, 2013 under the 2004 Stock Incentive Plan with a grant date of March 1, 2013 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(6)
|
|
These nonqualified stock options were approved on January 24, 2013 under the 2004 Stock Incentive Plan with a grant date of August 1, 2013 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
44
(7)
|
|
These nonqualified stock options were approved on January 24, 2013 under the 2004 Stock Incentive Plan with a grant date of November 1, 2013 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(8)
|
|
These nonqualified stock options were approved on January 30, 2014 under the 2013 Stock Incentive Plan with a grant date of March 3, 2014 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(9)
|
|
These nonqualified stock options were approved on January 30, 2014 under the 2013 Stock Incentive Plan with a grant date of August 1, 2014 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(10)
|
|
These nonqualified stock options were approved on January 30, 2014 under the 2013 Stock Incentive Plan with a grant date of November 3, 2014 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(11)
|
|
These nonqualified stock options were approved on January 29, 2015 under the 2013 Stock Incentive Plan with a grant date of March 2, 2015 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(12)
|
|
These nonqualified stock options were approved on December 11, 2012 under the 2004 Stock Incentive Plan with a grant date of January 2, 2013 and vest in four
equal annual installments beginning on the first anniversary of the grant date.
|
(13)
|
|
These nonqualified stock options were approved on April 22, 2015 under the 2013 Stock Incentive Plan with a grant date of June 1, 2015 and vest in four equal
annual installments beginning on the first anniversary of the grant date.
|
(14)
|
|
Includes PBRSU awards that were approved on January 22, 2012 under the 2004 Stock Incentive Plan with a grant date of March 1, 2012 and vest in increments of
25% on the first, second, third and fourth anniversary of the grant date, provided that a performance goal of cumulative ROCE exceeding the cumulative COE for the one-year performance period preceding the vesting date is met. Any units that do not
vest at the conclusion of the corresponding one-year performance period may vest at the conclusion of the fourth one-year period if the performance goal of cumulative ROCE exceeds cumulative COE for the four-year period has been met. Any units that
do not vest at the end of the fourth one-year period will be forfeited. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Walter W. Bettinger II
|
|
|
3/1/2016
|
|
|
|
46,713
|
|
|
|
|
Joseph R. Martinetto
|
|
|
3/1/2016
|
|
|
|
10,062
|
|
|
|
|
Charles R. Schwab
|
|
|
3/1/2016
|
|
|
|
21,560
|
|
|
|
|
Marie A. Chandoha
|
|
|
3/1/2016
|
|
|
|
10,062
|
|
|
|
|
James D. McCool
|
|
|
3/1/2016
|
|
|
|
10,780
|
|
45
(15)
|
|
Includes PBRSU awards that were approved on January 24, 2013 under the 2004 Stock Incentive Plan with a grant date of March 1, 2013 and vest in increments of
25% on the first, second, third and fourth anniversary of the grant date, provided that a target performance goal based on ROCE divided by COE for the one-year performance period preceding the vesting date is met. Shares are forfeited if the
performance target is not met or paid in a range from 100% to 200% of the target award when performance equals or exceeds target. Based on a target of 100%, future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Walter W. Bettinger II
|
|
|
3/1/2016
3/1/2017
|
|
|
|
50,062
50,062
|
|
|
|
|
Joseph R. Martinetto
|
|
|
3/1/2016
3/1/2017
|
|
|
|
11,553
11,553
|
|
|
|
|
Charles R. Schwab
|
|
|
3/1/2016
3/1/2017
|
|
|
|
23,105
23,106
|
|
|
|
|
Marie A. Chandoha
|
|
|
3/1/2016
3/1/2017
|
|
|
|
11,553
11,553
|
|
|
|
|
James D. McCool
|
|
|
3/1/2016
3/1/2017
|
|
|
|
11,553
11,553
|
|
(16)
|
|
Includes PBRSU awards that were approved on January 30, 2014 under the 2013 Stock Incentive Plan with a grant date of March 3, 2014 and vest in increments of
25% on the first, second, third and fourth anniversary of the grant date, provided that a target performance goal based on ROCE divided by COE for the one-year performance period preceding the vesting date is met. Shares are forfeited if the
performance target is not met or paid in a range from 100% to 200% of the target award when performance equals or exceeds target. Based on a target of 100%, future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Walter W. Bettinger II
|
|
|
3/3/2016
3/3/2017
3/3/2018
|
|
|
|
31,292
31,292
31,293
|
|
|
|
|
Joseph R. Martinetto
|
|
|
3/3/2016
3/3/2017
3/3/2018
|
|
|
|
7,222
7,221
7,222
|
|
|
|
|
Charles R. Schwab
|
|
|
3/3/2016
3/3/2017
3/3/2018
|
|
|
|
14,443
14,443
14,443
|
|
|
|
|
Marie A. Chandoha
|
|
|
3/3/2016
3/3/2017
3/3/2018
|
|
|
|
7,222
7,221
7,222
|
|
|
|
|
James D. McCool
|
|
|
3/3/2016
3/3/2017
3/3/2018
|
|
|
|
7,222
7,221
7,222
|
|
46
(17)
|
|
Includes PBRSU awards that were approved on January 29, 2015 under the 2013 Stock Incentive Plan with a grant date of March 2, 2015. One sixth of the awards
vest on each of the first and second anniversary of the grant date and two-thirds of the awards vest on the third anniversary of the grant date, provided that a target performance goal based on ROCE divided by COE for the applicable one, two or
three-year performance period preceding the vesting date is met. Shares are forfeited if the performance target is not met or paid in a range from 100% to 200% of the target award when performance equals or exceeds target. Based on a target of 100%,
future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Walter W. Bettinger II
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
20,994
20,994
83,978
|
|
|
|
|
Joseph R. Martinetto
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
4,898
4,898
19,596
|
|
|
|
|
Charles R. Schwab
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
8,397
8,398
33,592
|
|
|
|
|
Marie A. Chandoha
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
4,199
4,199
16,796
|
|
|
|
|
Terri R. Kallsen
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
3,499
3,499
13,997
|
|
|
|
|
James D. McCool
|
|
|
3/2/2016
3/2/2017
3/2/2018
|
|
|
|
4,199
4,199
16,796
|
|
(18)
|
|
These time-based RSUs were approved on December 11, 2012 under the 2004 Stock Incentive Plan with a grant date of January 2, 2013 and vest in four equal
annual installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Joseph R. Martinetto
|
|
|
1/2/2016
1/2/2017
|
|
|
|
1,347
1,347
|
|
(19)
|
|
These time-based RSUs were approved on April 22, 2015 under the 2013 Stock Incentive Plan with a grant date of June 1, 2015 and vest in four equal annual
installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Joseph R. Martinetto
|
|
|
6/1/2016
6/1/2017
6/1/2018
6/1/2019
|
|
|
|
1,983
1,984
1,983
1,984
|
|
47
(20)
|
|
These time-based RSUs were approved on May 25, 2012 under the 2004 Stock Incentive Plan with a grant date of June 1, 2012 and vest in four equal annual
installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Terri R. Kallsen
|
|
|
6/1/2016
|
|
|
|
1,032
|
|
(21)
|
|
These time-based RSUs were approved on October 26, 2012 under the 2004 Stock Incentive Plan with a grant date of November 1, 2012 and vest in four equal
annual installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Terri R. Kallsen
|
|
|
11/1/2016
|
|
|
|
2,210
|
|
(22)
|
|
These time-based RSUs were approved on November 1, 2013 under the 2013 Stock Incentive Plan with a grant date of November 1, 2013 and vest in four equal
annual installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Terri R. Kallsen
|
|
|
11/1/2016
11/1/2017
|
|
|
|
1,800
1,801
|
|
(23)
|
|
These time-based RSUs were approved on October 23, 2014 under the 2013 Stock Incentive Plan with a grant date of November 3, 2014 and vest in four equal
annual installments beginning on the first anniversary of the grant date. Future vesting for these RSUs is as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Vesting
Date
|
|
|
Number of
Units
|
|
|
|
|
Terri R. Kallsen
|
|
|
11/3/2016
11/3/2017
11/3/2018
|
|
|
|
1,706
1,705
1,706
|
|
48
2015 Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value
Realized
on
Exercise
($)
1
|
|
|
Number
of Shares
Acquired
on Vesting
(#)
|
|
|
Value
Realized
on
Vesting
($)
2
|
|
|
|
|
|
|
Walter W. Bettinger II
|
|
|
|
|
|
|
|
|
|
|
169,136
|
|
|
|
5,090,301
|
|
|
|
|
|
|
Joseph R. Martinetto
|
|
|
50,000
|
|
|
|
1,095,115
|
|
|
|
38,396
|
|
|
|
1,154,812
|
|
|
|
|
|
|
Charles R. Schwab
|
|
|
|
|
|
|
|
|
|
|
78,063
|
|
|
|
2,349,377
|
|
|
|
|
|
|
Marie A. Chandoha
|
|
|
113,577
|
|
|
|
1,676,126
|
|
|
|
36,734
|
|
|
|
1,104,389
|
|
|
|
|
|
|
Terri R. Kallsen
|
|
|
11,900
|
|
|
|
181,486
|
|
|
|
6,746
|
|
|
|
210,311
|
|
|
|
|
|
|
James D. McCool
|
|
|
176,705
|
|
|
|
2,783,975
|
|
|
|
38,400
|
|
|
|
1,155,127
|
|
(1)
|
|
The value realized on exercise of stock options as shown in this chart was calculated by subtracting the option exercise price from the market price to obtain
the value realized per share, and multiplying the value realized per share by the number of shares acquired upon exercise. The market price for each transaction was determined as follows: If upon exercising, the named executive officer sold the
shares acquired, the market price was determined to be the sale price. If upon exercising, the named executive officer kept the shares acquired, then the market price was determined to be the average of the high and low market price of the
companys common stock on the date of the exercise.
|
(2)
|
|
Amounts in this column were calculated by multiplying the number of shares acquired on vesting by the average of the high and low market price of the companys
common stock on the vesting date. If the vesting date was a weekend or holiday, the next business days prices were used to value the shares.
|
2015 Nonqualified Deferred Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
1
|
|
Plan
|
|
|
Executive
Contributions in
Last
Fiscal
Year
2
($)
|
|
|
Aggregate
Earnings in Last
Fiscal
Year
3
($)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate Balance
at Last
Fiscal
Year-End
($)
|
|
|
|
|
|
|
|
Walter W. Bettinger II
|
|
|
DCP2
|
|
|
|
3,801,600
|
|
|
|
4,910
|
|
|
|
|
|
|
|
6,834,140
|
4
|
|
|
|
|
|
|
Charles R. Schwab
|
|
|
DCP1
|
|
|
|
|
|
|
|
(51,776
|
)
|
|
|
|
|
|
|
19,029,563
|
5
|
|
|
|
|
|
|
Marie A. Chandoha
|
|
|
DCP2
|
|
|
|
50,000
|
|
|
|
(1,360
|
)
|
|
|
|
|
|
|
126,266
|
|
|
|
|
|
|
|
James D. McCool
|
|
|
DCP2
|
|
|
|
325,248
|
|
|
|
(13,235
|
)
|
|
|
|
|
|
|
2,294,390
|
6
|
(1)
|
|
Mr. Bettinger, Ms. Chandoha and Mr. McCool participate in The Charles Schwab Corporation Deferred Compensation Plan II (DCP2) only, and Mr. Schwab
participates in The Charles Schwab Corporation Deferred Compensation Plan I (DCP1) only. The other named executive officers do not participate in either of the companys deferred compensation plans.
|
(2)
|
|
The company does not make contributions to the deferred compensation plans.
|
(3)
|
|
The earnings reported in this column are not above-market or preferential and therefore are not reported in the Summary Compensation Table.
|
49
(4)
|
|
For Mr. Bettinger, includes executive contributions of $3,027,375 of annual cash incentives previously reported as compensation to Mr. Bettinger in the
Summary Compensation Table for 2014 and aggregate plan earnings of $5,165.
|
(5)
|
|
For Mr. Schwab, includes executive contributions of $6,513,138 of annual cash incentives previously reported as compensation to Mr. Schwab in the Summary
Compensation Tables for prior years (1994 1997), and aggregate plan earnings of $12,516,425. Mr. Schwab does not currently defer compensation.
|
(6)
|
|
For Mr. McCool, includes executive contributions of $511,125 of annual cash incentives and Long Term Incentive Plan awards previously reported as compensation to
Mr. McCool in the Summary Compensation Table for 2008 and aggregate plan earnings of $797,491.
|
The
Charles Schwab Corporation Deferred Compensation Plans
In December 2004, the Compensation Committee adopted the DCP2. Deferrals for
income earned prior to January 1, 2005 were made under the DCP1, and all deferrals for income earned after January 1, 2005 were made pursuant to the DCP2. Subject to the terms and conditions set forth in the plans, each eligible
participant may elect to defer a portion of amounts earned under the companys non-equity incentive plans (and in some cases, participants can elect to defer a portion of their base salary). All of a participants compensation deferrals
are credited to a deferral account maintained for each participant. Amounts credited to deferral accounts are adjusted periodically to reflect earnings and losses (calculated based on the market return of investment options selected by participants
that the company makes available under the plans). Investment options available under the plans are listed mutual funds and the Schwab Managed Retirement Trust Funds. Participants may make investment changes at any time. With certain exceptions,
deferral accounts are paid or commence payment upon a fixed payment date, as elected by the participant, or upon the participants retirement. Participants generally may elect that payments be made in a single lump sum or in annual installments
over a period of four, five, ten or fifteen years. However, payment will be made in a lump sum after a change in control of the company or upon a termination of a participants employment for any reason other than retirement.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table summarizes information as of December 31, 2015 with respect to equity compensation plans approved and not approved by
stockholders (shares in millions):
Securities Authorized for Issuance as of December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
PLAN CATEGORY
|
|
(A)
NUMBER OF SECURITIES
TO BE ISSUED UPON
EXERCISE OF OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS
|
|
|
(B)
WEIGHTED-AVERAGE
EXERCISE PRICE OF
OUTSTANDING
OPTIONS, WARRANTS
AND RIGHTS
1
|
|
|
(C)
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
|
|
Equity compensation plans approved by stockholders
|
|
|
48.4
|
2
|
|
$
|
19.83
|
|
|
|
97.0
|
3
|
|
|
|
|
Equity compensation plans not approved by stockholders
|
|
|
0.1
|
4
|
|
$
|
16.83
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
48.5
|
|
|
$
|
19.82
|
|
|
|
97.0
|
|
(1)
|
|
The weighted-average exercise price does not take into account awards that have no exercise price such as RSUs.
|
50
(2)
|
|
Consists of 40,178,067 stock options and 8,210,943 RSUs outstanding under the companys 2004 and 2013 Stock Incentive Plans.
|
(3)
|
|
Consists 57,205,435 shares (including stock options, stock appreciation rights, restricted stock, RSUs, performance stock and performance units) that may be awarded
under the 2013 Stock Incentive Plan and 39,749,710 shares that may be purchased under the Employee Stock Purchase Plan (ESPP). An offering period under the ESPP had begun but was not completed as of December 31, 2015 (347,277 shares were
subsequently purchased at the end of this offering period).
|
(4)
|
|
Includes grants under the optionsXpress Holdings, Inc. 2008 Equity Incentive Plan and 2005 Equity Incentive Plan (the optionsXpress Plans) which were
assumed by the company in connection with its acquisition of optionsXpress Holdings, Inc. in 2011. There were 117,503 stock options and 13,724 RSUs outstanding under the optionsXpress Plans as of December 31, 2015.
|
51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table shows common stock that is beneficially owned by the directors, the named executive officers and owners of 5% or more of the
outstanding company common stock, as of the close of business on March 18, 2016 or as noted otherwise.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAME OF BENEFICIAL OWNER
|
|
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
|
|
|
PERCENT
OF
OUTSTANDING
SHARES
|
|
|
SHARES
OWNED
1
|
|
|
STOCK OPTIONS
EXERCISABLE
WITHIN 60 DAYS
2
|
|
|
TOTAL
BENEFICIAL
OWNERSHIP
3
|
|
|
|
|
|
|
|
Charles R. Schwab
|
|
|
155,580,002
|
4
|
|
|
1,764,768
|
|
|
|
157,344,770
|
|
|
|
11.9
|
%
|
|
|
|
|
|
Dodge & Cox
|
|
|
102,622,637
|
5
|
|
|
|
|
|
|
102,622,637
|
|
|
|
7.8
|
%
|
|
|
|
|
|
Vanguard Group, Inc.
|
|
|
68,874,592
|
6
|
|
|
|
|
|
|
68,874,592
|
|
|
|
5.2
|
%
|
|
|
|
|
|
John K. Adams, Jr.
|
|
|
7,500
|
|
|
|
1,958
|
|
|
|
9,458
|
|
|
|
*
|
|
|
|
|
|
|
Nancy H. Bechtle
|
|
|
210,763
|
|
|
|
79,762
|
|
|
|
290,525
|
|
|
|
*
|
|
|
|
|
|
|
Walter W. Bettinger II
|
|
|
368,157
|
7
|
|
|
3,838,704
|
|
|
|
4,206,861
|
|
|
|
*
|
|
|
|
|
|
|
C. Preston Butcher
|
|
|
1,076,101
|
8
|
|
|
269,802
|
|
|
|
1,345,903
|
|
|
|
*
|
|
|
|
|
|
|
Christopher V. Dodds
|
|
|
470,836
|
|
|
|
2,498
|
|
|
|
473,334
|
|
|
|
*
|
|
|
|
|
|
|
Stephen A. Ellis
|
|
|
25,949
|
|
|
|
33,154
|
|
|
|
59,103
|
|
|
|
*
|
|
|
|
|
|
|
Mark A. Goldfarb
|
|
|
12,572
|
|
|
|
13,279
|
|
|
|
25,851
|
|
|
|
*
|
|
|
|
|
|
|
William S. Haraf
|
|
|
10,000
|
|
|
|
1,958
|
|
|
|
11,958
|
|
|
|
*
|
|
|
|
|
|
|
Frank C. Herringer
|
|
|
151,502
|
9
|
|
|
79,762
|
|
|
|
231,264
|
|
|
|
*
|
|
|
|
|
|
|
Stephen T. McLin
|
|
|
150,074
|
10
|
|
|
220,735
|
|
|
|
370,809
|
|
|
|
*
|
|
|
|
|
|
|
Arun Sarin
|
|
|
15,283
|
|
|
|
52,427
|
|
|
|
67,710
|
|
|
|
*
|
|
|
|
|
|
|
Paula A. Sneed
|
|
|
61,588
|
|
|
|
79,762
|
|
|
|
141,350
|
|
|
|
*
|
|
|
|
|
|
|
Roger O. Walther
|
|
|
257,890
|
11
|
|
|
74,518
|
|
|
|
332,408
|
|
|
|
*
|
|
|
|
|
|
|
Robert N. Wilson
|
|
|
132,507
|
|
|
|
83,695
|
|
|
|
216,202
|
|
|
|
*
|
|
|
|
|
|
|
Joseph R. Martinetto
|
|
|
138,574
|
|
|
|
869,885
|
|
|
|
1,008,459
|
|
|
|
*
|
|
|
|
|
|
|
Maria A. Chandoha
|
|
|
34,120
|
|
|
|
138,151
|
|
|
|
172,271
|
|
|
|
*
|
|
|
|
|
|
|
Terri R. Kallsen
|
|
|
5,343
|
|
|
|
23,198
|
|
|
|
28,541
|
|
|
|
*
|
|
|
|
|
|
|
James D. McCool
|
|
|
164,364
|
|
|
|
732,806
|
|
|
|
897,170
|
|
|
|
*
|
|
|
|
|
|
|
Directors and Executive Officers as a Group (22 Persons)
12
|
|
|
158,970,901
|
|
|
|
8,967,986
|
|
|
|
167,938,887
|
|
|
|
12.6
|
%
|
|
|
|
|
|
* Less than 1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This column includes shares for which the named person has sole voting and investment power, has shared voting and investment power with his or her spouse, or holds in
an account under The Charles Schwab Corporation Dividend Reinvestment Plan, ESPP and/or The SchwabPlan Retirement Savings and Investment Plan.
|
|
|
This column excludes RSUs held by directors under the 2004 Stock Incentive Plan, the 2013 Stock Incentive Plan and the Directors Deferred
Compensation Plans, which do not have voting rights. Under the Directors Deferred Compensation Plans, the RSUs are converted into shares of common stock and paid in a lump sum by
|
52
|
the end of February in the year following a directors termination of board service. As of March 18, 2016, there are no RSUs under the Directors Deferred Compensation Plans that
are convertible within 60 days. Information on these RSUs is contained in the section under Director Compensation.
|
|
|
This column also excludes PBRSUs and RSUs held by executive officers under the 2004 Stock Incentive Plan and the 2013 Stock Incentive Plan, which do not have voting
rights.
|
(2)
|
|
Shares that can be acquired through stock option exercises within 60 days of March 18, 2016.
|
(3)
|
|
This column includes the total number of shares beneficially owned, including shares owned and the number of shares underlying stock options exercisable within 60 days
of March 18, 2016.
|
(4)
|
|
Includes 9,068,425 shares held by Mr. Schwabs spouse as trustee, 34,637,941 shares held by a family limited partnership, 44,025 shares held by 188 Corp, and
the following shares for which Mr. Schwab disclaims beneficial ownership: 10,568,668 shares held by a nonprofit public benefit corporation established by Mr. Schwab, and 6,000 shares held in a trust for which Mr. Schwab acts as
trustee.
|
|
|
Mr. Schwabs address is c/o The Charles Schwab Corporation, 211 Main Street, San Francisco, CA 94105.
|
(5)
|
|
Includes shares held by Dodge & Cox as reported on its Schedule 13G filed with the Securities and Exchange Commission on February 12,
2016. The address of Dodge & Cox is 555 California Street, 40
th
Floor, San Francisco, CA 94104.
|
(6)
|
|
Includes shares held by Vanguard Group, Inc. as reported on its Schedule 13G filed with the Securities and Exchange Commission on February 11, 2016. The address of
Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, PA 19355.
|
(7)
|
|
Includes 2,272 shares held by Mr. Bettingers spouse.
|
(8)
|
|
Includes 270,699 shares held by Mr. Butchers spouse.
|
(9)
|
|
Includes 50,625 shares held by Mr. Herringers spouse.
|
(10)
|
|
Includes shares held by a nonprofit public benefit corporation established by Mr. McLin, for which he disclaims beneficial ownership.
|
(11)
|
|
Includes 31,772 shares held by Mr. Walthers spouse.
|
(12)
|
|
In addition to the officers and directors named in this table, three other executive officers are members of this group.
|
53
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on its records and other information, the company believes that during 2015 all filings with the SEC by its officers, directors and
10% stockholders timely complied with requirements for reporting ownership and changes in ownership of common stock under Section 16(a) of the Securities Exchange Act of 1934.
TRANSACTIONS WITH RELATED PERSONS
Charles R.
Schwab, the companys Chairman, has a daughter, Carolyn (Carrie) Schwab-Pomerantz, who was employed as President of the Charles Schwab Foundation during 2015 (and presently). Ms. Schwab-Pomerantz earned approximately $863,000 in salary,
bonus and benefits during 2015. She also received a grant of 2,906 RSUs and 6,897 stock options. Ms. Schwab-Pomerantz has been employed by the company for 33 years.
Stephen T. McLin, a director of the company, has a son, Stephen D. McLin, who was employed by the company in a non-executive officer, non-managerial capacity during 2015 (and presently). Mr. McLin
earned approximately $121,500 in salary, bonus and benefits during 2015. Mr. McLin has been employed by the company for 22 years.
Some
directors, executive officers and entities with which they are affiliated have credit transactions with the companys banking and brokerage subsidiaries, such as mortgage loans, revolving lines of credit or other extensions of credit. These
transactions with directors, executive officers and their affiliates are made in the ordinary course of business and as permitted by the Sarbanes-Oxley Act of 2002. Such transactions are on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with persons not related to the lender and do not involve more than the normal risk of collectability or present other unfavorable features.
The company has policies and procedures regarding the review and approval of related-person transactions. Such policies and procedures are in writing and
have been approved by the Audit Committee. The transactions covered by the companys policies and procedures include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series
of similar transactions, arrangements or relationships in which the company participates and the amount involved exceeds $120,000, and a director or executive officer of the company has a direct or indirect material interest. The policies and
procedures include transactions where the directors or executive officers children, stepchildren, parents, stepparents, spouse, siblings, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law or
members of their household (other than a tenant or employee) have a personal interest.
Any director or executive officer proposing a
transaction covered by the companys related-party transaction policies and procedures must notify the companys compliance department as soon as practicable after becoming aware of the transaction or proposed transaction and must provide
a description of all material details and his or her interest in the transaction. The Audit Committee will consider the transaction at its next meeting. The Audit Committee may authorize or ratify the transaction only if the Audit Committee
determines that the transaction is fair as to the company as of the time of authorization and in the best interests of the company. The transaction must be approved in good faith by a majority of the disinterested directors on the Audit Committee.
Notice to and approval by the Audit Committee as described above is not required if the transaction involves compensation to an immediate
family member of a director or executive officer, and the employment relationship has been approved in good faith by a majority of disinterested members of the Compensation Committee. As in the case of Ms. Schwab-Pomerantz and Mr. McLin,
after initial approval, further approval of the Compensation Committee is not required if the immediate family member is not an executive officer and all compensation and benefits to him or her, including salary increases, bonuses, incentive awards,
perquisites, benefits, severance payments, and all other forms of compensation, are made in accordance with the companys compensation programs, policies and plans.
54
PROPOSALS FOUR AND FIVE:
STOCKHOLDER PROPOSALS
We have been notified that stockholder proponents intend to present proposals for consideration at the annual meeting. The stockholder proposals and supporting statements appear in italics below, and we
present the proposals as they were submitted to us. We recommend that you vote
against
the two stockholder proposals. Our responses are contained immediately after each proposal.
If you want us to consider including a proposal in our proxy statement next year, you must deliver it to the Corporate Secretary at the companys
principal executive office no later than November 30, 2016. If you want to submit a proposal for action at next years annual meeting that is not to be included in our proxy statement, pursuant to our bylaws, you must deliver it to the
Corporate Secretary no earlier than February 16, 2017 and no later than March 18, 2017, and such proposal must be, under Delaware General Corporation Law, an appropriate subject for stockholder action.
The companys bylaws contain specific procedural requirements regarding a stockholders ability to nominate a director or submit a proposal to
be considered at a meeting of stockholders. The bylaws are available on our website at
www.aboutschwab.com/governance
. In addition, you may obtain a copy of our bylaws by contacting the Assistant Corporate Secretary at the address in the
Corporate Governance Information section of this proxy statement.
FIRST STOCKHOLDER PROPOSAL
The AFL-CIO Reserve Fund, 815 Sixteenth Street, N.W., Washington, D.C. 20006, which holds approximately 680 shares of company stock, has submitted the
following proposal for consideration at the annual meeting:
Whereas, we believe in full disclosure of our companys direct and
indirect lobbying activities and expenditures to assess whether our companys lobbying is consistent with The Charles Schwab Corporations (Schwab) expressed goals and in the best interests of shareholders.
Resolved, the shareholders of Schwab request the preparation of a report, updated annually, disclosing:
1.
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Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications.
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2.
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Payments by Schwab used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and
the recipient.
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3.
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Schwabs membership in and payments to any tax-exempt organization that writes and endorses model legislation.
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4.
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Description of managements and the Boards decision making process and oversight for making payments described in sections 2 and 3 above.
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For purposes of this proposal, a grassroots lobbying communication is a communication directed to the
general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or
regulation. Indirect lobbying is lobbying engaged in by a trade association or other organization of which Schwab is a member. Both direct and indirect lobbying and grassroots lobbying communications include
efforts at the local, state and federal levels. The report shall be presented to the Audit Committee of the Board or other relevant oversight committees of the Board and posted on the companys website.
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Stockholder Supporting Statement
As shareholders, we encourage transparency and accountability in Schwabs use of corporate funds to influence legislation and regulation. Schwab spent $2.5 million in 2014 and $3.4 million in 2013
on federal lobbying according to the Center for Responsive Politics website
htttp://www.opensecrets.org/
.
These figures do not
include lobbying expenditures to influence legislation in states, where disclosure requirements are uneven or absent. Schwab does not disclose its membership in, or payments to, trade associations, or portions of such amounts used for lobbying.
Finally, Schwab has not disclosed if it has membership in or contributions to tax-exempt organizations that write and endorse model legislation, such as the American Legislative Exchange Council (ALEC).
Transparent reporting of all lobbying activity will reveal whether company assets are being used for objectives contrary to Schwabs long-term
interests. For these reasons, we urge you to vote FOR this proposal.
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Board of Directors Recommendation
Against and Statement of Opposition to the First Stockholder Proposal
The company has a Statement on Public Policy and Political Participation that is disclosed on its website,
www.aboutschwab.com/governance
. The
Statement outlines the companys oversight with respect to lobbying activities and reporting. As discussed in the Statement, the company believes that it is in the best interests of the company, its employees, clients and stockholders to be
engaged in discussions concerning the effectiveness of current and proposed regulations and in other public policy and rulemaking activity that might affect its business.
As discussed in the Statement, the company reports its lobbying activities and
expenses and registers employees who engage in lobbying activities in accordance with federal law. Lobbying activities and employees who engage in lobbying activities must be approved and overseen by the Office of Legislative and Regulatory Affairs,
and lobbying activities are reviewed by the Audit Committee of the Board of Directors annually. In light of the focus of any lobbying activities on policy and rulemaking that might affect the companys business and oversight by the Audit
Committee, we believe this proposal is not appropriate for the company. We believe that the cost and effort to compile and report this data would outweigh its limited value to our stockholders. Stockholders defeated this proposal last
year.
We recommend a vote
against
the first stockholder
proposal.
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SECOND STOCKHOLDER PROPOSAL
Scott M. Stringer, Comptroller of the City of New York, on behalf of the New York City Employees Retirement System, the New York City Fire Department Pension Fund, The New York City Teachers
Retirement System and the New York City Police Pension Fund, One Centre Street, New York, New York 10007, which hold, in the aggregate, approximately 1.7 million shares of company stock, has submitted the following proposal for consideration at
the annual meeting:
RESOLVED: Shareholders request that the Board of Directors adopt and enforce a policy requiring The Charles Schwab
Corporation (the Company) to disclose annually its EEO-1 data a comprehensive breakdown of its workforce by race and gender according to 10 employment categories on its website or in its corporate responsibility report,
beginning in 2016.
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Stockholder Supporting Statement
Diversity matters. Numerous studies suggest that companies with comprehensive diversity policies and programs, and strong leadership commitment to implement and fully integrate diversity into their
culture and practices, enhance long-term shareholder value. A McKinsey & Company global study (Diversity Matters, February 2015), for example, found that companies in the top quartile for racial and ethnic diversity are 35 percent
more likely to have financial returns above their respective national industry median.
Workplace diversity provides competitive
advantage by generating diverse, valuable perspectives, creativity, innovation and adaption, increased productivity and morale, while eliminating the limitations of groupthink. It also reduces potential legal and reputational risks
associated with workplace discrimination and builds corporate reputations as fair employers.
The financial services industry, of which
the company is a part, is characterized by persistent and pervasive underrepresentation of minorities and women, particularly in senior positions.
Overall, the number of minorities and women holding management-level jobs in the financial sector did not substantially change over the 18 years from 1993 to 2011, according to 2010 and 2013 reports by
the U.S. Government Accountability Office (GAO) (
http://www.gao.gov/assets/660/653814.pdf; http://www.gao.gov/new.items/d10736t.pdf
). In 2011, minority men and women together held only 10% of senior positions at financial firms, with
African-Americans holding 2.7%, Hispanics 3.3%, and Asians 4.1%. Additionally, in 2008, the most recent such data provided by the GAO, white men held 64% of senior jobs, more than twice as many as white women, who held only 27%.
Charles Schwab discloses little or no workforce diversity data or even information about its diversity policies and initiatives. It discusses awards
and give anecdotal stories. These do not allow investors to fully evaluate the companys diversity initiatives and their impact, especially across job categories and particularly in more senior roles. Without more detailed quantitative
information on a comparable basis, shareholders have no way to evaluate and benchmark the effectiveness of these efforts over time and relative to peers.
Federal law requires companies with 100 or more employees to annually submit an EEO-1 Report to the Equal Employment Opportunity Commission. The report profiles a companys workforce by race and
gender in 10 job categories, including senior management.
Over two-thirds of S&P 100 companies now disclose EEO-1 data, including
financial peers such as Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and US Bancorp.
The proposal
does not limit the company from providing more detailed quantitative and qualitative disclosures where appropriate. We also encourage the company to describe the steps it is taking and the challenges it faces in moving forward to achieve its
diversity plans and goals.
57
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Board of Directors Recommendation
Against and Statement of Opposition to the Second Stockholder Proposal
The companys commitment to diversity and inclusion Everyone Matters and efforts to support this commitment are outlined on
our website at
www.aboutschwab.com/work-at-schwab/diversity
. The companys non-discrimination policy, contained in our Code of Business Conduct and Ethics (
www.aboutschwab.com/governance
), strengthens our commitment to recognize
the diversity of our workforce, our clients, and the communities that we serve. We are proud that this commitment to diversity and inclusion has been recognized, including achieving a 100% rating from the Human Rights Campaign Corporate Equality
Index every year since 2004.
The EEO-1 data that the proponent requests
be disclosed publicly is filed in a confidential report to the Equal Employment Opportunity Commission (EEOC) on the agencys standard form. The EEOCs instructions to the form direct the company to solicit data from its employees with
respect to gender, race and ethnicity. Those instructions also require the company to ask its employees to voluntarily self-identify their race or ethnicity and to state that the information obtained will be kept confidential and may only be
used in accordance with the provisions of applicable laws, executive orders, and regulations, including those that require the information to be summarized and reported to the federal government for civil rights enforcement. The company
provides the required notice to its employees and commits to them to keep their personal EEO-1 information strictly confidential, except as required to be reported to the federal government.
In our view, implementation of this proposal would cause the company to breach the
assurances of confidentiality and privacy that it has made to its employees. The EEO-1 data requested by the proposal a comprehensive breakdown of its workforce by race and gender according to 10 employment categories would
reveal the information that employees have confidentially shared with the company about the racial and ethnic groups with which they primarily identify. The company reports this information in 14 race/ethnicity and gender combinations that are
further broken down by specifying the employees job classifications (with 10 employment categories) and their work locations. We are concerned about the impact on our employees from public disclosure of data that we have asked them to share
voluntarily on assurances that it will be maintained in confidence.
We
believe that this proposal would undermine the companys ability to recruit and retain a diverse workforce. The diversity of the companys workforce includes the recognition of each individuals unique heritage and self-understanding.
According to the U.S. Census, over nine million Americans self-reported multiple races on the 2010 Census, an increase of 32% over the 2000 Census. Other respondents indicated only the racial or ethnic group with which they primarily identified.
Presumably, employees responses on an EEO-1 form would match their self-identification on a Census form. The company does not require its employees to disclose to the world their racial and ethnic group identifications, and the company
believes that it can best recruit and retain a diverse and competitive workforce and promote diversity in the workplace by honoring its commitment to keep this personal information confidential. In addition, this proposal does little to assist
investors in evaluating the companys effectiveness in meeting its commitment to equal opportunity in any meaningful way: EEO-1 data has been rejected by federal courts as not sufficiently probative for determining whether
employment decisions reflect bias against a particular racial or ethnic group.
Our view of diversity that
everyone matters
recognizes the uniqueness of experience, strength, culture and thought contributed by each employee. This proposal runs contrary to that
view, by calling into question the confidentiality of reports made by employees in self-identifying their racial and ethnic heritages, undermining the integrity of the process for gathering diversity data, and failing to recognize and support the
breadth of experience and uniqueness that each individual chooses to share with us (or not). Stockholders defeated this proposal in each of the last two years.
We recommend a vote
against
the second stockholder proposal.
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58
INFORMATION ABOUT VOTING PROCEDURES AND PROXIES
How is my vote counted?
You may vote either for or against or abstain from voting on each director nominee, the ratification of the selection of independent auditors, the advisory approval of
named executive officer compensation, and on the stockholder proposals. If you abstain from voting on any director nominee, the abstention will not count as a vote cast on the proposal to elect that director. If you abstain from voting on the
ratification of the selection of independent auditors, the advisory approval of named executive officer compensation, or the stockholder proposals, it will have the same effect as a vote against that proposal.
If you provide your voting instructions on your proxy, your shares will be voted as you instruct, and according to the best judgment of Charles R.
Schwab, Walter W. Bettinger II and David R. Garfield if a proposal comes up for a vote at the meeting that is not on the proxy.
If you do not
indicate a specific choice on the proxy you submit for one or more proposals, your shares will be voted (with respect to the proposal or proposals on which you do not vote):
·
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for
the five named nominees for directors,
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for
the ratification of the selection of independent auditors,
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·
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for
the advisory approval of named executive officer compensation,
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·
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against
the stockholder proposal on lobbying payments
,
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·
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against
the stockholder proposal on annual disclosure of EEO-1 data, and
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·
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according to the best judgment of Mr. Schwab, Mr. Bettinger and Mr. Garfield if a proposal comes up for a vote at the meeting that is
not on the proxy.
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How will my shares be voted if other business is presented at the annual meeting?
We know of no business other than the proposals contained in the proxy statement to be considered at the meeting. However, if other
matters are properly presented at the meeting, or at any adjournment or postponement of the meeting, and you have properly submitted your proxy, then Mr. Schwab, Mr. Bettinger and Mr. Garfield will vote your shares on those matters
according to their best judgment.
What if I change my mind after I submit my proxy?
You may revoke your proxy and change your vote by:
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signing a proxy card with a later date and returning it before the polls close at the meeting,
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voting by telephone or on the internet before 12:00 p.m., Central Time, on May 16, 2016, or
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How many votes must the director nominees receive to be elected as directors?
A director must receive more for than against votes to be elected as a director. If a director does not receive more for than against votes, the director
may be eligible under Delaware law to continue to serve a holdover term until the next annual meeting of stockholders. However, in the event that a director does not receive more for than
59
against votes, our corporate governance guidelines provide that the Nominating and Corporate Governance Committee shall meet within 90 days after the final certification of the vote
and evaluate the directors continued service for a holdover term. Under the guidelines, the Nominating and Corporate Governance Committee should consider the following:
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the reasons for the directors failure to receive an affirmative majority of votes,
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the directors qualifications and skills and contributions to the board and board committees,
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the effect on board composition without the directors continued service during the holdover term on the board or board committees,
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whether there are qualified candidates to fill a vacancy if the affected director immediately resigned from the board or board committees, and
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the guidelines for considering director candidates established by the Nominating and Corporate Governance Committee.
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In making its evaluation, the Nominating and Corporate Governance Committee may determine that:
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the director should continue to serve a holdover term on the board,
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the director should continue service on the board for a predetermined period (but less than a full holdover term),
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the director should continue service on the board for a holdover term or predetermined period but resign from one or more board committees, or
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the director should immediately resign from the board.
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If the Nominating and Corporate Governance Committee determines that the affected director should resign from the board or one or more board committees, the director will be expected to submit his or her
resignation immediately upon such determination. The Nominating and Corporate Governance Committees determination, including the reasons for such determination, will be publicly disclosed on a Form 8-K filed with the Securities and Exchange
Commission.
What happens if a director nominee is unable to stand for election?
The board may reduce the number of directors or select a substitute nominee. In the latter case, if you have submitted your proxy, Mr. Schwab,
Mr. Bettinger and Mr. Garfield can vote your shares for a substitute nominee. They cannot vote for more than five nominees.
How many votes are needed for the ratification of independent auditors and the advisory approval of named executive officer compensation?
The ratification of independent auditors and the advisory approval of named executive officer compensation will be approved if a majority of the shares
present at the meeting in person or by proxy and entitled to vote on the proposal vote for approval.
How many votes are
needed for the stockholder proposals?
The stockholder proposals will be approved if a majority of the shares present at the meeting in
person or by proxy and entitled to vote on the proposal vote for approval.
60
What is a broker non-vote?
A broker non-vote occurs when a brokerage firm holding shares in street name for a beneficial owner does not vote on a proposal because the broker has not
received instructions from the beneficial owner and does not have discretionary voting power with respect to the proposal.
What is the effect of not providing voting instructions if my shares are held in street name?
Brokerage firms have authority to vote clients unvoted shares on some routine matters. When a brokerage firm votes its clients
unvoted shares on routine matters, these shares are counted to determine if a quorum exists to conduct business at the meeting. A brokerage firm cannot vote clients unvoted shares on non-routine matters, which results in a broker non-vote. A
broker non-vote will be treated as not being entitled to vote on the proposal and will not be counted for purposes of determining whether the proposal has been approved.
The companys proposal to ratify the selection of independent auditors is considered a routine matter, but the election of directors, the advisory approval of named executive officer compensation,
and the stockholder proposals are not.
As a brokerage firm, Charles Schwab & Co., Inc. may vote its clients unvoted shares on
routine matters. However, as the companys subsidiary, when it is voting on company proposals, it can vote unvoted company shares held in brokerage accounts only in the same proportion as all other stockholders vote.
If you have a stockbroker or investment advisor, they may be able to vote your shares depending on the terms of the agreement you have with them.
What is the effect of not submitting my proxy if my shares are held in a retirement plan?
A trustee under a retirement plan may be able to vote a participants unvoted shares. For example, if you are a participant in The SchwabPlan
Retirement Savings and Investment Plan, the trustee, under certain circumstances, can vote your shares. Specifically, the trustee will vote shares you hold under the Employee Stock Ownership Plan (ESOP) component of The SchwabPlan Retirement Savings
and Investment Plan if the trustee does not receive voting instructions from you. The trustee will vote your unvoted shares held under the ESOP component of the overall plan in the same proportion as all other plan participants vote their shares
held under the ESOP component of the overall plan.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts at the transfer agent or with stockbrokers. Please complete and submit all proxies to ensure
that all your shares are voted.
Unless you need multiple accounts for specific purposes, it may be less confusing if you consolidate as many
of your transfer agent or brokerage accounts as possible under the same name and address.
Is my vote kept confidential?
Proxies, ballots and voting tabulations identifying stockholders are kept confidential by our transfer agent and will not be disclosed
except as may be necessary to meet legal requirements.
61
Where do I find voting results of the meeting?
We will announce preliminary voting results at the annual meeting. We will announce the final results on a Form 8-K following the annual meeting. You may
access a copy electronically on our website at
www.aboutschwab.com/investor-relations
by clicking on Financial Reports & Presentations or through the SECs electronic data system at
www.sec.gov
.
You
also may obtain a copy by contacting investor.relations@schwab.com.
Voting results are tabulated and
certified by our transfer agent, Wells Fargo Bank, N.A.
Who pays the cost for proxy solicitation?
The company is paying for distributing and soliciting proxies. As a part of this process, the company reimburses brokers, nominees, fiduciaries and other
custodians for reasonable fees and expenses in forwarding proxy materials to stockholders.
The company has retained D.F. King & Co.,
Inc. to act as proxy solicitor in conjunction with the annual meeting at an estimated fee of $13,000 plus reasonable out of pocket expenses. Employees of the company or its subsidiaries may solicit proxies through mail, telephone, the internet or
other means. Employees do not receive additional compensation for soliciting proxies.
What is householding?
Householding means that we deliver a single set of proxy materials to households with multiple stockholders, provided such
stockholders give their affirmative or implied consent and certain other conditions are met.
Some households with multiple stockholders
already may have provided the company with their affirmative consent or given a general consent to householding. We will provide only one set of proxy materials to each such household, unless we receive contrary instructions.
We will promptly deliver separate copies of our proxy statement and annual report at the request of any stockholder who is in a household that
participates in the householding of the companys proxy materials. You may call the Assistant Corporate Secretary at (415) 667-9979 or send your request to the Assistant Corporate Secretary at the address in the Corporate Governance
Information section of this proxy statement.
If you currently receive multiple copies of the companys proxy materials and would
like to participate in householding, please contact the Assistant Corporate Secretary.
62
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 17, 2016
2:00 p.m. (Pacific Time)
211 Main Street
San
Francisco, CA 94105
The Annual Meeting of Stockholders also will be hosted as a virtual event via the internet.
To attend the meeting via the internet, visit
www.schwabevents.com/corporation.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be held on May 17, 2016:
The proxy statement and annual report to security holders are available in
the Investor Relations section of our web site at
www.aboutschwab.com
.
211 Main Street
San Francisco, CA 94105
proxy
This proxy is solicited by the Board of
Directors for use at the Annual Meeting on May 17, 2016.
The shares of stock you hold in your account, as well as any shares you hold under The
Charles Schwab Corporation Dividend Reinvestment Plan and/or The SchwabPlan Retirement Savings and Investment Plan will be voted as you specify on the reverse side.
If you sign and return your proxy card and no choice is specified, your shares will be voted FOR Proposals 1(a) through 1(e), 2 and 3, and
AGAINST Proposals 4 and 5.
By signing the proxy, you revoke all prior proxies and appoint Charles R. Schwab, Walter W. Bettinger II
and/or David R. Garfield with full power of substitution, to vote your shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
COMPANY #
There are three ways to vote your proxy.
Your
internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
VOTE BY INTERNET www.eproxy.com/schw QUICK *** EASY *** IMMEDIATE
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Use the internet to vote your proxy 24 hours a day, 7 days a week, until 11:59 p.m. (CT) on May 16, 2016.
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Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.
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VOTE BY PHONE TOLL FREE
1-800-560-1965
QUICK *** EASY *** IMMEDIATE
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Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m. (CT) on May 16, 2016.
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Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the voice provides you.
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VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope weve provided or return it to The Charles Schwab Corporation, c/o Shareowner Services
SM
, P.O. Box 64873, St. Paul, MN 55164-0873.
If you vote by internet or telephone, please do not mail your proxy card.
Please detach here
The
Board of Directors Recommends a Vote FOR Proposals 1(a) through 1(e), 2 and 3,
and AGAINST Proposals 4
and 5.
Election of directors:
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1(a)
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John K. Adams, Jr.
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¨
For
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¨
Against
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¨
Abstain
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1(b)
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Stephen A. Ellis
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¨
For
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¨
Against
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¨
Abstain
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1(c)
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Arun Sarin
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¨
For
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¨
Against
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¨
Abstain
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1(d)
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Charles R. Schwab
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For
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Against
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Abstain
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1(e)
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Paula A. Sneed
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For
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Against
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¨
Abstain
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2.
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Ratification of the selection of Deloitte & Touche LLP as independent auditors
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¨
For
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¨
Against
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¨
Abstain
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3.
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Advisory approval of named executive officer compensation
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¨
For
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¨
Against
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¨
Abstain
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4.
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Stockholder proposal requesting disclosure of lobbying policy, procedures and oversight; lobbying expenditures; and participation in organizations engaged in lobbying
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¨
For
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¨
Against
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¨
Abstain
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5.
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Stockholder proposal requesting annual disclosure of EEO-1 data
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¨
For
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¨
Against
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¨
Abstain
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WHEN THIS PROXY IS PROPERLY EXECUTED YOUR SHARES WILL BE VOTED: (1) AS DIRECTED; (2) IF NO DIRECTION IS
GIVEN:
FOR
PROPOSALS 1(a) THROUGH 1(e), 2 and 3, AND
AGAINST
PROPOSALS 4 AND 5; AND (3) ACCORDING TO THE BEST JUDGMENT OF CHARLES R. SCHWAB, WALTER W. BETTINGER II AND/OR DAVID R. GARFIELD IF ANY OTHER MATTER COMES
BEFORE THE ANNUAL MEETING FOR A VOTE.
Address Change? Mark Box
¨
Indicate changes below:
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Signature(s) in Box
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Please sign exactly as your name(s) appears on proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and
title of authorized officer signing the proxy.
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Schwab (Charles) Corp. Prfd C (NYSE:SCHWPC)
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Schwab (Charles) Corp. Prfd C (NYSE:SCHWPC)
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부터 7월(7) 2023 으로 7월(7) 2024