Securities Exchange Act of 1934
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material under §240.14a-12 | |
| ☒ | No fee required |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11 |
two thousand twenty four 2024 Proxy Statement corporation
2022Proxy Statement
April 1, 2022
Dear Fellow Stockholders,
We cordially invite you to attend our 20222024 Annual Meeting of Stockholders to be held on Tuesday,Thursday, May 17, 2022,23, 2024, at 1:30 p.m.11:00 a.m. Central Time. The annual meeting will be held via the internet at www.schwabevents.com/corporationwww.proxydocs.com/SCHW. Please follow the registration instructions as outlined in this proxy statement to attend the meeting virtually via the internet.
At the annual meeting, we will conduct the items of business outlined in this proxy statement. We also will report on our corporate performance in 20212023 and answer your questions.
Your vote is important. We encourage you to read this proxy statement carefully and to vote your shares as soon as possible, even if you plan to attend the meeting. Voting instructions are contained on the proxy card or voting instruction form that you received with this proxy statement.
We look forward to your participation.
Sincerely,
|
| |
| CHARLES R. SCHWAB | WALTER W. BETTINGER II | |
| CO-CHAIRMAN AND CHIEF EXECUTIVE OFFICER | ||
Table of Contents
| 1 | ||||
| 5 | ||||
| Director Nominees and Continuing Directors | ||||
| 15 | ||||
| 31 | ||||
| Communications With the Board of Directors | ||||
| ||||
Proposal | ||||
| 55 | ||||
Narrative to Summary Compensation and Grants of Plan-Based Awards Tables | ||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS |
Notice of 2024 Annual Meeting of Stockholders
 |  |  | ||
May 23, 2024 | ||||
11:00 a.m. Central Time | Location www.proxydocs.com/SCHW | |||
Agenda
| 1. Elect five directors for three-year terms; |
| 2. Vote to ratify the selection of independent auditors; |
| 3. Vote for the approval, on an advisory basis, of compensation of named executive officers; |
| 4. Vote on three stockholder proposals, if properly presented; and |
| 5. Consider any other business properly coming before the meeting. |
Stockholders who owned shares of our voting common stock at the close of business on March 25, 2024 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 during the 10 days prior to the meeting at our principal executive offices at 3000 Schwab Way, Westlake, Texas 76262.
By Order of the Board of Directors,
PETER J. MORGAN III
Managing Director, General Counsel and Corporate Secretary
IMPORTANT NOTICE
Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 23, 2024. The proxy statement and annual report to security holders are available in the “Investor Relations” section of our website at www.aboutschwab.com.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | ||||
| ||||
| ||||
i
Proxy Statement Summary
The Board of Directors (the board) of The Charles Schwab Corporation (the company) is making the solicitation for proxies to be voted at the 2024 Annual Meeting of Stockholders to be held on May 23, 2024 (the annual meeting). These proxy materials were first made available to stockholders on or about April 5, 2024.
This summary highlights information contained in the proxy statement. This summary does not contain all of the information that you should consider, and you should review all of the information contained in the proxy statement before voting.
ANNUAL MEETING OF STOCKHOLDERSAnnual Meeting of Stockholders
| ||||||||||||||||||
Date & Time May 23, 2024 at 11 a.m. CT | ||||||||||||||||||
 | Record Date March 25, 2024 |  | Location www.proxydocs.com/SCHW | |||||||||||||||
VotingStockholders as of the record date are entitled to vote. Each share of voting common stock is | ||||||||||||||||||
| * Attending the MeetingPlease follow the | * Unless otherwise specified, references to “common stock” in this proxy statement do not include non-voting common stock. | |||||||||||||||||
VOTING PROPOSALSVoting Proposals
| Board Recommendation | Page | ||||||||
Election of Directors | |||||||||
Walter W. Bettinger II | |||||||||
| |||||||||
| FOR | 16 | ||||||||
Joan T. Dea | |||||||||
| |||||||||
| FOR | 18 | ||||||||
Christopher V. Dodds | |||||||||
| |||||||||
| FOR | 19 | ||||||||
Bharat B. Masrani | |||||||||
| |||||||||
| FOR | 24 | ||||||||
Charles A. Ruffel | FOR | 26 | |||||||
Ratification of Independent Auditors |
| ||||||||
| FOR | 36 | ||||||||
Advisory Approval of Named Executive Officer (NEO) Compensation |
| 39 | |||||||
Stockholder Proposal Requesting Changes to the Executive Compensation Program | AGAINST | 76 | |||||||
Stockholder Proposal on Workforce Discrimination Risk Oversight and Impact | AGAINST | 79 | |||||||
Stockholder Proposal on Pay Equity Disclosure | AGAINST | 82 | |||||||
HOW TO VOTE
| |||||||
Internet | |||||||
| |||||||
Telephone | |||||||
| |||||||
During the Meeting | |||||||
SCHW and follow the instructions on |
| While we encourage you to vote before the meeting, stockholders may vote online during the meeting by following the instructions on page 87. | |||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 1 |
ii
DIRECTOR NOMINEES
PROXY STATEMENT SUMMARY
Director Nominees
We ask that you vote for the election of John K. Adams, Jr., StephenWalter W. Bettinger II, Joan T. Dea, Christopher V. Dodds, Bharat B. Masrani and Charles A. Ellis, Brian M. Levitt, Arun Sarin, Charles R. Schwab, and Paula A. Sneed.Ruffel. The following table provides summary information on these nominees. Complete biographical information is contained in the proxy statement.
| Name | Age | Director Since | Occupation | Skills | Independent | Committees | ||||||
John K. Adams | 66 | 2015 | Former Managing Director, Financial Institutions Group, UBS Investment Bank | Financial services and investment banking experience | X | Audit | ||||||
Stephen A. Ellis | 59 | 2012 | Managing Partner, TPG | Leadership skills and global management consulting experience | X | Audit Nominating | ||||||
Brian M. Levitt | 74 | 2020 | Board Chair, The Toronto-Dominion Bank | Strategy, governance, financial services, and public company board experience | X | Compensation | ||||||
Arun Sarin | 67 | 2009 | Chairman, Trepont Acquisition Corp I | Public company knowledge and leadership experience | X | Nominating Risk | ||||||
Charles R. Schwab | 84 | 1986 | Chairman, The Charles Schwab Corporation | Founder of The Charles Schwab Corporation | ||||||||
Paula A. Sneed | 74 | 2002 | Chairman and Chief Executive Officer, Phelps Prescott Group, LLC | Marketing skills and management and executive leadership experience | X | Compensation | ||||||
Name | Age | Director Since | Occupation | Skills | Independent | Committees | ||||||
Walter W. Bettinger II | 63 | 2008 | Co-Chairman and Chief Executive Officer, The Charles Schwab Corporation | Financial services expertise and leadership experience | ||||||||
Joan T. Dea | 60 | 2017 | Founder and Managing Director, Beckwith Investments LLC | Investment and consulting expertise, strategic planning, and leadership experience |  | Compensation, Nominating | ||||||
Christopher V. Dodds | 64 | 2014 | Co-Founder and Managing Member, Crown Oak Advisors LLC | Leadership skills, knowledge of the financial service industry, and financial and accounting experience | | Risk | ||||||
Bharat B. Masrani | 67 | 2020 | Group President and Chief Executive Officer, The Toronto-Dominion Bank | Financial services expertise and international business and leadership experience | Risk | |||||||
Charles A. Ruffel | 68 | 2018 | Managing Partner, Kudu Investment Management, LLC | Financial services and asset management expertise and leadership experience | | Risk | ||||||
DECLASSIFICATION OF BOARD OF DIRECTORS
We ask that you approve amendments to the company’s Fifth Restated Certificate of Incorporation, as amended (the Certificate of Incorporation), and conforming amendments to the company’s Fourth Amended and Restated Bylaws, as amended (the Bylaws), to declassify the Board of Directors. Currently, the Certificate of Incorporation provides for the board to be divided into three classes, with each class elected every three years. We have approved recommended amendments that, subject to approval by stockholders at the 2022 Annual Meeting of Stockholders, would phase out the classification over a three-year period and provide for the annual election of all directors beginning at the 2025 Annual Meeting of Stockholders.
| 2 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
iii PROXY STATEMENT SUMMARY
INDEPENDENT AUDITORS
Independent Auditors
We ask that you ratify the appointment of Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu Limited (collectively referred to as Deloitte) as the company’s independent registered public accounting firm for the 20222024 fiscal year. While the Audit Committee has the sole authority to retain the independent auditors, we are asking for your ratification as part of the Audit Committee’s evaluation process of the independent registered public accounting firm for the next fiscal year.
Fees for services provided by Deloitte in the last two fiscal years were:
| 2021 | 2020 | 2023 | 2022 | |||||||||
| (amounts in millions) | ||||||||||||
Audit Fees | $ | 11.2 | $ | 9.2 | ||||||||
Audit Fees | $11,532,307 | $11,172,248 | ||||||||||
Audit-Related Fees | ||||||||||||
Audit-Related Fees | 4.5 | 4.1 | 4,342,211 | 4,175,673 | ||||||||
Tax Fees | 1.4 | 0.1 | ||||||||||
Tax Fees | 45,400 | 109,179 | ||||||||||
All Other Fees | ||||||||||||
All Other Fees | — | — | — | — | ||||||||
Total | $ | 17.1 | $ | 13.4 | ||||||||
Total | $15,919,918 | $15,457,100 | ||||||||||
EXECUTIVE COMPENSATIONExecutive Compensation
We ask that you approve, on an advisory basis, the compensation of our named executive officers.NEOs. The named executive officersNEOs are those executive officers listed in the 2023 Summary Compensation Table.Table (the 2023 SCT). The advisory approval of named executive officerNEO 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.
2021 Executive Compensation Highlights
In 2021, our management team worked through a challenging environment and continued to execute on its strategy of helping our clients – individual investors and the people and institutions who serve them – by placing their perspectives, needs, and desires at the forefront. Effective execution of our “Through Clients’ Eyes” strategy, while further advancing the integration of TD Ameritrade Holding Corporation and its subsidiaries (TD Ameritrade) helped us produce record core net new assets of $558.2 billion and reach total client assets of $8.14 trillion by year-end 2021. Our operating performance, coupled with rising equity markets and ongoing expense discipline, supported strong financial results, including a pre-tax profit margin of 41.6% and net income of $5.9 billion. Diluted earnings per share (EPS) was $2.83 on a Generally Accepted Accounting Principles (GAAP) basis, adjusted diluted EPS was $3.25, Return on Common Equity (ROCE) was 11%, and Return on Tangible Common Equity (ROTCE) was 22%. For reconciliation of non-GAAP financial measures including adjusted diluted EPS and ROTCE, please see “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” on pages 58 – 59 ofThe executive compensation program supports the company’s Annual Report on Form 10-K forstrategic objectives through the fiscal year ended December 31, 2021.
iv
The company’s compensation programs are designed to link pay to the long-term performance of the company. Key elements of 2021 compensation included:following design principles:
|
|
| |||||||
|
|
|
| ||||||
|
◾ Attract, retain, and reward talented executives.
|
| |||||||
The Compensation Committee is dedicated to delivering a robust and balanced executive compensation program, in support of a strong link between executive pay and the company’s financial performance. The executive compensation program uses three compensation elements: base salary, annual cash incentives, and long-term equity-based incentives (LTIs).
Given the company’s financial performance in 2021,2023, the Compensation Committee approved funding at 136.62%72.96% of the target award for the named executive officersNEOs for annual cash incentives. The performance goal for performance-based restricted stock units (PBRSUs) granted in 20212023 was set at ROTCE equaling orReturn on Tangible Common Equity (ROTCE) exceeding the Cost of Equity (COE); this aligns the executives’ incentives with the long-term interests of stockholders. The PBRSUs have cliff-vesting based on a three-year performance period.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 3 |
PROXY STATEMENT SUMMARY
Summary compensation information for the named executive officersNEOs 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 (SEC) rules, and the amount that the executive actually receives may vary from what is reported in the equity columns of the table.
v
2021 SUMMARY COMPENSATION2023 Summary Compensation
| Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
Walter W. Bettinger II Chief Executive Officer | 1,400,000 | — | 8,010,000 | 5,340,000 | 7,172,550 | 15,854 | 21,938,404 | |||||||||||||||||
Peter B. Crawford Managing Director, Executive Vice President and Chief Financial Officer | 621,073 | — | 2,550,000 | 1,700,000 | 1,697,019 | 15,412 | 6,583,504 | |||||||||||||||||
Joseph R. Martinetto Managing Director, Senior Executive Vice President and Chief Operating Officer | 759,188 | — | 4,950,000 | 3,300,000 | 2,437,425 | 15,554 | 11,462,167 | |||||||||||||||||
Richard A. Wurster President | 640,038 | 109,924 | 6,860,000 | 1,240,000 | 1,748,840 | 15,357 | 10,614,159 | |||||||||||||||||
Charles R. Schwab Chairman | 750,000 | — | 2,700,000 | 1,800,000 | 2,561,625 | 14,998 | 7,826,623 | |||||||||||||||||
| Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||
Walter W. Bettinger II Chief Executive Officer and Co-Chairman | 1,500,000 | — | 10,950,019 | 7,300,015 | 4,104,000 | 17,710 | 23,871,744 | |||||||
Peter B. Crawford Managing Director and Chief Financial Officer | 721,154 | — | 1,920,002 | 1,280,010 | 1,052,308 | 17,465 | 4,990,939 | |||||||
Joseph R. Martinetto Managing Director and Chief Operating Officer | 921,154 | — | 3,720,042 | 2,480,020 | 2,016,222 | 17,614 | 9,155,052 | |||||||
Richard A. Wurster President | 984,615 | — | 4,800,004 | 3,200,004 | 2,155,126 | 17,614 | 11,157,363 | |||||||
Charles R. Schwab Co-Chairman | 884,616 | — | 3,000,041 | 2,000,016 | 1,613,539 | 17,518 | 7,515,730 | |||||||
2022 STOCK INCENTIVE PLANStockholder Proposals
We ask that you approve the 2022 Stock Incentive Plan as a successor plan to the 2013 Stock Incentive Plan that expires by its terms in May 2023. Approval of the 2022 Stock Incentive Plan will permit the company to meet its long-term incentive needs without disrupting the company’s normal equity granting practices. Among other things, the 2022 Stock Incentive Plan provides for 113.0 million shares for equity awards and implements an annual non-employee director compensation limit of $1.0 million ($2.0 million in the first year of service), which will allow for the $30,000 increase to the annual non-employee director equity awards that the board has approved for 2022. The $30,000 increase to the annual non-employee director equity awards will only be granted if stockholders approve the 2022 Stock Incentive Plan at the 2022 Annual Meeting of Stockholders. If stockholders do not approve the 2022 Stock Incentive Plan, non-employee directors will receive $185,000 automatic annual equity retainers under the 2013 Stock Incentive Plan.
ADOPTION OF PROXY ACCESS
Proxy access would allow eligible stockholders who comply with the requirements set forth in the Bylaws to have their nominees for directors included in the company’s proxy materials along with the candidates nominated by the board. We approved amendments to our Bylaws to implement proxy access, subject to stockholder approval at the 2022 Annual Meeting of Stockholders.
STOCKHOLDER PROPOSALS
There are three stockholder proposals to vote on that are described in the proxy statement.
vi
|
|
| |
| ||
Stockholders who owned shares of our voting common stock at the close of business on March 18, 2022 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 3000 Schwab Way, Westlake, Texas 76262 and via a link made accessible from the webcast console during the virtual meeting.
| ||
 | ||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be Held on May 17, 2022. The proxy statement and annual report to
security holders are available in the “Investor Relations” section of our website at
www.aboutschwab.com.
vii
PROXY STATEMENTCompany Overview
The Board of Directors of The Charles Schwab Corporation (the company) is making the solicitation for proxies to be voted at the 2022 Annual Meeting of Stockholders to be held on May 17, 2022 (the annual meeting) and is sending these proxy materials to you on or about April 1, 2022. Stockholders who owned the company’s common stock at the close of business on March 18, 2022 may attend and vote at the annual meeting. Each share of common stock is entitled to one vote. There were 1,816,003,557 shares of voting common stock (common stock) outstanding on March 18, 2022 (except as otherwise indicated, references to “common stock” in this proxy statement do not include non-voting common stock, of which there were 79,293,695 shares outstanding on March 18, 2022).
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 virtual 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. Please send your legal proxy to our transfer agent, Equiniti Trust Company, by fax to 651-450-4078 or email to EQSS-ProxyTabulation@equiniti.com. 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 virtual annual meeting.
This year’s annual meeting will be a virtual event. You must register in advance to attend via the internet. To register, please go to:
www.schwabevents.com.
When registering, 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 that you hold the shares with in an account outside of Schwab).
Upon completion of registration, you will receive a confirmation email which has additional information about the webcast, including the link to join and a calendar reminder. You will have the opportunity to submit a question when registering and will also be able to submit questions and vote during the meeting from the webcast console.
You will be able to join the webcast 15 minutes prior to the start time of the annual meeting. You should ensure that you have a strong internet connection, and we recommend testing your system using the link that will be provided in the registration confirmation email and on the annual meeting website.
If you encounter any technical difficulties with the virtual meeting platform on the meeting day, please email schwabeventswebcasts@schwab.com. Technical support will also be available from the webcast console starting at 1:15 p.m. Central Time on May 17, 2022.
Properly submitted questions may be addressed during the question and answer session of the annual meeting. Due to limited time at the annual meeting, we may aggregate questions by topic and may not be able to address all submitted questions.
1
The Charles Schwab Corporation is a savings and loan holding company that engages, through its subsidiaries, in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. AtAs of December 31, 2021,2023, the company had $8.14$8.52 trillion in client assets, 33.234.8 million active brokerage accounts, 2.25.2 million corporate retirementworkplace plan participants,participant accounts, and 1.61.8 million banking accounts.
The company was founded on the belief that all Americans deserve access to a better investing experience. Although
much has changed in the intervening years, our purpose remains clear – to champion every client’s goals with passion and integrity. Guided by this purpose and our vision of creatingbeing the most trusted leader in investment services, management has adopted a strategy described as “Through Clients’ Eyes.”
The Board of Directors
The board is committed to the company’s vision of being the most trusted leader in investment services.services and believes that good corporate governance and high ethical standards are duties that we owe to our investors, customers, and employees, and are key to our long-term success and the creation of long-term stockholder value. The board has the responsibility to hold management accountable for carrying out the company’s daily operations consistent with its strategic vision while navigating changes in the financial services industry, effectively managing risks, and responding to competitive pressures, new technologies, and an evolving regulatory environment.
Our practices to maintain board effectiveness include the following:
BOARD LEADERSHIPBoard Leadership
TheOur Corporate Governance Guidelines provide that the roles of Chairman or Co-Chairman of the Board of Directors is Mr. Schwab. The Chairmanboard and Chief Executive Officer roles are split,may be separated or combined, and our board exercises its discretion in combining or separating these positions as it deems appropriate in light of prevailing circumstances. Currently, Mr. Schwab and Mr. Bettinger serve as Co-Chairmen of the board, and Mr. Bettinger also serves as Chief Executive Officer. The Chairman approvesboard has carefully considered its leadership structure and determined that leveraging our founder, in the agenda for board meetingscase of Mr. Schwab, and leadsChief Executive Officer, in the case of Mr. Bettinger, together as Co-Chairmen of the board incurrently serves the best
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 5 |
CORPORATE GOVERNANCE
interests of the company and its discussions.stockholders. Specifically, the board believes that Mr. Schwab and Mr. Bettinger are best situated to serve as Co-Chairmen given their deep knowledge of our business and strategy as the only two management directors, do not participatefounder and Chief Executive Officer of the company, respectively, and their ability to draw on that experience in sessions of non-management directors. order to provide leadership to the board. This structure also reflects Mr. Schwab’s and the board’s intention to ensure strategic and leadership continuity for the company by following a thoughtful and long-term succession plan.
As provided in our Corporate Governance Guidelines, non-management
2
directors meet regularly in executive session without management.management and independent directors meet at least annually in executive session with only independent directors. The Chair of the Nominating and Corporate Governance Committee, Mr. Herringer, presides over these sessions. Through the independence of the board’s committees and the regular use of executive sessions led by Mr. Herringer, the board is able to maintain independent oversight of non-management directors.our business strategy, annual operating plan, and other corporate activities. These features ensure a full and free discussion of issues that are important to the company and its stockholders. At the same time, the board is able to take advantage of the unique blend of leadership, experience, and knowledge of our industry and business that Mr. Schwab and Mr. Bettinger bring to the roles of Co-Chairmen.
The board has four standing committees (Audit, Compensation, Nominating and Corporate Governance, and Risk). Given the role and scope of authority of these committees, and that over 82%76% of the board is composed ofdirectors are independent, directors, the board believes that its leadership structure, with the ChairmanCo-Chairmen of the Board of Directorsboard leading board discussions, and the Chair of the Nominating and Corporate Governance Committee leading non-managementexecutive sessions, is appropriate.
DIRECTOR INDEPENDENCEDirector Independence
We have considered the independence of each member of the boarddirector in accordance with New York Stock Exchange (NYSE) corporate governance standards. To assist us in our determination, we have general guidelines for independence. The guidelines for independence are available on the company’s website at www.aboutschwab.com/governance.
Based on our guidelines and New York Stock ExchangeNYSE corporate governance standards, we have determined that each of the company’s directors, except Mr. Schwab, Mr. Bettinger, and Mr. Masrani, and Ms. Schwab-Pomerantz, is independent.
In determining independence, the board considers broadly all relevant facts and circumstances regarding a director’s relationships with the company. All non-employee directors receive compensation from the company for their service as directors, as disclosed in the “Director Compensation” section of this proxy statement, 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 company’s 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.
In addition to the relationships outlined above and in “Transactions with Related Persons”the board considered the following as part of its determination of independence:
Marianne C. Brown serves as a director of technology companies to which, or to the parent company of which, the company has made payments for products and services. |
| 6 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| ◾ | Joan T. Dea’s spouse serves as a trustee of a nonprofit organization to which the company, its affiliates, or its charitable foundation have made donations. |
Mark A. Goldfarb serves as a member of an advisory council of a nonprofit organization to which the company, its affiliates, or its charitable foundation have made donations. |
Frank C. Herringer’s spouse serves as a trustee of a nonprofit organization to which the company, its affiliates, or its charitable foundation have made donations. |
Todd M. Ricketts serves as a director of a professional baseball organization to which the company has made payments in connection with sponsorship and advertising. |
Arun Sarin serves as a director of a consulting firm to which the company has made payments for consulting services. |
Board Structure and Committees
3
BOARD STRUCTURE AND COMMITTEES
The authorized number of directors is currently seventeen17, and the company has seventeen17 directors. There are sixfive nominees for election this year and eleven11 directors will continue to serve the terms described in their biographies. Mr. Goldfarb’s term is expiring at the annual meeting, and he is not standing for re-election as a director, and accordingly, the authorized number of directors will be reduced from 17 to 16 effective at the annual meeting.
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 nineeight meetings in 2021.2023. Each director attended at least 75% of all applicable board and committee meetings during 2021.2023. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. In 2021,2023, all of the then-serving directors attended the annual meeting.meeting, which was held virtually.
Risk Oversight
We believe a fundamental commitment to strong and effective risk management is integral to achieving the company’s vision and executing on its strategy to be the most trusted leader in investment services. As part of its oversight functions, the board is responsible for oversight of risk management at the company.company and for holding senior management accountable for implementing the board’s approved risk tolerance. The board exercises this oversight both directly and indirectly through its standing committees, each of which is delegated responsibility for specific risks and keeps the board informed of its oversight efforts through regular reports by each committee Chair. The Risk Committee assists the board in fulfilling its oversight responsibilities with respect to the company’s risk management program and provides reports to the board and the Audit Committee. Among other responsibilities, the Risk Committee reviews the company’s overall risk governance and approves the enterprise-wide risk management framework. In addition, the Risk Committee has oversight of independent risk management, liquidity, market risk, and capital adequacy and credit-related and other key policies. The Audit Committee reviews reports from management and the Risk Committee concerning the company’s risk assessment and major risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee oversees incentive compensation risk and 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 “PartPart II, Item 7, Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2023.
Committees
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 7 |
Committees
Each of our four standing committees is chaired by an independent director. The Audit, Compensation, and Nominating and Corporate Governance Committees are composed entirely of independent directors as determined by the board in accordance with its independence guidelines and New York Stock ExchangeNYSE corporate governance standards. Thestandards, and the Risk Committee is chaired by an independent director and is composed of entirely non-management directors.director. In addition to these standing committees, the board may from time to time establish ad hoc committees to assist in various matters.
4
The board and its committees are currently composed of the following individuals:
| Committee Memberships | |||||||||||||||||||||||||
| Name | Independent | AC | CC | NCGC | RC | ||||||||||||||||||||
Charles R. Schwab | |||||||||||||||||||||||||
Walter W. Bettinger II | |||||||||||||||||||||||||
John K. Adams, Jr. | C | ||||||||||||||||||||||||
Marianne C. Brown | ✓ | C | |||||||||||||||||||||||
| |||||||||||||||||||||||||
| • | • | ||||||||||||||||||||||||
| |||||||||||||||||||||||||
Stephen A. Ellis | |||||||||||||||||||||||||
| ✓ | • | • | |||||||||||||||||||||||
| • | ||||||||||||||||||||||||
| C | ||||||||||||||||||||||||
Brian M. Levitt | |||||||||||||||||||||||||
| ✓ | VC | ||||||||||||||||||||||||
| • | ||||||||||||||||||||||||
Bharat B. Masrani | • | ||||||||||||||||||||||||
| • | ||||||||||||||||||||||||
Charles A. Ruffel | ✓ | • | |||||||||||||||||||||||
| • | ||||||||||||||||||||||||
Carolyn Schwab-Pomerantz | |||||||||||||||||||||||||
| • | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
AC CC | Audit Committee Compensation Committee | NCGC | RC | Risk Committee | Committee Member Committee Chair C Committee Vice ChairVC |
| 8 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
AUDIT COMMITTEE
John K. Adams, Jr. (Chair) • Stephen A. Ellis • Mark A. Goldfarb • William S. Haraf
Gerri K. Martin-Flickinger • Todd M. Ricketts CORPORATE GOVERNANCE
The Audit Committee held twelve meetings in 2021. 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 the members of the Audit Committee are financially literate in accordance with New York Stock Exchange listing standards and Mr. Adams, Mr. Ellis, Mr. Goldfarb, and Mr. Haraf are Audit Committee financial experts in accordance with SEC rules.
Primary responsibilities:
| Audit Committee | The Audit Committee held 13 meetings in 2023 | |
| None of the directors on the Audit Committee is or, during the past three years, has been an employee of the company 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 the members of the Audit Committee are financially literate in accordance with NYSE listing standards, and Mr. Adams, Mr. Ellis, and Mr. Goldfarb are Audit Committee financial experts in accordance with SEC rules. | ||
| Primary responsibilities: | ||
| ||
|
|
5
|
|
 |  |  |  |  | ||||
John K. Adams, Jr. (Chair) | Stephen A. Ellis | Mark A. Goldfarb | Gerri K. Martin-Flickinger | Todd M. Ricketts |
COMPENSATION COMMITTEE
Paula A. Sneed (Chair) • Brian M. Levitt (Vice Chair)• Joan T. Dea • Frank C. Herringer
The Compensation Committee held six meetings in 2021.
Primary responsibilities:
| Compensation Committee | The Compensation Committee held six meetings in 2023 | |
| Primary responsibilities: | ||
| ||
|
|
|
|
|
|
 |  |  |  | |||
Paula A. Sneed (Chair) | Brian M. Levitt (Vice Chair) | Joan T. Dea | Frank C. Herringer |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 9 |
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Frank C. Herringer (Chair) • Joan T. Dea • Stephen A. Ellis • Arun Sarin
The Nominating and Corporate Governance Committee held four meetings in 2021.
Primary responsibilities:
| Nominating and Corporate Governance Committee | The Nominating and Corporate Governance Committee held four meetings in 2023 | |
| Primary responsibilities: | ||
| ||
|
|
|
|
| | |  | |||
Frank C. Herringer (Chair) | Joan T. Dea | Stephen A. Ellis | Arun Sarin |
RISK COMMITTEE
Christopher V. Dodds (Chair) • Marianne C. Brown • Bharat B. Masrani
Charles A. Ruffel • Arun Sarin
The Risk Committee held five meetings in 2021.
Primary responsibilities:
| Risk Committee | The Risk Committee held five meetings in 2023 | |
| Primary responsibilities: | ||
| ||
|
6
|
|
 |
|
|
|
|  | |||||
Marrianne C. Brown (Chair) | Christopher V. Dodds | Bharat B. Masrani | Charles A. Ruffel | Arun Sarin | Carolyn Schwab-Pomerantz |
Each standing committee has a written charter. You may find a copy of these charters, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics, on the company’s website at www.aboutschwab.com/governance. You also may request and obtain a paper copy of these items, without charge, from:
The Charles Schwab Corporation
Attn: Office of the Corporate Secretary
3000 Schwab Way
Building DFW-1, 4th Floor
Westlake, Texas 76262
(817) 854-6800SchwabCorporateSecretary@Schwab.com
BOARD QUALIFICATIONS AND COMPOSITION
| 10 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
CORPORATE GOVERNANCE
Board Qualifications and Composition
The Nominating and Corporate Governance Committee regularly assesses the board’s composition in light of our business operations, strategic directioncomplexity, asset size, and risk profile to assure appropriate succession, and our Corporate Governance Guidelines provide that the board should be composed of directors who have the qualifications necessary for effective service as determined in this assessment.
Director Qualifications
The qualifications for directors are described in our Corporate Governance Guidelines, which are available on the company’s 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:any director nominee:
|
current knowledge of and experience in the company’s business or operations, or contacts in the |
|
The Nominating and Corporate Governance 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 director’s ability to discharge |
diversity of experience, including the need for financial, business, academic, public sector, and other expertise on the board or board |
diversity of background, including race, ethnicity, and |
the fit of the individual’s skills and experience with those of the other directors and potential directors in comparison to the needs of the company. |
7
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 necessarilyneed apply to every candidate.
Diversity
The Nominating and Corporate Governance Committee considers the qualifications and experience represented on the board when identifying director nominees and assessing the composition of the board. The board recognizes that a variety of viewpoints is vital to effective decision-making, constructive dialogue, and a healthy boardroom culture. As discussed in the “Director Qualifications” section above, the board’s evaluation encompasses the diversity of experience and background of directors. This consideration includes diversity of skill sets and experience as well as background, including race, ethnicity, and gender.
The Nominating and Corporate Governance Committee considers these qualifications and regularly assesses the overall effectiveness of the board in maintaining a balance of perspectives important to the company’s business. To this end, the Nominating and Corporate Governance Committee has acted repeatedly in recent years to increase board diversity. Since July 2020, three women directors and one underrepresented minority director have been added to the board, furthering board diversity.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 11 |
CORPORATE GOVERNANCE
Skills and Competencies
Set forth below are some of the experience, skills, and competencies that the Nominating and Corporate Governance Committee views as important for the board as a whole to possess in light of the board’s areas of oversight of management.
For simplicity, each qualification is assigned to one category of oversight, even though some qualifications may pertain to multiple areas.
Board Oversight of Management | Related Qualifications and Experience | |||
Carrying out the company’s daily operations consistent with its strategic vision |
◾ Banking
◾ ESG
| |||
Navigating changes in the financial services industry and responding to competitive pressures |
◾ Marketing
| |||
Overseeing the integrity of the company’s financial statements and financial reporting process |
◾ Accounting
| |||
Ensuring compliance with legal and regulatory requirements |
| |||
Implementing the board’s approved risk tolerance, maintaining the company’s risk |
| |||
| 12 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
8
CORPORATE GOVERNANCE
The following matrix highlights the qualifications and skillsexperience represented on the board:by our director nominees and continuing directors:
| Qualifications and Experience |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | ||||||||||||||||
Public Company Executive Experience | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||
Public Company Board Experience | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||
Financial Services | • | • | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||||
Banking | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||
Asset Management | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||||||
Brokerage/Investment Banking | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||||||
Strategic Planning | • | • | • | • | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||
Finance | • | • | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||
Business Operations | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||
Information Technology/Cybersecurity | • | • | • | • | • | |||||||||||||||||||||||||||
Marketing | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||
Regulatory | • | • | • | • | • | • | • | • | • | |||||||||||||||||||||||
Accounting | • | • | • | |||||||||||||||||||||||||||||
Risk Management | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||||||
Government Service | • | • | • | |||||||||||||||||||||||||||||
International Business | • | • | • | • | • | • | • | • | • | • | ||||||||||||||||||||||
Academia | • | |||||||||||||||||||||||||||||||
Environmental, Social, and Governance | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||
Additional Qualifications and Information | ||||||||||||||||||||||||||||||||
Audit Committee Financial Expert | • | • | ||||||||||||||||||||||||||||||
Other Current Public Boards | 3 | 1 | 1 | 2 | ||||||||||||||||||||||||||||
Board Tenure, Age and Diversity | ||||||||||||||||||||||||||||||||
Tenure | 9 | 16 | 4 | 7 | 10 | 12 | 28 | 4 | 4 | 4 | 4 | 6 | 15 | 38 | 2 | 22 | ||||||||||||||||
Age | 68 | 63 | 65 | 60 | 64 | 61 | 81 | 76 | 61 | 67 | 54 | 68 | 69 | 86 | 64 | 76 | ||||||||||||||||
Racial/Ethnic Diversity | ||||||||||||||||||||||||||||||||
Asian | • | • | ||||||||||||||||||||||||||||||
Black or African American | • | |||||||||||||||||||||||||||||||
Hispanic or Latino | ||||||||||||||||||||||||||||||||
American Indian or Alaskan Native | ||||||||||||||||||||||||||||||||
Native Hawaiian or Pacific Islander | ||||||||||||||||||||||||||||||||
White/Caucasian | • | • | • | • | • | • | • | • | • | • | • | • | • | |||||||||||||||||||
Gender | M | M | F | F | M | M | M | M | F | M | M | M | M | M | F | F | ||||||||||||||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 13 |
CORPORATE GOVERNANCE
John K. Adams, Jr. Walter W. Bettinger II Marianne C. Brown Joan T. Dea Christopher V. Dodds Stephen A. Ellis Mark A. Goldfarb William S. Haraf Frank C. Herringer Brian M. Levitt Gerri K. Martin-Flickinger Bharat B. Masrani Todd M. Ricketts Charles A. Ruffel Arun Sarin Charles R. Schwab Paula A. Sneed Qualifications and Experience Public Company Executive Experience Public Company Board Experience Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Information Technology/Cybersecurity Marketing Regulatory Accounting Risk Management Government Service International Business Academia Environmental, Social and Governance Additional Qualifications and Information Audit Committee Financial Expert Other Current Public Boards Board Tenure, Age, and Diversity Tenure Age Racial/Ethnic Diversity Asian Black or African American Hispanic or Latino American Indian or Alaskan Native Native Hawaiian or Pacific Islander White/Caucasian Gender 3 2 1 3 1 7 14 2 5 8 10 10 7 26 2 2 2 2 4 13 36 20 66 61 63 58 62 59 70 73 79 74 59 65 52 66 67 84 74 M M F F M M M M M M F M M M M M F
Succession Planning and Refreshment
The board views the annual nomination process conducted by the Nominating and Corporate Governance Committee, including its review of the skills and competencies represented on the board and the self-assessment process, as critical elements in planning for board succession. In addition, the Chair of the Nominating and Corporate Governance Committee discusses with each board member his or herthe member’s perspective on succession planning, including
9
overall size and composition, tenure, and the effectiveness of the board and board committees. The Chair of the Nominating and Corporate Governance Committee also speaks with the Chairs of the Audit Committee, Compensation Committee, and Risk Committee about any particular succession issues that may affect their committees. As part of the succession planning process, the Nominating and Corporate Governance Committee considers the contributions made by directors with deep knowledge and experience with the company and its business through continued service over the years, as well as the need to refresh the board with new insights and perspectives. The board has demonstrated its commitment to refreshment by adding six new directors, including three women and one underrepresented minority, since the beginning of 2020.
As part of board succession planning, the Nominating and Corporate Governance Committee will planplans for anticipated vacancies, and the timing thereof, including those due to directors’ plans for retirement or expected changes in status. The Nominating and Corporate Governance Committee will evaluateevaluates potential needs for skills and experience due to anticipated departures.
Board and Committee Evaluations
The Nominating and Corporate Governance Committee leads the board in its annual self-evaluation of the performance of the board and its committees to determine whether they are functioning effectively. The charters of each committee require an annual performance evaluation. Committee self-evaluations are conducted by the Chair of each committee and are reported to the full board by the respective Chairs. The Chair of the Nominating and Corporate Governance Committee reviews any issues arising from the committee self-evaluations with the Chairs of the other board committees. The Chair of the Nominating and Corporate Governance Committee also discusses the results of the board self-evaluation with the full board. The respective committee or the full board, as appropriate, will take such steps as are necessary or advisable to address weaknesses or deficiencies identified as part of the performance evaluation process.
Environmental, Social, and Governance Practices
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE PRACTICES
The company is invested in the success of ourits clients, employees, and communities. We describe certain of theseour ESG initiatives more fully on the “Citizenship” section of our website and in our Environmental, Social, &and Governance Report, 2020-2021, our inaugural ESG report, which is available at www.aboutschwab.com/citizenship. Information available on or through ourthe company’s website is not incorporated by reference into and is not part of this proxy statement, and any references to ourthe website are intended to be inactive textual references only.
| 14 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| PROPOSAL ONE: ELECTION OF DIRECTORS |
10
ELECTION OF DIRECTORS
Nominees for directors this year are:
| |
|
|
|
Walter W. Bettinger II |
|
Dea
|
Dodds
Masrani | Charles A. Ruffel |
Each nominee has consented to serve a three-year term and is presently a director of the company. Biographical information about each of the company’s directorsdirector nominees and nomineescontinuing directors is contained in the following section.
Mark A. Goldfarb, who is a current director and whose term is expiring at the annual meeting, is not standing for re-election as a director, and accordingly, the size of the board will be reduced from 17 directors to 16 directors effective at the annual meeting. We would like to thank Mr. Goldfarb for his service on the board since 2012 and his important contributions to the company in that time.
MEMBERS OF THE BOARD OF DIRECTORSDirector Nominees and Continuing Directors
COMMITTEES Audit | ||||
Mr. Adams is
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 Suisse’s Financial Institutions Group.
| ||||
UBS Investment Bank Managing Director (2002-2013) Credit Suisse Financial Institutions Group (1985-2002) |
Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Regulatory Environmental, Social, and Governance | |||
11
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 15 |
PROPOSAL ONE: ELECTION OF DIRECTORS
2008
63 | ||||
Mr. Bettinger has served as Chief Executive Officer of
Mr. Bettinger has significant financial services experience, having served in a senior executive role overseeing sales, service, marketing, and operations for
| ||||
CAREER EXPERIENCE The Charles Schwab Corporation Co-Chairman (2022-present) Chief Executive Officer (2008-present)
President (2008-2021)
Officer (2007-2008) Multiple Executive Vice President positions (2000-2007) |
QUALIFICATIONS Public Company Executive Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Marketing Regulatory Accounting Risk Management International Business Environmental, Social, and Governance | |||
| 16 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
12
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Risk | Marianne C. Brown | |||
Ms. Brown is the former Co-Chief Operating Officer of Fidelity National Information Services, Inc. (FIS), a financial services technology company, where she served from 2018 to 2019. She served as Chief Operating Officer, Institutional and Wholesale Business, of FIS from 2015, when it acquired SunGard Financial Systems LLC (SunGard), a software and IT services provider, to 2018. She served as the Chief Operating Officer of SunGard Financial Systems from 2014 to 2015. Prior to that, Ms. Brown was the Chief Executive Officer and President of Omgeo LLC, a financial services technology company, from 2006 to 2014. Before joining Omgeo LLC, she was the Chief Executive Officer of the Securities Industry Automation Corporation, a technical services company and subsidiary of the
Ms. Brown brings financial technology expertise and significant public company board experience to the board, having served as an executive at several financial technology companies and as a director of other public company boards.
| ||||
CAREER EXPERIENCE Fidelity National Information Services, Inc. Co-Chief Operating Officer (2018-2019)
Chief Operating Officer (2015-2018)
SunGard Financial Systems, LLC Chief Operating Officer (2014-2015)
Omgeo LLC President and Chief Executive Officer (2006-2014) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Business Operations Information Technology/Cybersecurity Risk Management International Business | |||
13
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 17 |
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Compensation Nominating and Corporate Governance | Joan T. Dea | |||
Ms. Dea is the founder of Beckwith Investments LLC, a private investment and consulting firm, and has served as
Ms. Dea brings public company, leadership, strategy, governance, and financial services experience to the board, having served in a variety of executive leadership positions at BMO Financial Group and Boston Consulting Group.
| ||||
CAREER EXPERIENCE Beckwith Investments LLC Managing Director (2008-present) BMO Financial Group Executive Committee (2003-2008) Boston Consulting Group Partner and Director (1994-2003) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Marketing International Business Environmental, Social, and Governance | |||
| 18 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
14
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Risk | Christopher V. Dodds | |||
Mr. Dodds has served as the Co-Founder and Managing Member of Crown Oak Advisors LLC, a registered investment advisor, since
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 member of the Board of Directors of
| ||||
CAREER EXPERIENCE Crown Oak Advisors, LLC Managing Member (2020-present) The Cynosure Group Senior Advisor (2018-present) The Carlyle Group Senior Advisor (2008-2018) The Charles Schwab Corporation Chief Financial Officer (1999-2007) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Regulatory Accounting Risk Management | |||
15
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 19 |
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Audit Nominating and Corporate Governance | ||||
Mr. Ellis is a Managing Partner at TPG, a private equity and alternative investment firm, where he co-leads The Rise Fund, the firm’s impact investing platform. Prior to joining TPG in 2015,
Mr. Ellis brings leadership and management skills, investment expertise, and experience in global management consulting to the board, having served as Worldwide Managing Director of Bain,
| ||||
TPG Managing Partner (2015-present) Asurion, LLC Chief Executive Officer Bain & Company Worldwide Managing Director (2005-2012) |
QUALIFICATIONS Public Company Board Financial Services Asset Management Strategic Planning Finance Business Operations International Business Academia Environmental, Social, and Governance | |||
| 20 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
16
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Compensation Nominating and Corporate Governance |
| ||||
|
| ||||
17
|
| |||
|
| |||
18
|
Mr. Herringer is the former Chairman of the Board and Chief Executive Officer of Transamerica,
Mr. Herringer brings public company knowledge and leadership experience to the board, having served as Chief Executive Officer of Transamerica, and his service at Transamerica and AEGON contributes to his knowledge of the financial services industry. Mr. Herringer brings insights to the board from his service on other public company boards.
| |||
CAREER EXPERIENCE Transamerica Corporation Chairman of the Board (1996-2015) Chief Executive Officer (1991-1999) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Strategic Planning Business Operations Finance Regulatory Risk Management Government Service Environmental, Social, and Governance | |||
19
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 21 |
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Compensation | ||||
Mr. Levitt
Mr. Levitt is one of the two directors currently designated by TD Bank. He brings significant strategy, governance, financial services, and public company board experience to the board.
| ||||
CAREER EXPERIENCE The Toronto-Dominion Bank Board Chair Osler, Hoskin & Harcourt LLP Partner (2001-2015) Imasco Limited President and Chief Executive Officer (1991-2000) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Strategic Planning Finance Business Operations Regulatory Risk Management International Business Environmental, Social, and Governance | |||
| 22 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
20
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Audit | Gerri K. Martin-Flickinger | |||
Ms. Martin-Flickinger is a former Executive Vice President and Chief Technology Officer of Starbucks Corporation (Starbucks), a coffeehouse chain and coffee roasting company, where she served from 2015 to 2021. Prior to joining Starbucks in 2015, Ms. Martin-Flickinger served as Senior Vice President and Chief Information Officer of Adobe Inc. (Adobe), a computer software company, from 2006 to 2015, where she led portions of Adobe’s technology transformation to a cloud-based, subscription services business. She has previously served as Chief Information Officer at VeriSign, Inc. (VeriSign), Network Associates, Inc. (Network Associates), and McAfee Associates, Inc. (McAfee). She began her career at Chevron Corporation, where she held several senior positions. Ms. Martin-Flickinger served as a member of the Board of Directors of Tableau Software, Inc., a computer software company, from 2018 to
Ms. Martin-Flickinger brings consumer retail and customer-digital knowledge and executive leadership experience to the board, having served as Executive Vice President and the Chief Technology Officer of Starbucks. She brings technology company industry insight and cybersecurity experience having served as Chief Information Officer of Adobe, Verisign, Network Associates, and McAfee, and public company board experience with Tableau Software.
| ||||
CAREER EXPERIENCE Starbucks Corporation Executive Vice President and Chief Technology Officer (2015-2021) Adobe Inc. Senior Vice President and Chief Information Officer (2006-2015) |
QUALIFICATIONS Public Company Executive Public Company Board Strategic Planning Finance Information Technology/Cybersecurity Marketing Risk Management International Business | |||
21
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 23 |
PROPOSAL ONE: ELECTION OF DIRECTORS
67
COMMITTEES Risk | ||||
Mr. Masrani has served as Group President and Chief Executive Officer of TD Bank
Mr. Masrani is one of the two directors currently designated by TD Bank. He brings leadership and risk management skills, knowledge of the banking and the financial services industry, and international experience to the board, having served as Chief Executive Officer of TD Bank.
| ||||
CAREER EXPERIENCE The Toronto-Dominion Bank Group President and Chief Executive Officer (2014-present) Chief Operating Officer (2013-2014) Group Head, U.S. Personal and Commercial Banking (2008-2013) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Marketing Regulatory Accounting Risk Management International Business Environmental, Social, and Governance | |||
| 24 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
22
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Audit | Todd M. Ricketts | |||
Mr. Ricketts served as a member of the Board of Directors of TD Ameritrade, a registered broker-dealer and investment advisory firm, from 2011 to 2020. He has managed his personal investment portfolio since 2001. Mr. Ricketts previously served as Corporate Secretary and Director of Business Development for TD Ameritrade. Mr. Ricketts has served as a member of the Board of Directors of CSB since 2023. Mr. Ricketts has also served as a member of the Board of Directors of the parent company of the Chicago Cubs, Chicago Baseball Holdings, LLC, since 2009. Mr. Ricketts’ term expires in
| ||||
CAREER EXPERIENCE Chicago Baseball Holdings, LLC Director (2009-present) TD Ameritrade Holding Corporation Director (2011-2020) |
QUALIFICATIONS Public Company Board Financial Services Brokerage/Investment Banking Finance Business Operations Information Technology/Cybersecurity Environmental, Social, and Governance | |||
23
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 25 |
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Risk | Charles A. Ruffel | |||
Mr. Ruffel is the founder and Managing Partner of Kudu Investment Management, LLC, a private equity firm. He served as Chief Executive Officer and Managing Partner of Kudu Advisors, LLC, an investment banking company, from 2009 to 2015. He was the founder and Chief Executive Officer of Asset International, Inc., an information provider in the field of asset management, retirement, and bank services, from 1989 to 2010. He served as a trustee of Schwab Strategic Trust from 2009 to 2018 and as a trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust and Schwab Annuity Portfolios, Laudus Trust, and Laudus Institutional Trust from 2015 to 2018. He has served as a member of the Board of Directors of
Mr. Ruffel brings financial and leadership experience to the board, having served as Chief Executive Officer of Kudu Advisors, LLC and Asset International, Inc. He brings insight to the board from his service as a trustee of numerous asset management funds of the company.
| ||||
CAREER EXPERIENCE Kudu Investment Management, LLC Managing Partner (2015-present) Kudu Advisors, LLC Managing Partner (2009-2015) Asset International, Inc. Chief Executive Officer (1998-2010) |
QUALIFICATIONS Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Information Technology/Cybersecurity Marketing Regulatory Risk Management International Business Environmental, Social, and Governance | |||
| 26 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
24
PROPOSAL ONE: ELECTION OF DIRECTORS
COMMITTEES Nominating and Corporate Governance Risk | ||||
Mr. Sarin
Mr. Sarin brings public company knowledge, information technology/cybersecurity experience, and leadership experience to the board, having served as President and Chief Operating Officer of AirTouch
| ||||
CAREER EXPERIENCE Trepont Acquisition Corp I Chairman Vodafone Group Plc Chief Executive Officer (2003-2008) Accel-KKR Telecom Chief Executive Officer (2001-2003) Infospace, Inc. Chief Executive Officer (2000-2001) |
QUALIFICATIONS Public Company Executive Public Company Board Strategic Planning Finance Business Operations Information Technology/Cybersecurity Marketing Regulatory Risk Management International Business Environmental, Social, and Governance | |||
25
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 27 |
PROPOSAL ONE: ELECTION OF DIRECTORS
1986
86 | ||||
Mr. Schwab has
Mr. Schwab is the founder of the company, was the Chief Executive Officer of the company, and has been the Chairman or Co-Chairmansince its inception. His vision continues to drive the company’s growth.
| ||||
CAREER EXPERIENCE The Charles Schwab Corporation Co-Chairman (2022-present) Chairman Chief Executive Officer (1986-1997; 2004-2008) Co-Chief Executive Officer(1998-2003)
Charles Schwab & Co. Inc. Chief Executive Officer (2004-2008) |
QUALIFICATIONS Public Company Executive Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Marketing Regulatory International Business Environmental, Social, and Governance | |||
| 28 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
26
PROPOSAL ONE: ELECTION OF DIRECTORS
Risk | Carolyn Schwab-Pomerantz | |||
Ms. Schwab-Pomerantz was employed by CS&Co for 40 years. She served as Managing Director, Consumer Education of CS&Co from 2022 to 2023 and served as Senior Vice President, Consumer Education of CS&Co from 2005 to 2022. Ms. Schwab-Pomerantz also served as President of Charles Schwab Foundation, the Company’s charitable foundation, from 2002 to 2023, and as Chair of Charles Schwab Foundation from 2014 to 2023. She also served as Chair of Schwab Charitable Fund, a donor-advised fund, from 2012 to 2023, and as Chair of the Board of Governors for Boys & Girls Clubs of America, a nonprofit corporation, from 2021 to 2022 (and has served as Chair Emeritus since 2023). Ms. Schwab-Pomerantz is the daughter of the company’s Co-Chairman and founder Charles R. Schwab. Ms. Schwab-Pomerantz’s term expires in 2026. Ms. Schwab-Pomerantz has significant financial services and environmental, social, and governance experience, having served in a senior role overseeing consumer education with the company from 2005 to 2023 and including through her roles with Charles Schwab Foundation, Schwab Charitable Fund, and Boys & Girls Clubs of America. | ||||
CAREER EXPERIENCE Charles Schwab Foundation Chair (2004-2023) President (2002-2023) Charles Schwab & Co., Inc. Managing Director – Consumer Education (2022-2023) Senior Vice President – Consumer Education (2005-2022) | QUALIFICATIONS Financial Services Brokerage/Investment Banking Strategic Planning Finance Marketing Risk Management Government Service Environmental, Social, and Governance | |||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 29 |
PROPOSAL ONE: ELECTION OF DIRECTORS
DIRECTOR SINCE 2002 AGE AT ANNUAL MEETING: 76 INDEPENDENT DIRECTOR COMMITTEES Compensation | Paula A. Sneed | |||
Ms. Sneed is Chairman and Chief Executive Officer of Phelps Prescott Group, LLC (Phelps Prescott), a strategy and management consulting firm. She served as Executive Vice President, Global Marketing Resources and Initiatives, of Kraft Foods, Inc. (Kraft), 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,
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,
| ||||
CAREER EXPERIENCE Phelps Prescott Group, LLC Chairman and Chief Executive Officer (2007-present) Kraft Foods, Inc. Executive Vice President (2005-2006)
Senior Vice President (2004-2005) Kraft Foods North America Executive Vice President (2000-2004) |
QUALIFICATIONS Public Company Executive Public Company Board Strategic Planning Business Operations Marketing Environmental, Social, and Governance | |||
| 30 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
27
Director Nominations
The Nominating and Corporate Governance Committee recommended all of the nominees for election included in this year’s proxy statement.
The Nominating and Corporate Governance Committeecommittee has a policy to consider candidates recommended by stockholders. The policy requires written stockholder recommendations that include the following information: (i) the name, address, and contact information of the recommending stockholder; (ii) proof of the stockholder’s share ownership; (iii) a resume or statement of the candidate’s qualifications; and (iv) a statement of the stockholder’s relationship with the proposed candidate or interest in the proposed candidacy. The written recommendation must be addressed to the Office of the Corporate Secretary at the address provided in the “Corporate Governance” section of this proxy statement.statement, or by email to SchwabCorporateSecretary@Schwab.com.
IDENTIFYING AND EVALUATING CANDIDATES FOR DIRECTORIdentifying 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, as well as director qualifications as determined by the board. The Nominatingcommittee evaluates attributes and Corporate Governance Committee evaluates capabilities valuable to the company’s business and commensurate with the size, complexity, and risk profile of the company and, as needed, to bring fresh perspective to the board. Candidates considered for nomination to the board 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 company’s Chairman,Co-Chairmen, by the Nominating and Corporate Governance Committee, which may retain the services of a professional search firm to assist it in identifying or evaluating potential candidates.
In connection withCommunications With the acquisitionBoard of TD Ameritrade, the company agreed to add to the board two directors designated by The Toronto-Dominion Bank (TD Bank). The agreements provided that the designees met the director qualification and eligibility criteria of the Nominating and Corporate Governance Committee and any applicable regulatory requirements or standards for board service, and otherwise were reasonably acceptable to the Nominating and Corporate Governance Committee. Mr. Levitt, who is standing for election at the annual meeting for the first time since his appointment, was designated by TD Bank.Directors
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
If you wish to communicate with the board, the Chair of the Nominating and Corporate Governance Committee, or the independent directors as a group, you may send your communication in writing to the Office of the Corporate Secretary at the address provided in the “Corporate Governance” section of this proxy statement.statement or by email to SchwabCorporateSecretary@Schwab.com. You must include your name and address in the written communication and indicate whether you are a stockholder of the company.
The Office of the Corporate Secretary will compile all communications, summarize lengthy, repetitive, or duplicative communications, and forward them to the appropriate director or directors. The Office of the 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 Office of the Corporate Secretary will retain a copy of such communication for review by any director upon histhe director’s request.
Director Compensation
The Compensation Committee reviews, approves, and establishes guidelines for the compensation of directors, including appropriate levels of compensation for service on board committees. In 2023, 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 company’s peer group. Based on this review and upon recommendation by the Compensation Committee, the board did not approve any changes to either the annual cash or her request.
28
annual equity retainers for committee Chairs and members. Mr. Schwab and Mr. Bettinger, who are employed by the company, receive no additional compensation for their service as directors. In 2021, non-employeedirectors, and Ms. Schwab-Pomerantz received no additional compensation for her service as director during the following cash retainers and equity grants:period in which she was employed by the company.
CASH RETAINERS
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 31 |
Each PROPOSAL ONE: ELECTION OF DIRECTORS
Cash Retainers
For 2023, each non-employee director received an annual cash retainer in the amount of $100,000. In addition, the Chairs of the Audit Committee and the Risk Committee each received an annual cash retainer of $40,000,$50,000, and the other members of the Audit Committee and the Risk Committee each received an annual cash retainer of $15,000.$20,000. The ChairChairs of the Compensation Committee received an annual cash retainer of $30,000, and the other members of the Compensation Committee each received an annual cash retainer of $10,000. The Chair of the Nominating and Corporate Governance Committee received an annual cash retainer of $25,000, and the other members of the Nominating and Corporate Governance Committee each received an annual cash retainer of $10,000.$50,000, and the other members of the Compensation Committee and the Nominating and Corporate Governance Committee each received an annual cash retainer of $15,000.
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 GRANTSEquity Grants
For 2021,2023, each non-employee director received an annual equity grant under the 20132022 Stock Incentive Plan, with an aggregate value of $185,000. Non-employee directors received this$215,000. This equity grant was awarded 60% in restricted stock units (RSUs) and 40% in stock options.
TERMS AND CONDITIONSTerms and Conditions
Non-employee directors receive annual RSU and option grants 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, the company grants that individual a pro-ratapro rata amount of cash retainers and equity awards 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 board has adopted stock ownership guidelines to promote significant equity ownership by non-employee directors and further align their long-term financial interests with those of stockholders. Under the guidelines, each non-employee director is expected to maintain an investment position in companythe company’s common stock with a fair market value equal to at least $400,000. A new director is expected to 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
29
equivalent number of shares as on the date the target level was met. Shares owned outright, deferred shares, and RSUs are included in determining ownership levels, but stock options are not. As of December 31, 2023, all directors complied with the stock ownership guidelines.
DIRECTORS’ DEFERRED COMPENSATION PLAN
| 32 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS
Directors’ Deferred Compensation Plan
Non-employee directors also may participate in the Directors’ Deferred Compensation Plan II.II (the DCP2). 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:to 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 |
vest immediately upon grant and generally expire ten years after the grant |
– or –
| (2) | 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. |
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 2021.
2021 DIRECTOR COMPENSATION TABLE2023.
| Name | Fees Earned or Paid in Cash ($)
| |||||||||||||||||||
Cash1 ($) | Deferred into ($) | Stock Awards3, 5 ($) | Option Awards4, 5 ($) | Total ($) | ||||||||||||||||
John K. Adams, Jr. | 175,000 | — | 111,000 | 74,000 | 360,000 | |||||||||||||||
Marianne C. Brown | 130,598 | — | 111,000 | 74,000 | 315,598 | |||||||||||||||
Joan T. Dea | 155,000 | — | 111,000 | 74,000 | 340,000 | |||||||||||||||
Christopher V. Dodds | 175,000 | — | 111,000 | 74,000 | 360,000 | |||||||||||||||
Stephen A. Ellis | — | 125,000 | 111,000 | 74,000 | 310,000 | |||||||||||||||
Mark A. Goldfarb | 146,889 | — | 111,000 | 74,000 | 331,889 | |||||||||||||||
William S. Haraf | 150,000 | — | 111,000 | 74,000 | 335,000 | |||||||||||||||
Frank C. Herringer | — | 135,000 | 111,000 | 74,000 | 320,000 | |||||||||||||||
Brian M. Levitt | 110,000 | — | 111,000 | 74,000 | 295,000 | |||||||||||||||
Gerri K. Martin-Flickinger | 115,000 | — | 111,000 | 74,000 | 300,000 | |||||||||||||||
Bharat B. Masrani | — | 115,000 | 111,000 | 74,000 | 300,000 | |||||||||||||||
Todd M. Ricketts | 115,000 | — | 111,000 | 74,000 | 300,000 | |||||||||||||||
Charles A. Ruffel | 35,000 | 115,000 | 111,000 | 74,000 | 335,000 | |||||||||||||||
Arun Sarin | 125,000 | — | 111,000 | 74,000 | 310,000 | |||||||||||||||
Paula A. Sneed | 130,000 | — | 111,000 | 74,000 | 315,000 | |||||||||||||||
30
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 33 |
PROPOSAL ONE: ELECTION OF DIRECTORS
2023 Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | |||||||||||
Cash1 ($) | Deferred into ($) | Stock Awards3, 5 ($) | Option Awards4, 5 ($) | All Other ($) | Total ($) | |||||||
John K. Adams, Jr. | 185,000 | — | 129,037 | 86,003 | — | 400,040 | ||||||
Marianne C. Brown | 35,000 | 120,000 | 129,037 | 86,003 | — | 370,040 | ||||||
Joan T. Dea | 165,000 | — | 129,037 | 86,003 | — | 380,040 | ||||||
Christopher V. Dodds | 185,000 | — | 129,037 | 86,003 | — | 400,040 | ||||||
Stephen A. Ellis | — | 135,000 | 129,037 | 86,003 | — | 350,040 | ||||||
Mark A. Goldfarb | 155,000 | — | 129,037 | 86,003 | — | 370,040 | ||||||
William S. Haraf6 | 77,500 | — | — | — | — | 77,500 | ||||||
Frank C. Herringer | — | 165,000 | 129,037 | 86,003 | — | 380,040 | ||||||
Brian M. Levitt | 115,000 | — | 129,037 | 86,003 | — | 330,040 | ||||||
Gerri K. Martin-Flickinger | 120,000 | — | 129,037 | 86,003 | — | 335,040 | ||||||
Bharat B. Masrani | — | 120,000 | 129,037 | 86,003 | — | 335,040 | ||||||
Todd M. Ricketts | 137,500 | — | 129,037 | 86,003 | — | 352,540 | ||||||
Charles A. Ruffel | 35,000 | 120,000 | 129,037 | 86,003 | — | 370,040 | ||||||
Arun Sarin | 135,000 | — | 129,037 | 86,003 | — | 350,040 | ||||||
Carolyn Schwab-Pomerantz7 | 60,000 | — | — | — | 612,400 | 672,400 | ||||||
Paula A. Sneed | 150,000 | — | 129,037 | 86,003 | — | 365,040 | ||||||
| (1) | This column shows cash amounts earned for retainers. For Mr. Adams, Ms. Brown, Ms. Dea, Mr. Dodds, Mr. Goldfarb, Mr. Haraf, Mr. Ricketts, and Mr. Ruffel, the |
| (2) | This column shows the dollar amount of retainers deferred into RSUs or options under the |
| (3) | The amounts shown in this column represent the grant date fair value of the RSU award. In |
| (4) | The amounts shown in this column represent the grant date fair value of the stock option award. In |
| 34 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL ONE: ELECTION OF DIRECTORS
| (5) | The following table shows the aggregate number of outstanding stock option and RSU awards held by the non-employee directors as of December 31, |
| Name | Stock Option Awards | Restricted Stock Unit Awards | ||||||||
John K. Adams, Jr. | 47,634 | 5,860 | ||||||||
Marianne C. Brown | 7,496 | 2,408 | ||||||||
Joan T. Dea | 25,708 | 5,860 | ||||||||
Christopher V. Dodds | 13,674 | 5,860 | ||||||||
Stephen A. Ellis | 124,414 | 14,868 | ||||||||
Mark A. Goldfarb | 31,933 | 4,997 | ||||||||
William S. Haraf | 31,933 | 5,860 | ||||||||
Frank C. Herringer | 89,694 | 141,571 | ||||||||
Brian M. Levitt | 5,633 | 1,881 | ||||||||
Gerri K. Martin-Flickinger | 7,496 | 2,408 | ||||||||
Bharat B. Masrani | 5,633 | 3,649 | ||||||||
Todd M. Ricketts | 5,633 | 1,881 | ||||||||
Charles A. Ruffel | 41,444 | 5,860 | ||||||||
Arun Sarin | 53,358 | 4,997 | ||||||||
Paula A. Sneed | 31,933 | 54,055 | ||||||||
31
CHANGES TO NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2022
In 2021, 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 company’s peer group. Based on this review and upon recommendation by the Compensation Committee, the board approved increases to annual cash retainers for committee chairs and members effective January 1, 2022 and an increase of $30,000 in the annual equity retainer. The board approved (i) a $10,000 increase in the annual cash retainer for the Chairs of the Audit Committee and the Risk Committee and a $5,000 increase in the annual cash retainer for each other member of these committees; (ii) a $20,000 increase in the annual cash retainer for the Chair of the Compensation Committee and a $5,000 increase in the annual cash retainer for each other member of this committee; and (iii) a $25,000 increase in the annual cash retainer for the Chair of the Nominating and Corporate Governance Committee and a $5,000 increase in the annual cash retainer for each other member of this committee. As a result of the increases, the Chairs of the Audit Committee, the Risk Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee each will receive an annual cash retainer of $50,000 and the members of the Audit Committee and the Risk Committee each will receive an annual cash retainer of $20,000, and the members of the Compensation Committee and the Nominating and Corporate Governance Committee each will receive an annual cash retainer of $15,000. These annual cash retainer increases were effective January 1, 2022.
If stockholders approve the 2022 Stock Incentive Plan at the annual meeting, each non-employee director will receive an annual equity grant under the 2022 Stock Incentive Plan with an aggregate value of $215,000. The equity grants will be 60% in RSUs and 40% in stock options. Equity grants vest 25% on each of the first and second anniversaries of the date of grant and the remaining 50% on the third anniversary of the date of grant. In the event a new non-employee director is elected to the board during the year, a pro-rata cash retainer amount with the same ratio between cash retainers and equity grants is granted to that individual. If the 2022 Stock Incentive Plan does not receive stockholder approval, non-employee directors will receive the $185,000 annual equity retainer under the 2013 Stock Incentive Plan for 2022.
32
APPROVAL OF AMENDMENTS TO
CERTIFICATE OF INCORPORATION AND
BYLAWS TO DECLASSIFY THE BOARD
The Certificate of Incorporation provides that the board is divided into three classes of directors, with each class elected every three years. The company’s stockholders approved the election of directors by classes in 1996. Stockholders voted in favor of a classified board at that time to ensure the continuity and stability of the company’s directors and policies, so that a majority of directors at any given time would have prior experience as directors of the company.
As part of its ongoing review of corporate governance matters, including a review of the level of support received for the stockholder proposal calling for the annual election of directors submitted last year, the board considered the advantages and disadvantages of maintaining the classified board structure. There are two sides to the argument: some stockholders believe that annual elections may increase accountability of directors because stockholders may evaluate and elect all directors on an annual basis, and the election of directors may be the primary means for stockholders to express their satisfaction or dissatisfaction with the actions of the board and to influence corporate governance policies of the company. By enhancing accountability, a declassified board may also help to promote good financial performance over the long term. In addition, a significant majority of large publicly traded financial institutions do not have a classified board, and many institutional investors express a preference for a board that is not classified. Other stockholders may prefer to retain the benefits of the classified board structure. A classified structure may allow directors to exercise greater independence on behalf of all stockholders if they do not face an annual vote for reelection, as well as provide continuity and stability in the management of the business and affairs of the company. In some circumstances, classified boards may enhance stockholder value by forcing an entity seeking control of the company to initiate discussions at arm’s-length with the board of the company, because the entity cannot replace the entire board in a single election. While the board continues to believe that these benefits exist, the board also recognizes the possible benefits of a declassified board and understands that corporate governance best practices have moved away from classified boards in favor of electing all directors annually. After considering these interests, the board recommended submitting the proposed amendments to stockholders regarding the declassification of the board.
The proposed amendments eliminate the classification of the board over a three-year period, provide for the annual election of all directors beginning at the 2025 annual meeting of stockholders and make certain conforming changes to the Certificate of Incorporation and the Bylaws. If approved, the proposed amendments would become effective upon the filing and effectiveness of a certificate of amendment with the Secretary of State of the State of Delaware, which would occur promptly after stockholder approval is obtained for the proposed amendments. Board declassification would be phased-in beginning at the 2023 annual meeting of stockholders as follows:
Name | Stock Option Awards | Restricted Stock Unit Awards | ||
John K. Adams, Jr. | 57,801 | 5,567 | ||
Marianne C. Brown | 17,663 | 8,432 | ||
Joan T. Dea | 35,875 | 5,567 | ||
Christopher V. Dodds | 23,841 | 5,567 | ||
Stephen A. Ellis | 129,642 | 15,713 | ||
Mark A. Goldfarb | 42,100 | 5,567 | ||
Frank C. Herringer | 69,025 | 151,010 | ||
Brian M. Levitt | 15,800 | 5,567 | ||
Gerri K. Martin-Flickinger | 17,663 | 5,567 | ||
Bharat B. Masrani | 15,800 | 11,062 | ||
Todd M. Ricketts | 15,800 | 5,567 | ||
Charles A. Ruffel | 58,561 | 5,567 | ||
Arun Sarin | 63,525 | 5,567 | ||
Carolyn Schwab-Pomerantz | 37,428 | — | ||
Paula A. Sneed | 21,212 | 55,994 | ||
| (6) |
|
| (7) |
|
33
|
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| 35 |
|
|
Delaware corporate law provides, unless otherwise provided in the certificate of incorporation, that members of a board that is classified may be removed only for cause. At present, because the board is classified, the Certificate of Incorporation and the Bylaws provide that the members
Proposal Two: Ratification of the board are removable only for cause. The proposed amendments provide that, once the board is fully declassified in 2025, directors may be removed with or without cause.Selection of Independent Auditors
The proposed amendments, if passed, also would eliminate the requirement that the affirmative vote of the holders of 80% of all outstanding shares of common stock is necessary to amend the provision concerning the annual election of directors once the board is fully declassified.
The proposed amendments to the Certificate of Incorporation and the proposed amendments to the Bylaws are attached to this proxy statement as Exhibit A and Exhibit B, respectively.
34
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Audit Committee has the sole authority to hire,appoint, 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 evaluatesconducts a comprehensive annual evaluation of the independent auditor’s qualifications, performance, and independence (including assessing non-audit fees and services). The Audit Committee takes into account the insight provided to the Audit Committee and the quality of the independent auditors, including theinformation provided on accounting issues, auditing issues, and regulatory developments. The Audit Committee also considers whether, in order to ensure continuing auditor independence, there should be periodic rotation and selection of the lead audit partner and whether it is appropriate to rotaterotation of the audit firm itself.itself, taking into consideration the advisability and potential costs and impact of selecting a different firm.
The Audit Committee has selected Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu Limited (collectively referred to as Deloitte) as the company’s independent registered public accounting firm for the 20222024 fiscal year. Deloitte has served in this capacity since the company’s inception. The Audit Committee evaluated Deloitte’s institutional knowledge and experience, quality of service, sufficiency of resources, and quality of the team’s communications and interactions, as well as the team’s objectivity and professionalism. As a result, the Audit Committee and the Board of Directorsboard believe that the retention of Deloitte for the 20222024 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 Committee’s 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.
Auditor Fees
Fees for services provided by Deloitte in the last two fiscal years were:
| 2021 | 2020 | 2023 | 2022 | |||||||||
| (amounts in millions) | ||||||||||||
Audit Fees1 | $ | 11.2 | $ | 9.2 | ||||||||
Audit Fees1 | $11,532,307 | $11,172,248 | ||||||||||
Audit-Related Fees2 | ||||||||||||
Audit-Related Fees2 | 4.5 | 4.1 | 4,342,211 | 4,175,673 | ||||||||
Tax Fees3 | 1.4 | 0.1 | ||||||||||
Tax Fees3 | 45,400 | 109,179 | ||||||||||
All Other Fees4 | ||||||||||||
All Other Fees4 | — | — | — | — | ||||||||
Total | $ | 17.1 | $ | 13.4 | ||||||||
Total | $15,919,918 | $15,457,100 | ||||||||||
| (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 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, service auditor reports over internal controls, review of SEC filings, |
| (3) | Tax fees include permitted compliance and advisory services such as tax return review, preparation and compliance, and advice on the application of rules or changes to tax |
| (4) | All other fees represent fees not included in “audit fees,” “audit-related fees,” and “tax fees.” |
| 36 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
35
PROPOSAL TWO: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
In addition to the services listed above, Deloitte provides audit and tax return review and preparation and compliance services to certain unconsolidated mutual funds, charitable trusts, and foundations. The fees for such services are included in the expenses of the mutual funds, charitable trusts, and foundations and borne by the stockholders of the funds and foundations. Amounts billed by Deloitte for these services were $3.2 million$3,399,050 for 20212023 and $3.1 million$3,052,475 for 2020.2022. These amounts are not included in the expenses of The Charles Schwab Corporation.
NON-AUDIT SERVICES POLICIES AND PROCEDURESNon-Audit Services Policies and Procedures
The Audit Committee has adopted a policy regarding non-audit services performed by Deloitte. The Audit Committee’s policy prohibits engaging Deloitte to perform the following services:
any contingent fee |
bookkeeping or other services relating to accounting records or financial statements of the audit |
broker-dealer, investment advisor, or investment banking |
actuarial |
management and human resource functions (including executive search services) |
legal services or expert services unrelated to the |
appraisal and valuation services, fairness opinions or contribution-in-kind |
internal audit |
financial information systems design and |
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 |
tax services to employees who have a financial reporting oversight role. |
The Audit Committee may approve other non-audit services in advance of their performance as part of its review and approval of Deloitte’s audit service plan. In addition, the Audit Committee has pre-approved three separate categories of non-audit services under the policy, subject to an annual aggregate dollar limit for each category. OnceIf 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:
accounting theory consultation (includes services such as guidance on the application of |
assurance and due diligence (includes services such as certain service auditor reports over internal controls, review of |
tax related services (includes tax return review, preparation and compliance, advice on the application of rules or changes to tax laws, and review of tax issues in connection with merger and acquisition activity). |
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 CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 37 |
PROPOSAL TWO: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
36
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.
Audit Committee Report
The Audit Committee has met and held discussions with management and the company’s independent registered public accounting firm. As part of this process, the committee has:
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 company’s Annual Report on Form 10-K for the fiscal year ended December 31,
John K. Adams, Jr., Chair Stephen A. Ellis Mark A. Goldfarb
Gerri K. Martin-Flickinger Todd M. Ricketts
|
| 38 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
37
ADVISORY APPROVAL OF NAMED
| PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION |
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.NEOs. The “named executive officers”NEOs are those executive officers who are listed in the Summary Compensation Table.2023 SCT. We ask that you provide an advisory vote to approve the following, non-binding resolution on named executive officerNEO 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.
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 officerNEO 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 Directorsboard 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
COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
This section describes the company’s executive compensation program, policies, and practices, and how executive compensation is designed to support the company’s strategic objectives. It also summarizes ourthe compensation decisions made for the company’s named executive officers:NEOsduring 2023:
Named Executive Officer | Title | |
Walter W. Bettinger II | Co-Chairman of the Board and Chief Executive Officer (CEO) | |
Peter B. Crawford | Managing Director and Chief Financial Officer | |
Joseph R. Martinetto | Managing Director and Chief Operating Officer | |
Richard A. Wurster | President | |
Charles R. Schwab | Co-Chairman of the Board | |
Executive Summary Table of Contents
| 44 | ||||
| 44 | ||||
| 46 | ||||
| 51 | ||||
| 53 | ||||
Key Business Results
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 39 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Company Strategy
The company’s strategy is to putemphasizes placing clients’ perspectives, needs, and desires at the forefront by seeing the business “Through Clients’ Eyes.”through clients’ eyes. Because investing plays a fundamental role in building financial security, the company strives to deliver a better investing experience for its clients – individual investors and the people and institutions who serve them – by disrupting longstanding industry practices on their behalf and providing superior service. In pursuing this strategy, the company:
|
|
|
38
Effective execution of this strategy in 2021, bolstered by strong client engagement in the midst of a fluctuating environment, was reflected in key metrics:
|
|
|
The combination of the full-year impact of recent acquisitions, our success with clients, rising equity markets, and ongoing expense discipline, led to strong financial performance in 2021:
|
|
|
|
|
The ongoing integration of TD Ameritrade will allow us to provide clients with an even broader set of products, tools, and advisory solutions for an unparalleled investing experience.
Executive Compensation Program
The executive compensation program is intended to support the company’s strategic objectives by:
|
|
|
|
39
The 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: 94% for the Chief Executive Officer and 92% on average for the other named executive officers. This approach maintains a strong link between executive pay and the company’s financial performance, rewards executives only when value has been created for stockholders, and drives long-term performance.
Key Compensation Decisions
The company’s “Through Clients’ Eyes” strategy is based on the principle that developing trusted relationships will translate into more assets from both new and existing clients, ultimately driving more revenue and, along with expense discipline generatingand thoughtful capital management, will generate earnings growth and buildingbuild long-term stockholder value.
2023 Business Highlights
In pursuing the “Through Clients’ Eyes” strategy, the company achieved the following performance results for 2023:
| ◾ | total client assets of $8.52 trillion, an increase of 21% from year-end 2022; |
| ◾ | core net new assets of $305.7 billion, inclusive of anticipated TD Ameritrade conversion-related attrition, representing a 4.3% annual organic growth rate; |
| ◾ | 34.8 million active brokerage accounts at year-end, an increase of 3% over year-end 2022; |
| ◾ | total net revenues were $18.8 billion; |
| ◾ | net income was $5.1 billion, or $6.2 billion on an adjusted basis;* |
| ◾ | diluted earnings per common share (EPS) was $2.54, or $3.13 on an adjusted basis;* |
| ◾ | Return on Common Equity (ROCE) was 16%, while ROTCE was 54%;* and |
| ◾ | pre-tax profit margin was 33.9%, or 41.5% on an adjusted basis.* |
| * | For reconciliation of our results as reported under GAAP to non-GAAP financial measures, including diluted EPS to adjusted diluted EPS, ROCE to ROTCE, and pre-tax profit margin to adjusted pre-tax profit margin, please see Appendix A beginning on page A-1. |
One of the company’s primary objectives going into 2023 was a successful TD Ameritrade integration, which is the largest in the history of the financial services industry. By the end of the year, approximately 90% of TD Ameritrade client assets and accounts were transitioned with no significant disruptions. The company also identified at least $500 million in incremental cost savings beyond the pre-committed TD Ameritrade synergies – further enhancing our scale and enabling the prioritization of investments in key client initiatives.
Moving forward, the company remains confident that the combination of its “Through Clients’ Eyes” strategy and “through the cycle” financial formula that has guided the company’s culture and operating priorities for five decades will continue to drive sustained long-term profitable growth for its clients and stockholders.
| 40 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Overview of the Executive Compensation Committee’s decisions for 2021 aligned with this disciplined focus on financial results. For 2021,Program
The executive compensation program supports the Compensation Committee:company’s strategic objectives through the following design principles:
Pay for Performance |
| Risk Management | ||||||
◾ Link executives’ pay with company financial and stock price performance. ◾ Reward executives for individual performance. | ◾ Promote profitable growth that delivers on the ◾ Attract, retain, and reward talented executives. | ◾ Create appropriate balance of ◾ Ensure effective governance and risk management practices are in place. | ||||||
The Compensation Committee is dedicated to delivering a robust and balanced executive compensation program, in support of a strong link between executive pay and the company’s financial performance. The executive compensation program uses three compensation elements: base salary, annual cash incentives, and LTIs. The chart below summarizes certain design aspects and governance practices included in the program:
| Short- and Long-Term Incentives. Both short- and long-term incentive plans, designed to balance sound short-term decision-making with the |
| Equity Awards. A combination of stock options and PBRSUs align executives’ interests with the creation of long-term stockholder value. |
| Vesting Periods. Stock options vest annually over a four-year period and PBRSUs vest on the third anniversary of grant based on achieved performance results. |
| Market-Based Analysis. Executive compensation and related practices are regularly evaluated against select peer companies and the broader market to maintain the competitiveness of the company’s executive compensation program. |
| Risk Management. Annual review of incentive compensation practices and policies and their potential impact on employee risk-taking. |
| Limited Perquisites. Executives receive limited perquisites with no financial planning assistance, tax gross-ups, or special retirement and/or benefit plans. |
| Stock Ownership Guidelines. CEO and other executive officers are required to maintain minimum stock ownership levels (5x and 3x base salary, respectively) to reinforce the alignment of their interests with stockholder interests. |
| Recoupment Policy. Both a mandatory recoupment policy that aligns with NYSE requirements and a broader policy to ensure coverage of all executive incentive-based compensation. |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 41 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
In addition, most executive compensation is delivered through variable, performance-based incentives: 94% for the Chief Executive Officer and 89% on average for the other NEOs.
| 2023 CEO Pay Mix* |
Other Named Executive Officers* |
| * | Pay mix is based on amounts in the 2023 SCT. The annual cash incentive is the amount reported for the CEBP under Non-Equity Incentive Plan Compensation in the 2023 SCT. Stock awards are the amounts reported in the 2023 SCT for PBRSUs. |
Key Executive Compensation Decisions for 2023
The Compensation Committee regularly reviews and evaluates the company’s executive compensation program and related policies and considers stockholder views regarding executive compensation. For 2023, the Compensation Committee:
| ◾ | assessed the competitiveness of executive compensation using peer group data, and based on such assessment, increased executives’ total direct compensation; |
| ◾ | continued to select adjusted diluted EPS as the performance |
40
| ◾ |
|
| ◾ |
|
|
|
| ◾ |
|
| ◾ |
|
| ◾ |
|
| ◾ | introduced a threshold level of performance into the PBRSU design that will provide a payout of 50% of the |
| ◾ | approved payout under the PBRSUs vesting based on the three-year performance period ended December 31, 2023 (the 2021 PBRSU awards) at 200.00% of target based on the company’s financial performance as measured by ROTCE divided by COE for the three-year performance period from January 1, 2021 through December 31, 2023. |
| 42 |
|
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Response to Advisory Vote on Say-on-Pay and Stockholder Engagement
The Compensation Committee continuously reviewsconsiders the result of the stockholders’ advisory say-on-pay vote when reviewing and evaluatesevaluating the executive compensation program throughout the year. The Compensation Committee noted the strong overall support of the stockholders, who approved the company’s advisory say-on-pay proposal by approximately 92% at the company’s 2023 annual meeting of stockholders, and believes this vote reflects broad support for the executive compensation program and policies and considers stockholder views regarding executive compensation. For the 2022 program, the Compensation Committee made decisions that maintain the strong relationship between compensation opportunity and the management team’s success in executing on the business strategy. For 2022, the Compensation Committee:policies.
The Compensation Committee continues to review and evaluate the company’s executive compensation program and policies in the context of the company’s business, regulatory requirements, and evolving best practices. As part of this process, members of investor relations, legal, and human resources meet with stockholders each year on a variety of topics, and the Compensation Committee takes into consideration any stockholder views regarding executive compensation. Given the nature of the feedback received through stockholder engagement and the results of the company’s 2023 say-on-pay vote, the Compensation Committee determined that the executive compensation program should remain generally consistent with existing practice. |
 |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| 43 |
|
41 PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
SUMMARY OF THE EXECUTIVE COMPENSATION PROGRAM
Summary of the Executive Compensation Program
The Compensation Committee believes that incorporating three elements into the executive compensation program uses three key elements:enables the recruitment and retention of talented executives and provides them incentive to act in the best interests of the company and its stockholders. The executive compensation program favors variable, performance-based opportunities as opposed to fixed base salary, annual cash incentivespay in alignment with a pay for performance philosophy. Both short-term incentive opportunities and long-term incentives. incentive opportunities are included in the program to ensure there is an appropriate balance of risk and reward. Further, the Compensation Committee chooses incentive plan measures for their ability to work together to drive executives’ focus on short-term profitability that supports the creation of value over the long term. Incentive plan design, along with incentive plan goals aligned to the long-term financial plan, are reviewed and approved annually by the Compensation Committee in its January meeting. Individual compensation targets for each NEO are also approved during this meeting.
The table below identifiesprovides additional detail about the objective of each compensation element and how each of these elementselement supports the objectives articulated above.design principles of pay for performance, stockholder value creation, and risk management.
Element of Compensation | ||||||||||||
Fixed | Variable | |||||||||||
Base Salary |
| Long-Term Incentives | ||||||||||
| ||||||||||||
| Provides a fixed level of compensation | Aligns pay with both individual and company performance | Aligns pay with long-term value creation | ||||||||||
| ||||||||||||
Pay for Performance | ||||||||||||
◾ Reward | | | ||||||||||
◾ Link | | | ||||||||||
| ||||||||||||
| | | ||||||||||
| | | | |||||||||
Risk Management | ||||||||||||
◾ Create appropriate balance of risk and | | | | |||||||||
◾ Ensure effective governance and
| | | | |||||||||
COMPENSATION PLANNING AND THE DECISION-MAKING PROCESSCompensation Planning and the Decision-Making Process
The Compensation Committee reviewsreceives input from several sources and approvesreferences throughout the year that help inform its decision-making. Data and advice from its independent compensation consultant, Semler Brossy, feedback from stockholders, information from external market practice surveys, and individual performance and risk assessments are all considered by the Compensation Committee when determining plan design and making compensation decisions for the Chairman, the Chief Executive Officer, and other executive and senior officers, and reviews and recommends to the Board of Directors compensation for the non-employee directors.NEOs.
| 44 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
The Compensation Committee evaluates as a committee, or together with the other independent directors and the Chairman,Mr. Schwab, the performance and compensation of members of the Executive Council, which includes the Chief Executive Officer.Officer and the other NEOs. The Compensation Committee also evaluates the performance andCommittee’s review of NEO compensation of the Chairman. The Compensation Committee also considers:
in 2023 included consideration of:
recommendations from |
| ◾ | recommendations from Mr. Schwab and the Chief Executive Officer regarding performance criteria for annual and long-term incentives, developed in consultation with the |
|
advice from the |
|
While the Compensation Committee considers the information provided by management and its independent compensation consultant, it does not delegate authority to management for executive compensation decisions.
Executive officers may not be present when the Compensation Committee deliberates or votes on their compensation.
42
The Compensation Committee’s review of named executive officer compensation in 2021 included consideration of:
the company’s performance, how executives’ roles and responsibilities continue to evolve after the company’s recent acquisitions, the economic environment, and market |
|
each executive’s experience, responsibilities, changes in job scope, individual performance and risk assessment, and pay relative to internal |
reports prepared by |
actual total compensation from |
proposed |
option exercises, equity vesting amounts, dividend equivalents, 401(k) balances, deferred compensation balances, and other cash compensation |
the value and vesting schedule of outstanding long-term |
The Compensation Committee also evaluates Mr. Schwab’s performance and compensation as part of this process and also reviews and recommends compensation for the non-employee directors on the board. Executives recuse themselves when the Compensation Committee deliberates or votes on their compensation.
|
While the Compensation Committee considers the information provided by management and Semler Brossy, it does not delegate authority to management for executive compensation decisions.
The Compensation Committee does not use a formula or assign a weighting to various factors considered in setting compensation. Itcompensation and does not target a specific percentage mix between cash compensation and long-term incentivesLTI or any specific percentage of total compensation for each compensation component.element. This approach aims to align short-term achievements with long-term value creation, and to support a strong link between executive pay and the company’s financial performance.
Peer Group
The Compensation Committee uses a peer group as a sourcemarket reference point for plan design, assessment of market data to assess the competitiveness of the executive compensation program, and when making pay practicesdecisions for executive officersexecutives and non-employee directors. The data is not used to set compensation targets. Peers werePotential peers are selected consideringfrom a broad group of companies in select industries based on an evaluation of the following factors:
|
|
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 45 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
There are a limited number ofcompanies comparable to Schwab in terms of business model and geographical coverage. The peer group includesgoal is to create a mixbalanced composition of brokerage firms, banking and asset management companies, and companies that provide custody services and process a significant daily volume of consumer financial transactions because the company has few competitors comparable in terms of business model and geographic coverage.transactions.
The Compensation Committee periodically reviews the peer group annually to ensure that it remains relevant as a market reference tool and modifies ittool. Modifications are made as necessary to reflect changes atwithin the company, among peers, or within the industry. In October 2020,For 2023, the Compensation Committee reviewed the peer group based on the factors noted above and considered companies of similar size as measured by revenue and market capitalization and similar business, talent, and operational characteristics, considering the company’s new scale after its acquisition of TD Ameritrade. Based on this review, the Compensation Committee updated the peer group for periods after 2020. With the following changes, the new peer group reflects Schwab’s current scale and complexity:
|
|
43
|
|
did not make any changes. The peer group of 20 companies used for compensation analyses for 20212023 was:
Asset Management | 6 Peers | |||
◾ Ameriprise Financial ◾ Blackrock, Inc. ◾ Franklin Resources | ◾ Goldman Sachs ◾ Northern Trust ◾ T. Rowe Price Group | |||
Brokerage | 4 Peers | |||
◾ Fidelity Investments ◾ LPL Financial Holdings | ◾ Morgan Stanley ◾ Raymond James | |||
Banking | 4 Peers | |||
◾ Fifth Third Bancorp ◾ PNC Financial Services Group, Inc. | ◾ Truist Financial ◾ U.S. Bancorp | |||
Custody and Processing | 6 Peers | |||
◾ Bank of New York Mellon ◾ Discover Financial Services ◾ Mastercard, Inc. | ◾ PayPal ◾ State Street ◾ Visa, Inc. | |||
Compensation Consultant
Under its charter, the Compensation Committee is authorized to retain the services of an external compensation consultantsconsultant to provide guidance and advice to approvethe committee on all matters covered by its charter. Accordingly, the Compensation Committee engaged Semler Brossy and approved all the terms of the engagement. In 2021, the Compensation Committee engaged2023, Semler Brossy to review pay trends acrossperformed the financial services industry and in the peer group, advise directly on Chief Executive Officer, Chairman, President, and non-employee director compensation, provide competitive assessments of executive compensation, review the company’s long-term incentives as well as the long-term incentives used by companies in the peer group, assist with the review and analysis of the peer group, and provide general advice and counsel with respect to executive compensation programs, market practices, and trends. following key actions:
| ◾ | attended and participated in each Compensation Committee meeting held during 2023; |
| ◾ | advised on market trends, competitive practices, and the peer group composition; |
| ◾ | advised on compensation for the Chief Executive Officer, Mr. Schwab, and the other executive officers; |
| ◾ | reviewed tally sheets, reflecting each executive officer’s total compensation and compensation mix; |
| ◾ | provided an annual comparative review of the performance and executive pay levels for the company and its peer group; |
| ◾ | reviewed the company’s annual cash incentive and LTI design against incentives used by peer group companies; and |
| ◾ | advised on new regulations impacting the executive compensation program. |
Semler Brossy was engaged by the Compensation Committee directly and does not provide other services to the company. In 2021,To assess Semler Brossy’s independence, the Compensation Committee reviewedreviews information regarding potential conflicts of interest, withincluding any other services Semler Brossy including: other services it might provideprovides to the company, fees received from the company as a percentage of Semler Brossy’s 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. The annual independence assessment for 2023 did not identify any conflicts of interest or independence issues related to Semler Brossy’s services.
Plan Design and Compensation Decisions
The following describes each compensation element included in the executive compensation program, along with the compensation decisions made and any changes made for 2023.
| 46 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
44
ELEMENTS OF COMPENSATION
Base salary annual cash incentives, and long-term incentives are the key compensation elements for achieving the company’s objectives. The adjustments summarized below were made to base salary, annual cash incentives, and long-term incentivesis a fixed element of the named executive officers in 2021. The column for long-term incentive increases includes one-time grants awarded in recognition of the importance of integration execution over the next several years.
| Executive | Compensation Adjustments | |||||||
Base Salary $ Increase |
Increase in Bonus | LTI $ Increase* | Reason for Adjustments | |||||
Walter W. Bettinger II | — | — | $2,850,000 | · To reward and recognize accomplishments as CEO | ||||
Peter B. Crawford | $25,000 | — | $2,750,000 | · Individual performance · Pay relative to internal peers · Pay relative to external compensation data | ||||
Joseph R. Martinetto | $37,000 | 10% | $5,000,000 | · Individual performance · Pay relative to internal peers · Pay relative to external compensation data | ||||
Richard A. Wurster | $200,000 | 75% | $7,000,000** | · Increase in responsibilities · Individual performance · Pay relative to internal peers · Pay relative to external compensation data | ||||
Charles R. Schwab | — | — | $600,000 | · To reward and recognize accomplishments as Chairman
| ||||
Base Salary
compensation. Base salaries are established at levels intended to attract, motivate, and retain highly capabletalented executive officers. The Compensation Committee reviews base salary annually or at the time of promotion or hire, as applicable.
As illustrated by the pay mix charts in the Executive Summary above, executive officersNEOs receive a small percentage of their overall compensation in base salary. The Compensation Committee approved the base salaries listed below effective March 1, 2021. For Mr. Wurster, the Compensation Committee approved a $75,000 increase effective March 1, 2021 and a $125,000 increase effective October 15, 2021 upon his promotion to President in recognition of the increase in his responsibilities.February 27, 2023.
| Executive | 2021 Base Salary Effective March 1, 2021, except as noted | 2022 Base Salary Effective February 28, | 2022 Base Salary Effective February 28, | 2023 Base Salary Effective February 27, | 2023 Base Salary Effective February 27, | Increase Amount ($) | Increase Amount ($) | Increase Amount (%) | Increase Amount (%) | ||||||||||||||||
Walter W. Bettinger II | $ | 1,400,000 | |||||||||||||||||||||||
Walter W. Bettinger II | |||||||||||||||||||||||||
Walter W. Bettinger II | |||||||||||||||||||||||||
Walter W. Bettinger II | |||||||||||||||||||||||||
Walter W. Bettinger II | $ | 1,500,000 | $ | 1,500,000 | $ | 0 | 0 | % | |||||||||||||||||
Peter B. Crawford | |||||||||||||||||||||||||
Peter B. Crawford | |||||||||||||||||||||||||
Peter B. Crawford | |||||||||||||||||||||||||
Peter B. Crawford | |||||||||||||||||||||||||
Peter B. Crawford | $ | 625,000 | $ | 700,000 | $ | 725,000 | $ | 25,000 | 3.6 | % | |||||||||||||||
Joseph R. Martinetto | $ | 765,000 | |||||||||||||||||||||||
Joseph R. Martinetto | |||||||||||||||||||||||||
Joseph R. Martinetto | |||||||||||||||||||||||||
Joseph R. Martinetto | |||||||||||||||||||||||||
Joseph R. Martinetto | $ | 900,000 | $ | 925,000 | $ | 25,000 | 2.8 | % | |||||||||||||||||
Richard A. Wurster | |||||||||||||||||||||||||
Richard A. Wurster | |||||||||||||||||||||||||
Richard A. Wurster | |||||||||||||||||||||||||
Richard A. Wurster | |||||||||||||||||||||||||
Richard A. Wurster | $ | 750,000 | * | $ | 900,000 | $ | 1,000,000 | $ | 100,000 | 11.1 | % | ||||||||||||||
Charles R. Schwab | $ | 750,000 | |||||||||||||||||||||||
Charles R. Schwab | |||||||||||||||||||||||||
Charles R. Schwab | |||||||||||||||||||||||||
Charles R. Schwab | |||||||||||||||||||||||||
Charles R. Schwab | $ | 800,000 | $ | 900,000 | $ | 100,000 | 12.5 | % | |||||||||||||||||
45
Annual Cash IncentivesIncentive
AnnualEach NEO is eligible to earn an annual cash incentive awards for the named executive officers were made pursuant to the Corporate Executive Bonus Plan.CEBP, the intent of which is to reward executives for strong results during the performance year, in support of long-term value creation. In the first quarter of 2021,2023, the Compensation Committee established the performance criterion for the CEBP, set performance goals, and approved a target bonus award, expressed as a percentage of base salary, for each named executive officer. For Mr. Wurster, the Compensation Committee approved a 25% increase from 175% to 200% in January 2021 and a 50% increase from 200% to 250% effective October 15, 2021 upon his promotion to President. The bonus amount associated with increasing Mr. Wurster’s target due to his promotion was paid outside of the Corporate Executive Bonus Plan and is reported in the Bonus column of the Summary Compensation Table.NEO.
In 2022, the Compensation Committee reviewed performance, certified the achievement of performance goals, and determined bonus awards based on the approved target percentage, which is applied to salary earned during the performance period by each named executive officer. The Compensation Committee approved the following annual incentives for 2021:
| Executive | 2021 Target Cash Incentive (%) | 2021 Target Cash Incentive ($)* | 2021 Actual Cash Incentive ($) | |||
Walter W. Bettinger II | 375% | $5,250,000 | $7,172,550 | |||
Peter B. Crawford | 200% | $1,242,146 | $1,697,019 | |||
Joseph R. Martinetto | 235% | $1,784,091 | $2,437,425 | |||
Richard A. Wurster** | 250% | $1,360,537 | $1,858,764 | |||
Charles R. Schwab | 250% | $1,875,000 | $2,561,625 | |||
Adjustedchose to use adjusted diluted EPS was established as the performance criterion for all named executive officers. The Compensation Committeethe CEBP because it believes adjusted diluted EPSthe measure provides a comprehensive measureassessment of the company’s profitability and focuses executives on operating performance and decisions around capital structure. For purposes
As part of the Corporate Executive Bonus Plan,CEBP, adjusted diluted EPS is defined as the fully diluted EPS for net income available to common stockholders calculated in accordancegoals and payouts were established with GAAP for the applicablea matrix of threshold, target, and maximum performance period, adjusted to remove the after-tax fully diluted per share impact of (i) acquisition-related costs and (ii) amortization of acquired intangible assets, as defined by the company’s Use of Non-GAAP Financial Measures Policy and supported by the company’s policy guidance defining acquisition-related costs. Adjusted diluted EPS is subject to further categories of adjustments and exclusions for unusual items approved by the Compensation Committee at the time the performance criterion was established. Adjusted diluted EPS goals were summarized in a matrix with potential payouts ranging from 50%0% to 200% of a target award. Awards would be paid out at 100% of target if the target bonus award, with a 100% payout assigned to the adjusted diluted EPS goal set by the Compensation Committee, based on achievingin alignment with the company’s 2023 financial plan approved by the board. Achieving adjusted diluted EPSboard, was achieved. The matrix established both a threshold level of less thanperformance that was equal to 50% of the target adjusted diluted EPS goal would result in no bonus payment;
46
achieving adjusted diluted EPS between 50% and 100%a maximum level of the target EPS goal would result in a payoutperformance that was equal to 200% of between 50% and 100% of the target bonus award; and achieving adjusted diluted EPS of more than the target adjusted diluted EPS goal would result in a payout of between 100% and 200% of the target bonus award. The threshold of 50% of targetgoal. Payouts for adjusted diluted EPS was adopted to establishresults between threshold and target and between target and maximum levels would be interpolated. No payout would be made for performance below the minimum level of achievementthreshold, and no additional payout would be made for a bonus payment, and a cap on bonus payout was set at 200% ofperformance above the target award. maximum.
When determining whether and the extent to which the performance goals havegoal has been achieved, the Compensation Committee reviews unusual gains and losses and whether results have been achieved in a manner consistent with the company’s risk profile. Based on this review, the Compensation Committee may exercise discretion to reduce payouts.funding levels.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 47 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
In 2021,For 2023, the Compensation Committee approved the following threshold, target, adjusted diluted EPS goal was set at $2.3789; theand maximum payment was 200% of the target bonus awardperformance goals for adjusted diluted EPS of $4.7578 or higher; and the minimum payment was 50% of the target bonus award for adjusted diluted EPS of $1.18945. The target EPS goal of $2.3789 was set to result in a payout of 100% of the target bonus award for performance in line with the company’s 2023 financial plansplan approved by the board. For 2021,board, and the following result was achieved:
2023 Annual Cash Incentive Performance Criterion and Result
| * | For purposes of the CEBP, adjusted diluted EPS is defined as the fully diluted EPS for net income available to common stockholders calculated in accordance with GAAP for the applicable performance period, adjusted to remove the after-tax fully diluted per share impact of (i) acquisition and integration-related costs, (ii) amortization of acquired intangible assets, and (iii) restructuring costs, as defined by the company’s Use of Non-GAAP Financial Measures Policy and supported by the company’s policy guidance defining acquisition and integration-related and restructuring costs. Adjusted diluted EPS is subject to further categories of adjustments and exclusions for unusual items approved by the Compensation Committee at the time the performance criterion was established. For a reconciliation of GAAP diluted EPS to non-GAAP adjusted diluted EPS, please see Appendix A beginning on page A-1. |
In January 2024, the Compensation Committee approved payoutsreviewed performance, certified a funding level of 72.96% based on an adjusted diluted EPS result of $3.25. For reconciliation of the non-GAAP financial measure adjusted diluted EPS, please see “Part II, Item 7, Management’s Discussion$3.13, and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures” on pages 58 – 59 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The Compensation Committee determined that the company achieved these results while maintaining a low creditan appropriate risk profile. The Compensation Committee did not apply negative discretion to reduce the cash incentive awardpayout for the CEBP generally or with respect to any individual named executive officer andNEO.
The Compensation Committee approved funding at 136.62% of targetthe following annual cash incentives for 2023:
Executive | 2023 Earned Salary | 2023 Target Annual Cash Incentive (%) | 2023 Target Annual Cash Incentive ($)* | 2023 Actual Annual Cash Incentive ($)** | ||||
Walter W. Bettinger II | $1,500,000 | 375% | $5,625,000 | $4,104,000 | ||||
Peter B. Crawford | $ 721,154 | 200% | $1,442,308 | $1,052,308 | ||||
Joseph R. Martinetto | $ 921,154 | 300% | $2,763,462 | $2,016,222 | ||||
Richard A. Wurster | $ 984,615 | 300% | $2,953,846 | $2,155,126 | ||||
Charles R. Schwab | $ 884,616 | 250% | $2,211,539 | $1,613,539 | ||||
| * | Target annual cash incentive equals base salary earned for 2023 multiplied by the target annual cash incentive percentage approved by the Compensation Committee for each NEO. |
| ** | Actual annual cash incentive equals target annual cash incentive for 2023 multiplied by the funding level of 72.96% for each NEO. |
| 48 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Long-Term Incentives
The Compensation Committee believes that LTIs align executives’ interests with the long-term interests of the named executive officers.
Long-Term Incentives
Atcompany and its January 2021 meeting,stockholders. For 2023, LTIs comprised 60% PBRSU grants and 40% stock option grants. In the first quarter of 2023, the Compensation Committee approved equity awardsthe following LTIs with a grant date of March 1, 20212023 for the named executive officersNEOs pursuant to the 20132022 Stock Incentive Plan. OfPlan:
Executive | 2023 PBRSUs ($) (60% of Award) | 2023 Stock Option ($) (40% of award) | 2023 Total LTI ($) | |||
Walter W. Bettinger II | $10,950,000 | $7,300,000 | $18,250,000 | |||
Peter B. Crawford | $ 1,920,000 | $1,280,000 | $ 3,200,000 | |||
Joseph R. Martinetto | $ 3,720,000 | $2,480,000 | $ 6,200,000 | |||
Richard A. Wurster | $ 4,800,000 | $3,200,000 | $ 8,000,000 | |||
Charles R. Schwab | $ 3,000,000 | $2,000,000 | $ 5,000,000 | |||
Mr. Bettinger’s 2023 LTI awards reflect an increase of $1,250,000 compared with his 2022 LTI awards. In approving this increase in January 2023, the total target equity awards granted, 40% was grantedCompensation Committee considered Mr. Bettinger’s success in creating a leadership team and maintaining its stability during the integration of recent acquisitions. The Compensation Committee also considered the size and scale of the company following recent acquisitions and the ongoing financial performance of the company, including with respect to adjusted diluted EPS and ROTCE. The Compensation Committee believes that Mr. Bettinger’s focus on serving clients, operating in a disciplined manner, and building a leadership team for the future have been key factors in the successful execution of the company’s strategy, and the increase in LTI value reinforces the importance of Mr. Bettinger’s leadership in the years to come.
Stock Options– The Compensation Committee included stock options in the equity mix to ensure that a portion of the LTI program is growth-oriented and 60% was granted in PBRSUs to align thealigns executives’ incentives of executives with the long-term interests of stockholders.company’s stockholders and stock price. Stock options granted to NEOs in 2023 will vest 25% annually over four years.
PBRSUs– The Compensation Committee includes PBRSUs in the equity mix to tie executives’ incentive opportunities to the results achieved on multi-year financial performance goals. For 2021,the 2023 PBRSU awards, the Compensation Committee approved the long-term incentives summarized below, which include one-time awards granted to maintain stability within the leadership team throughout the integration of TD Ameritrade. The one-time awards were approved with the annual equity awards and have the same vesting schedule anda target performance conditions.
47
In addition, the Compensation Committee granted Mr. Wurster a $5.0 million promotional grant of time-vested RSUs with a grant date of October 25, 2021. The RSUs granted to Mr. Wurster vest 25% on each of the first, second, third, and fourth anniversary of the grant date, provide for accelerated vesting in the event of death, disability, a change-in-control or retirement, and provide for pro-rated accelerated vesting following a termination under the Charles Schwab Severance Pay Plan (Severance Plan).
| Executive | 2021 PBRSUs ($) | 2021 Stock Options ($) | 2021 Total LTI ($) | ||||||||||||
Walter W. Bettinger II | $8,010,000 | $5,340,000 | $ | 13,350,000 | |||||||||||
Peter B. Crawford | $2,550,000 | $1,700,000 | $ | 4,250,000 | |||||||||||
Joseph R. Martinetto | $4,950,000 | $3,300,000 | $ | 8,250,000 | |||||||||||
Richard A. Wurster | $1,860,000 | $1,240,000 | $ | 8,100,000 | * | ||||||||||
Charles R. Schwab | $2,700,000 | $1,800,000 | $ | 4,500,000 | |||||||||||
Stock Options
The Compensation Committee approved stock options to be granted on March 1, 2021 vesting 25% annually over four years. The stock options provide for accelerated vesting due to a change in control, death or disability, or retirement, and the amounts associated with accelerated vesting are included in the Termination and Change in Control Benefits Table. The stock options also provide for accelerated vesting on awards that would otherwise vest during the severance period following termination under the Severance Plan and the value of awards subject to the accelerated vesting is included in the Termination and Change in Control Benefits Table.
PBRSUs
The Compensation Committee approved PBRSUs with cliff-vestinggoal based on the extent to which ROTCE, excluding Accumulated Other Comprehensive Income (AOCI), exceeds COE for a three-year performance period from January 1, 2021 to2023 through December 31, 2023. The main features of the 2021 PBRSUs are summarized below.
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
48
2025. The Compensation Committee approved a performance goal based onbelieves that ROTCE excluding AOCI and COE with potential payouts ranging from 100%is appropriate for measuring long-term company performance 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 while excluding the impact of certain unrealized gains or losses. Executives will be able to earn between zero and 200% of the target shares granted. Where ROTCE divided by COE equals at least one and no more than two, 100% of target shares are paid. Where ROTCE divided by COE is less than one,award based on the target shares are forfeited. Where ROTCE divided by COE is more than two,company’s performance. PBRSU awards granted in 2023 will be earned according to the target shares are paid out in a range from 100% to 200% of target. Whenfollowing matrix:
PBRSU Performance Matrix | ||||||
ROTCE Excluding AOCI* Divided by COE** Result | Payout % | |||||
| < | 100% | 0% | ||||
100% | to | 199.9% | 50%-100% based on linear interpolation between threshold and target | |||
200% | to | 600% | 100% | |||
>600% | to | 800% | 100%-200% based on linear interpolation between target and maximum | |||
>800% | > | 200% | ||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 49 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
| * | For 2023, ROTCE excluding AOCI is the simple average ROTCE excluding AOCI determined separately for each calendar year in the three-year performance period. ROTCE was defined as adjusted net income available to common stockholders for the calendar year divided by average tangible common stockholders’ equity excluding AOCI (defined as the balance of tangible common stockholders’ equity excluding AOCI at the beginning of the calendar year plus the balance of tangible common stockholders’ equity excluding AOCI at the end of the calendar year divided by two). Adjusted net income available to common stockholders equals net income available to common stockholders calculated in accordance with GAAP for the applicable performance period, adjusted to remove the after-tax impact of (i) acquisition and integration-related costs, (ii) amortization of acquired intangible assets, and (iii) restructuring costs, as defined by the company’s Use of Non-GAAP Financial Measures Policy and supported by the company’s policy guidance defining acquisition and integration-related and restructuring costs. Tangible common stockholders’ equity excluding AOCI equals total stockholders’ equity calculated in accordance with GAAP, minus the sum of (i) preferred stock, (ii) goodwill, (iii) acquired intangible assets – net, and (iv) deferred tax liabilities related to goodwill and acquired intangible assets – net. AOCI is calculated in accordance with GAAP as included in the Company’s consolidated balance sheets. |
| ** | COE is defined as the simple average COE based on the twelve quarters in the three-year performance period. COE is calculated using the Capital Asset Pricing Model, 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 beta of the company’s equity (a measure of the volatility of the company’s 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). |
In determining whether the performance goals have been achieved,met, the Compensation Committee reviewsexcludes any gains or losses from any unusual or non-recurring items, including those not already contemplated in the company’s financial plan at the time of grant, including, but not limited to: (i) charges, costs, benefits, gains or income associated with reorganizations or restructurings of the company, mergers or acquisitions by the company, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorney’s fees, settlements or judgements), or currency or commodity fluctuations; and (ii) the effects of changes in applicable laws, regulations or accounting principles, and any other unusual or non-recurring gains or losses, andprovided that such items are not already taken into account in the normal calculation of performance.
The Compensation Committee also considers whether results have been achieved in a manner consistent with the company’s risk profile. Based on this review, the Compensation Committee may exercise discretion to reduce payouts.
The Compensation Committee selected the performance measure of ROTCE because it incorporates the capital position of the company absent the effects of goodwill, acquired intangible assets, deferred tax liabilities related to goodwill and acquired intangible assets, and preferred stock. The performance goal of ROTCE equaling or exceeding COE 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 company’s performance up to a cap of 200%. If the Compensation Committee certifies that the goal has been met for the performance period, then the award for that performance period will vest. If the goal has not been met, then the PBRSUs and associated dividend equivalent payments will be forfeited.
For 2021, ROTCE is defined as adjusted net income available to common stockholders for the calendar year divided by average tangible common stockholders’ equity (defined as the balance of tangible common stockholders’ equity at the beginning of the calendar year plus the balance of tangible common stockholders’ equity at the end of the calendar year divided by two). Adjusted net income available to common stockholders equals net income available to common stockholders calculated in accordance with GAAP for the applicable performance period, adjusted to remove the after-tax impact of (i) acquisition-related costs and (ii) amortization of acquired intangible assets as defined by the Corporation’s Use of Non-GAAP Financial Measures Policy and supported by the Corporation’s policy guidance defining acquisition-related costs. Tangible common stockholders’ equity equals total stockholders’ equity calculated in accordance with GAAP, minus the sum of (i) preferred stock, (ii) goodwill, (iii) acquired intangible assets and (iv) deferred tax liabilities related to goodwill and acquired intangible assets. The calculation of ROTCE is subject to further categories of adjustments and exclusions for unusual items approved by the Compensation Committee at the time the performance criteria were established.
COE is calculated using the Capital Asset Pricing Model, 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 beta of the company’s equity (a measure of the volatility of the company’s 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).
In determining whether the performance goals have been met, the Compensation Committee excludes losses from any unusual or non-recurring items, including but not limited to charges, or costs associated with reorganizations or restructurings, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation, or currency or commodity fluctuations, and the effects of changes in applicable laws, regulations or accounting principles, and any other unusual or non-recurring losses, provided that such items are not already taken into account in the normal calculation of ROTCE.
The PBRSUs provide for accelerated vesting and payment of target awards due to a change in control, death or disability. The PBRSUs also provide for continued vesting following termination under the Severance Plan or
49
retirement, subject to achievement of performance goals established at the time such awards were granted. The values of awards subject to these accelerated vesting and continued vesting provisions are included in the Termination and Change in Control Benefits Table.
Vesting of PBRSUs for the Performance Period EndingEnded December 31, 20212023
In January 2019,2021, the Compensation Committee approved thea grant of performance-based equity awardsPBRSUs with cliff-vesting and a three-year performance period beginning on January 1, 2021 and ending on December 31, 2021,2023, with payment under the award subject to the Compensation Committee certifying achievement of the applicable performance goals. The 2021 PBRSU awards were based on the level at which ROTCE exceeded COE according to the PBRSU Performance Matrix as follows:
PBRSU Performance Matrix | ||||||
ROTCE versus COE Result | Payout % | |||||
|
| < | 100% | 0% | |||
| 100% | to | 200% | 100% | |||
| 200% | to | 400% | ½ of the ROTCE versus COE result (i.e., an ROTCE versus COE result of 300% earns a 150% PBRSU payout) | |||
|
| > | 400% | 200% | |||
When determining whether performance goals for the 2021 PBRSU awards were met, the Compensation Committee chose ROCE compared to COE as the performance criterionreviewed final company results for these equity awards, 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. Shares are earned at target when ROCE divided by COE is at least one and no more than two. Shares are earned above target when ROCE divided by COE is greater than two. For PBRSUs vesting based on the three-year performance period ending December 31,showing that ROTCE divided by COE was 497.61%, based on a three-year average ROTCE of 39.51%and a twelve-quarter average COE of 7.94%, as calculated under the terms of the 2021 PBRSU awards, which according to the PBRSU Performance Matrix, results in a 200.00% award payout. Based on the Compensation Committee’s review as described, the Compensation Committee determinedcertified achievement of the performance goal was metgoals for the 2021 PBRSU awards and approved payouts based on ROCE of 18.99% and COE of 6.85%, exceeding target performance at 277.32% and resulting in a payout above target at 138.65%. 200.00% with no discretionary exceptions or adjustments.
The Compensation Committee determined the achievement ofabove results were appropriate given the performance goals excluding 2019 charges related to the acquisition of the wealth management business of USAA Investment Management Company and acquisition of TD Ameritrade and with adjustments for 2020 and 2021 for acquisition and integration-related costs, amortization of acquired intangible assets,progress made on long-term initiatives and the tax impacts of these adjustments instrong financial performance achieved during the calculation of net income available to common stockholders, and adjustments for 2020 and 2021 for goodwill, acquired intangible assets, and deferred tax liabilities related to goodwill and acquired intangible assets in the calculation of total stockholders’ equity. The Compensation Committee certified the following achievement ofthree-year performance goals for 2021:period.
| Grant Year | Performance Goal | Performance Period | ROCE | COE | Performance Goal Met | Payout | ||||||
| 2019 | ROCE greater than or equal to COE
| January 1, 2019 to December 31, 2021 | 18.99% | 6.85% | Exceeded | 138.65% of Target | ||||||
| 50 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Other Compensation
Executive Benefits and Perquisites
The company provides limited executive perquisites. The Compensation Committee previously approved certain benefits, for Mr. Bettinger, including a car service for commuting purposes for Mr. Bettinger, which he has not used, parking for Mr. Bettinger, and use of fractionally-ownedfractionally owned aircraft for Mr. Bettinger and Mr. Wurster consistent with company policies.policies and the terms of aircraft time-sharing arrangements. Under the terms of their time-sharing arrangements, Mr. Bettinger and Mr. Wurster reimburse the company in connection with any personal use of the aircraft, subject to Federal Aviation Administration regulations. In 2023, personal use of the aircraft was limited to guests accompanying Mr. Bettinger and Mr. Wurster on business flights. Mr. Bettinger and Mr. Wurster reimbursed the company in full for the aggregate incremental costs of this use, including disallowed tax deductions.
For named executive officers,NEOs, the company:
does not provide special financial planning |
does not gross up payments to cover executives’ personal tax |
does not offer executive retirement or medical |
does not match contributions to the deferred compensation plan. |
Employee Benefit Plans
The company offers nodoes not fund a defined benefit plan, special retirement plan for executives, or other nonqualified excess plans to named executive officers.NEOs. Executive officers may participate in the company’s 401(k) plan and employee stock
50
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 company’s stock)Employee Stock Purchase Plan (the ESPP), and a deferred compensation plan available to officers and other key employees. The ESPP is available to all eligible employees subject to Internal Revenue Service limits, except Mr. Schwab, who is excluded from the ESPP because he owns more than 5% of the company’s stock.
Severance
All employees, including executive officers other than Mr. Schwab, are eligible to receive severance benefits under the Severance 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 Plan, 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, as described in the narrative to the Summary 2023 SCT.
Compensation Table.Policies
COMPENSATION POLICIES
Stock Ownership Guidelines
The Board of Directorsboard has adopted and maintains 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:
|
|
Shares owned directly, shares beneficially owned under company benefit plans, restricted stock, RSUs, and PBRSUs are included in determining ownership levels, but stock options are not. PBRSUs are included when computing ownership as they comprise sixty percent of an executive’s equity mix and the company does not utilize RSUs in its equity mix for the NEOs. The Compensation Committee monitors compliance with the stock ownership guidelines and
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 51 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
may take compensation related action if the target ownership levels are not met within five years. For 2021, all ofyears after the named executive officers assume their respective positions. As of December 31, 2023, each NEO had met their stock ownership exceeding the guidelines.requirement.
Prohibition on Insider Trading, Speculative Trading and Certain Types of Hedging and Pledging Activity
SpeculativeThe company maintains an insider trading policy that applies to all the company’s directors, executive officers, employees, contingent workers, and certain of their related parties. The insider trading policy is designed to promote compliance with applicable laws and regulations regarding insider trading and to protect the company’s reputation for integrity and ethical conduct. The policy prohibits insider trading, tipping, and speculative trading in the company’s stock, including short term trading, is prohibited.other company securities, or derivatives of such securities. The company’s policies prohibitingprohibition on speculative trading apply to employees (including officers) and non-employee directors and prohibitexpressly includes (i) certain types of hedging activities, including sellingengaging in short sales, buying options to open a position, and selling uncovered options.options; and (ii) except for company equity securities acquired via the vesting of options or restricted stock units or acquired under the ESPP, engaging in short term transactions of company equity securities. The policy also prohibits using company securities as collateral for a margin loan or otherwise pledging company securities.
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 the Compensation Committee, or the independent directors, take action. Under the terms of the company’s stock incentive plan, the exercise price of options cannot be less than the closing price of company stock on the grant date.
51
Recoupment Policies
Pursuant to the SEC’s newly adopted final rules regarding recovery of erroneously awarded compensation, as required by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), and the NYSE listing standards implementing those rules, the Compensation Committee approved in October 2023 the Section 16 Officer Incentive Compensation Recovery Policy (the Section 16 Clawback Policy). This new policy, which applies only to Section 16 officers, complies with the applicable SEC clawback rules and NYSE clawback listing standards, and applies to all incentive-based compensation (as that term is defined in the SEC’s newly adopted final rules), which includes bonuses paid pursuant to the CEBP and PBRSUs paid under the company’s stock incentive plans. The Section 16 Clawback Policy was filed as Exhibit 97.1 to the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
In addition, in October 2023, the company has aamended and restated its existing general recoupment policy, the Executive Council Incentive Compensation Recovery Policy, which applies to recover incentive awards grantedall executives and former executives (Section 16 and non-Section 16 officers) whose compensation is determined by the Compensation Committee and gives the Compensation Committee discretion to executive officers in the event of a significantinitiate recovery for actions related to an accounting restatement, of financial results from material noncompliance with financial reporting requirements due tofraud, or misconduct.
In addition, in the event of certain securities law violations, under the Executive Council Incentive Compensation Recovery Policythe 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
| 52 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
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 overall support of the stockholders, who approved the company’s advisory say-on-pay proposal by approximately 94% at the 2021 Annual Meeting of Stockholders, and believes this vote reflects broad support of our compensation program and policies. PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
The Compensation Committee continues to review and evaluate the company’s compensation program and policies in the context of our business, regulatory requirements, and evolving best practices. As part of this process, members of our investor relations and legal teams meet with stockholders, and the Compensation Committee takes into consideration stockholder views regarding executive compensation.
Given the nature of the feedback received through stockholder engagement and the results of our 2021 say-on-pay vote, the Compensation Committee determined that the executive compensation program should remain generally consistent. In addition, members of our investor relations and legal teams met with stockholders who provided feedback on a variety of topics, including corporate governance, workforce diversity, and environmental and social matters.
Risk Assessment
The Compensation Committee reviewed the annual report by the company’s Human Resources and Corporate Risk Management Departments on incentive compensation practices and policies throughout the company and the potential impact on risk-taking by employees. The report reviewed payouts, risk ratings, and balancing methods for incentive compensation plans, changes into new or existing incentive compensation plans and programs made in 2021,2023, bank product incentives, and enhancements to the incentive compensation risk management program.
The annual report identified the following risk-mitigating compensation practices currently in place:
|
a balanced suite of performance metrics with a strong link to stockholder |
payments may be subject to adjustment based on risk management |
performance goals based on financial plans approved by the |
caps on annual incentive opportunities and PBRSU payouts; |
a four-year vesting period for stock options and RSUs with limited opportunities for accelerated |
a three-year performance period and cliff-vesting for PBRSUs with limited opportunities for accelerated |
meaningful executive stock ownership guidelines. |
52
The annual risk report also identified the following risk-mitigating oversight practices currently in place:
approval of executive compensation by an independent board committee with advice from an independent compensation |
review of plan design and performance results for all executive incentive plans by the corporate risk |
annual review of incentive plan performance, along with centralized design and administration of all incentive |
a committee of senior management overseeing the company’s incentive compensation risk management program and reporting directly to the Compensation |
risk management performance assessments for covered employees as defined in the 2010 Guidance on Sound Incentive Compensation |
monitoring of incentive compensation plan results to identify emerging risks and recommend modifications and balancers, as appropriate. |
In addition, when reviewing the design of and payments pursuant to executive incentive compensation programs, the Compensation Committee considers the review by the Managing Director and Chief Risk Officer regarding consistency with the company’s financial plan, strategic objectives, and risk profile.
Internal Revenue Code Section 162(m)Plan Design and Compensation Decisions Made for 2024
Historically, the company’s compensation plans were structured so that compensation would be performance-based and deductible under Section 162(m) of the Internal Revenue Code, as amended (Section 162(m)), with the Compensation Committee approving compensatory arrangements that were not deductible under Section 162(m) based on business needs. The Tax Cuts and Jobs Act enacted in 2017 eliminated the performance-based compensation exemption from the Section 162(m) one million dollar deduction limit, with an exception for certain agreements in effect on November 2, 2017 (the 162(m) Grandfather). The company intends to administer outstanding arrangements and plans to the extent compatible with business needs to preserve potential deductions that may be available under the 162(m) Grandfather.
COMPENSATION DECISIONS MADE FOR 2022
2022 Compensation for the Chief Executive Officer
In 2022, the Compensation Committee approved a $100,000 increase in base salary and a $3,650,000 increase in target long-term incentives for Mr. Bettinger to recognize his accomplishments as CEO, including the substantial growth in the company and managing the company through the Covid-19 pandemic. The Compensation Committee consideredreviews the size and scale ofexecutive compensation program annually to determine if changes should be made to the company following recent acquisitions – $8.1 trillion in client assets across more than 33 million brokerage accounts; almost $19.0 billion in revenues and $6.0 billion in earnings – as well as maintaining leadership stability during integration. The Compensation Committee believes that Mr. Bettinger’s leadership is a key factor in growing the long-term strength of our company by focusing on serving clients, operating in a disciplined manner, and building a leadership teamprogram for the future. The increase in Mr. Bettinger’s long-term incentive grant reinforcesupcoming year. During the importance ofreview for the successful execution of Schwab’s strategy in the years to come.
2022 Annual Cash Incentives
In 2022,2024 program, the Compensation Committee considered company performance criteriain 2023, an analysis of market pay levels and pay practices, individual performance, changes to the scope of certain roles, and input from its compensation consultant, and determined that no changes will be made to the program. Additionally, the Compensation Committee determined that base pay levels and targets for 2022executives will remain unchanged from 2023 levels.
2024 Annual Cash Incentives
In 2024, the Compensation Committee established a performance criterion matrix for 2024 annual cash incentive awards under the Corporate Executive Bonus Plan.CEBP. The Compensation Committee again selected overall corporate performance as
53
measured by adjusted diluted EPS as the performance measure for purposes of these awards and set the target adjusted diluted EPS goal for 100% payout upon achieving the company’s target adjusted diluted EPS in the 2024 financial plan approved by the board. Adjusted diluted EPS is defined as the fully diluted EPS for net income available to common stockholders calculated in accordance with GAAP for the applicable performance period, adjusted to remove the after-tax fully diluted per share impact of (i) acquisition-related costs and (ii) amortization of acquired intangible assets, as defined by the company’s Use of Non-GAAP Financial Measures Policy and supported by the company’s policy guidance defining acquisition-related costs.
2022
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 53 |
PROPOSAL THREE: ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
2024 Long-Term Incentives
In 2022,2024, the Compensation Committee approved long-term equity awards under the 2022 Stock Incentive Plan of 40% stock options and 60% PBRSUs underbased on the 2013 Stock Incentive Plangrant date fair values to align the long-term incentives of the executives with the long-term interests of the stockholders. These equity awards were granted on March 1, 2022.2024. 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, 20222024 to December 31, 2024. The main features of2026 and will be earned based on the 2022 PBRSUs are summarized below.level by which ROTCE exceeds COE.
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
The Compensation Committee selected the performance measure of ROTCE divided by COE as it incorporates the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company. For 2022, ROTCE is defined as adjusted net income available to common stockholders for the calendar year divided by average tangible common stockholders’ equity (defined as the balance of tangible common stockholders’ equity at the beginning of the calendar year plus the balance of tangible common stockholders’ equity at the end of the calendar year divided by two). Adjusted net income available to common stockholders equals net income available to common stockholders calculated in accordance with GAAP for the applicable performance period, adjusted to remove the after-tax impact of (i) acquisition-related costs and (ii) amortization of acquired intangible assets. Tangible common stockholders’ equity equals total stockholders’ equity calculated in accordance with GAAP, minus the sum of (i) preferred stock, (ii) goodwill, (iii) acquired intangible assets and (iv) deferred tax liabilities related to goodwill and acquired intangible assets.
54
The following is a reasonable estimate, calculated in accordance with SEC rules, of the ratio of the 2021 annual total compensation of the company’s median employee to the 2021 annual total compensation of Mr. Bettinger, the Chief Executive Officer:
| 54 |
|
|
|
For 2021, the company selected a new median employee because it experienced a change in its employee population as a result of the TD Ameritrade Acquisition, which was completed in October 2020.
To identify the company’s median employee in 2021, the company used internal records to determine the employee population as of December 31, 2021, which equaled 31,449 individuals, including full-time, part-time, temporary and seasonal employees. Of the 31,449 individuals represented on our compensation and benefits platforms, 31,401 were employed in the United States and 48 outside the United States. The company’s 48 non-U.S. employees accounted for less than 5% of the total employee population and were excluded from the analysis. Such employees were located in: Hong Kong (28 employees); Singapore (eleven employees); India (one employee); and the United Kingdom (eight employees).
The company used the taxable Medicare wages as reflected in the Company’s payroll records as reported to the Internal Revenue Service on Forms W-2 Box 5 (Taxable Medicare Wages) as the consistently applied compensation measure. The company’s payroll records were used to calculate total Taxable Medicare Wages compensation for each of the 31,400 employees, other than the CEO and non-U.S. employees identified as excluded above. The median employee was then identified by consistently applying this compensation measure to all employees included in the analysis.
55
The following tables show compensation information for the named executive officers:NEOs: Walter W. Bettinger II, Chief Executive Officer,Officer; Peter B. Crawford, Managing Director Executive Vice President and Chief Financial Officer,Officer; and the next three most highly compensated executive officers as of December 31, 2021.2023.
2021 SUMMARY COMPENSATION TABLE2023 Summary Compensation Table
| NAME AND PRINCIPAL POSITION | YEAR | SALARY ($) | BONUS1 ($) | STOCK AWARDS2 ($) | OPTION AWARDS3 ($) | NON-EQUITY INCENTIVE PLAN COMPEN- SATION4 ($) | ALL OTHER COMPEN- SATION5 ($) | TOTAL ($) | ||||||||||||||||||||||||||||||||
Walter W. Bettinger II Chief Executive Officer | | 2021 2020 2019 | | 1,400,000 1,383,333 1,300,000 | | — — — | | 8,010,000 6,300,000 5,000,000 | | 5,340,000 4,200,000 5,000,000 | | 7,172,550 4,060,256 4,785,787 | | 15,854 15,604 15,354 | | 21,938,404 15,959,193 16,101,141 | ||||||||||||||||||||||||
Peter B. Crawford Managing Director, Executive Vice President and Chief Financial Officer | | 2021 2020 2019 | | 621,073 587,500 516,667 | | — — — | | 2,550,000 900,000 625,000 | | 1,700,000 600,000 625,000 | | 1,697,019 919,672 887,620 | | 15,412 15,080 14,774 | | 6,583,504 3,022,252 2,669,061 | ||||||||||||||||||||||||
Joseph R. Martinetto Managing Director, Senior Executive Vice President and Chief Operating Officer | | 2021 2020 2019 | | 759,188 723,333 700,000 | | — — — | | 4,950,000 1,950,000 1,625,000 | | 3,300,000 1,300,000 1,625,000 | | 2,437,425 1,273,844 1,443,099 | | 15,554 15,273 15,023 | | 11,462,167 5,262,450 5,408,122 | ||||||||||||||||||||||||
Richard A. Wurster President | 2021 | 640,038 | 109,924 | 6,860,000 | 1,240,000 | 1,748,840 | 15,357 | 10,614,159 | ||||||||||||||||||||||||||||||||
Charles R. Schwab6 Chairman | | 2021 2020 2019 | | 750,000 741,667 700,000 | | — — — | | 2,700,000 2,340,000 1,850,000 | | 1,800,000 1,560,000 1,850,000 | | 2,561,625 1,451,256 1,717,975 | | 14,998 14,732 14,482 | | 7,826,623 6,107,655 6,132,457 | ||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus1 ($) | Stock Awards2 ($) | Option Awards3 ($) | Non-equity Incentive Plan Compensation4 ($) | All Other Compensation5 ($) | Total ($) | ||||||||||||||||||||||||||||||||
Walter W. Bettinger II Chief Executive Officer and Co-Chairman | 2023 2022 2021 | 1,500,000 1,484,615 1,400,000 | — — — | 10,950,019 10,200,043 8,010,000 | 7,300,015 6,800,011 5,340,000 | 4,104,000 5,885,200 7,172,550 | 17,710 16,460 15,854 | 23,871,744 24,386,329 21,938,404 | ||||||||||||||||||||||||||||||||
Peter B. Crawford Managing Director and Chief Financial Officer | 2023 2022 2021 | 721,154 688,462 621,073 | — — — | 1,920,002 1,800,045 2,550,000 | 1,280,010 1,200,016 1,700,000 | 1,052,308 1,455,545 1,697,019 | 17,465 16,133 15,412 | 4,990,939 5,160,201 6,583,504 | ||||||||||||||||||||||||||||||||
Joseph R. Martinetto Managing Director and Chief Operating Officer | 2023 2022 2021 | 921,154 879,231 759,188 | — — — | 3,720,042 3,600,010 4,950,000 | 2,480,020 2,400,011 3,300,000 | 2,016,222 2,788,305 2,437,425 | 17,614 16,234 15,554 | 9,155,052 9,683,791 11,462,167 | ||||||||||||||||||||||||||||||||
Richard A. Wurster President | 2023 2022 2021 | 984,615 876,923 640,038 | — — 109,924 | 4,800,004 4,200,079 6,860,000 | 3,200,004 2,800,009 1,240,000 | 2,155,126 2,780,986 1,748,840 | 17,614 16,260 15,357 | 11,157,363 10,674,257 10,614,159 | ||||||||||||||||||||||||||||||||
Charles R. Schwab6 Co-Chairman | 2023 2022 2021 | 884,616 792,308 750,000 | — — — | 3,000,041 3,000,022 2,700,000 | 2,000,016 2,000,013 1,800,000 | 1,613,539 2,093,871 2,561,625 | 17,518 16,220 14,998 | 7,515,730 7,902,434 7,826,623 | ||||||||||||||||||||||||||||||||
| (1) | The |
| (2) | 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 |
PBRSUs awarded in |
For further discussion of the company’s accounting for its equity compensation plans, including key assumptions, see |
56
| Financial |
| (3) | The amounts shown in this column represent the aggregate grant date fair value of the stock option awards as determined in accordance with |
| (4) | The amounts shown in this column |
| (5) | The amounts shown in this column for |
| (6) | Mr. Schwab has had an employment contract with the company since |
2021 GRANTS OF PLAN-BASED AWARDS TABLE
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 55 |
EXECUTIVE COMPENSATION TABLES
2023 Grants of Plan-Based Awards Table
| Name | Grant Date | Date of Action1 | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards2 | Estimated Future Payouts Under Equity Incentive Plan Awards3 | All Other (#) | All Other (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Equity Awards ($)5 | ||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||
Walter W. Bettinger II | 1/25/2023 3/1/2023 3/1/2023 | — 1/25/2023 1/25/2023 | 2,812,500 — — | 5,625,000 — — | 11,250,000 — — | — — — | — 141,757 — | — 283,514 — | — — — | — — 332,878 | — — $77.41 | — 10,950,019 7,300,015 | ||||||||||||
Peter B. Crawford | 1/25/2023 3/1/2023 3/1/2023 | — 1/25/2023 1/25/2023 | 721,154 — — | 1,442,308 — — | 2,884,616 — — | — — — | — 24,856 — | — 49,712 — | — — — | — — 58,368 | — — $77.41 | — 1,920,002 1,280,010 | ||||||||||||
Joseph R. Martinetto | 1/25/2023 3/1/2023 3/1/2023 | — 1/25/2023 1/25/2023 | 1,381,731 — — | 2,763,462 — — | 5,526,924 — — | — — — | — 48,159 — | — 96,318 — | — — — | — — 113,088 | — — $77.41 | — 3,720,042 2,480,020 | ||||||||||||
Richard A. Wurster | 1/25/2023 3/1/2023 3/1/2023 | — 1/25/2023 1/25/2023 | 1,476,923 — — | 2,953,846 — — | 5,907,692 — — | — — — | — 62,140 — | — 124,280 — | — — — | — — 145,919 | — — $77.41 | — 4,800,004 3,200,004 | ||||||||||||
Charles R. Schwab | 1/25/2023 3/1/2023 3/1/2023 | — 1/25/2023 1/25/2023 | 1,105,770 — — | 2,211,539 — — | 4,423,078 — — | — — — | — 38,838 — | — 77,676 — | — — — | — — 91,200 | — — $77.41 | — 3,000,041 2,000,016 | ||||||||||||
| (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. |
57
| (2) | These columns show |
| (3) | These PBRSU awards were granted under the |
| (4) |
These stock option awards were granted under the |
Represents the grant date fair value of each equity award as determined in accordance with |
For the RSU award
| 56 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION TABLES
Narrative to Mr. Wurster, the grant date fair value was determined by multiplying the numberSummary Compensation and Grants of units granted by the average of the high and low market price of the company’s common stock on the grant date of October 25, 2021, which was $83.43.Plan-Based Awards Tables
NARRATIVE TO SUMMARY COMPENSATION AND GRANTS OF PLAN-BASED AWARDS TABLES
Base Salaries
In 2021,January 2023, the Compensation Committee increased theapproved an increase in base salary for Mr. Crawford by $25,000 (4%(3.6%), for Mr. Martinetto by $37,000 (5%$25,000 (2.8%), for Mr. Wurster by $100,000 (11.1%), and for Mr. WursterSchwab by $200,000 (36%$100,000 (12.5%).
Annual Cash Incentives
In 2021, the Compensation Committee increased Mr. Martinetto’s annual cash incentive from 225% to 235% of base salary and increased Mr. Wurster’s annual cash incentive from 175% to 250% of base salary. The Compensation Committee made no other adjustments to base salary for the NEOs in 2023.
Annual Cash Incentives
In 2023, the Compensation Committee made no adjustments to annual cash incentive targets for the named executive officers in 2021.NEOs.
Long-Term Incentives
In 2021,2023, the Compensation Committee increased theapproved annual long-term incentiveLTI awards for Mr. Bettinger by $2,850,000, for Mr. Crawford by $2,750,000, for Mr. Martinetto by $5,000,000, for Mr. Wurster by $7,000,000,the NEOs commensurate with their role and for Mr. Schwab by $600,000.individual performance, as disclosed on page 49.
58
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.
Employment Agreement for Mr. Schwab
The company and Mr. Schwab entered into an amended employment agreement, effective March 31, 2003, and stockholders approved the annual bonus provision contained in the 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 Directorsboard and Mr. Schwab agreed to amendments to his employment agreement in 2008 to specify the timing of payments, establish definitions of triggering events that are consistent with the Internal Revenue Service’s 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. Schwab’s bonus is determined under the Corporate Executive Bonus Plan,CEBP, 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. Schwab’s 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) |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 57 |
EXECUTIVE COMPENSATION TABLES
| ◾ | 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 |
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. Schwab’s estate equal to five times his then current 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
59
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 6six 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 $1.0 million or 75% of his then current 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,However, that restriction does not apply if Mr. Schwab resigns his employment within 24 months of a change in control of the company.)
License Agreement for Mr. Schwab
The company and Charles Schwab & Co., Inc.CS&Co also are parties to an assignment and license agreement with Mr. Schwab that was approved in July 1987 by the company’s non-employee directors. Under the agreement, Mr. Schwab has assigned to the company all service mark, trademark, and trade name rights to Mr. Schwab’s 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. Schwab’s 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.CS&Co 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
| 58 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION TABLES
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 $2.0 million per year, adjusted up or down to reflect changes from the cost of living prevailing in the San Francisco Bay Area in May 1987, and they will terminate if the company and its subsidiaries cease using Mr. Schwab’s name and likeness. For estimated payments to Mr. Schwab under his license agreement, please refer to the Termination and Change in Control Benefits Table below.
The license agreement permits the company to continue using Mr. Schwab’s name and likeness even after he is no longer affiliated with the company and, under most circumstances, limits Mr. Schwab’s separate use of his name and
60
likeness in the financial services business. However, the company’s ability to assign the license agreement, or to permit others to use Mr. Schwab’s name and likeness, is limited during Mr. Schwab’s lifetime. Thus, without Mr. Schwab’s consent, the company may not transfer the license, or any of the company’s rights under the license, to a third party, including by means of mergers or reorganizations in which the stockholders who held shares prior to the transaction do not retain the ability to elect the majority of the board immediately following such transaction (among other circumstances).
61
2021 TERMINATION AND CHANGE IN CONTROL BENEFITS TABLE
| NAME | EVENT1 | SALARY BONUS ($) | EARLY ($) | EARLY OR ($) | OTHER ($) | TOTAL ($) | |||||||||||||||||||||
Walter W. Bettinger II | Termination under Severance Plan | 1,654,878 | 3 | 26,705,788 | 4 | 36,015,657 | 4 | 25,366 | 5 | 64,401,689 | |||||||||||||||||
Change in control
| — | 26,705,788 | 6 | 36,015,657 | 6 | — | 62,721,445 | ||||||||||||||||||||
Death or disability
| — | 26,705,788 | 6 | 36,015,657 | 6 | — | 62,721,445 | ||||||||||||||||||||
| Retirement or voluntary resignation | — | 26,705,788 | 4 | 36,015,657 | 4 | — | 62,721,445 | ||||||||||||||||||||
Peter B. Crawford | Termination under Severance Plan
| 738,780 | 3 | 3,151,991 | 7 | 3,413,030 | 7 | 25,366 | 5 | 7,329,168 | |||||||||||||||||
Change in control
| — | 4,560,882 | 6 | 6,777,030 | 6 | — | 11,337,912 | ||||||||||||||||||||
| Death or disability | — | 4,560,882 | 6 | 6,777,030 | 6 | — | 11,337,912 | ||||||||||||||||||||
Joseph R. Martinetto | Termination under Severance Plan
| 904,272 | 3 | 10,129,565 | 4 | 14,600,096 | 4 | 25,722 | 5 | 25,659,656 | |||||||||||||||||
Change in control
| — | 10,129,565 | 6 | 14,600,096 | 6 | — | 24,729,662 | ||||||||||||||||||||
Death or disability
| — | 10,129,565 | 6 | 14,600,096 | 6 | — | 24,729,662 | ||||||||||||||||||||
| Retirement or voluntary resignation | — | 10,129,565 | 4 | 14,600,096 | 4 | — | 24,729,662 | ||||||||||||||||||||
Richard A. Wurster | Termination under Severance Plan
| 569,235 | 3 | 1,268,001 | 7 | 251,5437 | 15,0055 | 2,103,783 | |||||||||||||||||||
Change in control
| — | 3,752,762 | 6 | 9,541,061 | 6 | — | 13,293,823 | ||||||||||||||||||||
| Death or disability | — | 3,752,762 | 6 | 9,541,061 | 6 | — | 13,293,823 | ||||||||||||||||||||
Charles R. Schwab | Termination without cause
| 9,934,875 | 8 | 9,749,221 | 9 | 12,996,478 | 4 | 81,119,861 | 10 | 113,800,435 | |||||||||||||||||
Change in control
| — | 9,749,221 | 6 | 12,996,478 | 6 | — | 22,745,699 | ||||||||||||||||||||
Death
| 3,750,000 | 11 | 9,749,221 | 6 | 12,996,478 | 6 | 80,050,680 | 12 | 106,546,379 | ||||||||||||||||||
Disability
| 2,250,000 | 13 | 9,749,221 | 6 | 12,996,478 | 6 | 80,050,680 | 12 | 105,046,379 | ||||||||||||||||||
Resignation following a change in control
| 2,812,500 | 14 | 9,749,221 | 6 | 12,996,478 | 6 | 80,050,680 | 12 | 105,608,879 | ||||||||||||||||||
| Retirement or voluntary resignation | 2,812,500 | 14 | 9,749,221 | 4 | 12,996,478 | 4 | 80,050,680 | 12 | 105,608,879 | ||||||||||||||||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 59 |
EXECUTIVE COMPENSATION TABLES
2023 Termination and Change in Control Benefits Table
| Name | Event1 | Salary Bonus ($) | Early ($) | Early or ($) | Other ($) | Total ($) | ||||||
Walter W. Bettinger II | Termination under Severance Plan | 1,773,0693 | 3,063,9034 | 35,807,2354 | 26,0495 | 40,670,256 | ||||||
Change in control | — | 3,063,9036 | 35,807,2356 | — | 38,871,138 | |||||||
Death or disability | — | 3,063,9036 | 35,807,2356 | — | 38,871,138 | |||||||
Retirement or voluntary resignation | — | 3,063,9034 | 35,807,2354 | — | 38,871,138 | |||||||
Peter B. Crawford | Termination under Severance Plan | 856,9923 | 549,7194 | 8,760,9234 | 26,0495 | 10,193,683 | ||||||
Change in control | — | 549,7196 | 8,760,9236 | — | 9,310,642 | |||||||
Death or disability | — | 549,7196 | 8,760,9236 | — | 9,310,642 | |||||||
Retirement or voluntary resignation | — | 549,7194 | 8,760,9234 | — | 9,310,642 | |||||||
Joseph R. Martinetto | Termination under Severance Plan | 1,093,3943 | 1,145,2564 | 17,091,2964 | 26,4055 | 19,356,351 | ||||||
Change in control | — | 1,145,2566 | 17,091,2966 | — | 18,236,552 | |||||||
Death or disability | — | 1,145,2566 | 17,091,2966 | — | 18,236,552 | |||||||
Retirement or voluntary resignation | — | 1,145,2564 | 17,091,2964 | — | 18,236,552 | |||||||
Richard A. Wurster | Termination under Severance Plan | 758,9753 | 328,2297 | 4,014,7557 | 15,4035 | 5,117,362 | ||||||
Change in control | — | 402,3436 | 13,960,8966 | — | 14,363,239 | |||||||
Death or disability | — | 402,3436 | 13,960,8966 | — | 14,363,239 | |||||||
Charles R. Schwab | Termination without cause | 7,605,3198 | 1,116,0999 | 11,077,8324 | 88,572,44310 | 108,371,693 | ||||||
Change in control | — | 1,116,0996 | 11,077,8326 | — | 12,193,931 | |||||||
Death | 4,500,00011 | 1,116,0996 | 11,077,8326 | 87,193,95012 | 103,887,881 | |||||||
Disability | 2,764,70213 | 1,116,0996 | 11,077,8326 | 87,193,95012 | 102,152,583 | |||||||
Resignation following a change in control | 3,375,00014 | 1,116,0996 | 11,077,8326 | 87,193,95012 | 102,762,881 | |||||||
Retirement or voluntary resignation | 3,375,00014 | 1,116,0994 | 11,077,8324 | 87,193,95012 | 102,762,881 | |||||||
| (1) | This table shows the amount of benefits due to termination or change in control to be paid to the |
The benefits payable to Mr. Schwab are based on the terms of his employment, license, and equity |
Except for Mr. Schwab, all other |
Stock option and RSU agreements 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, |
62
| 60 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION TABLES
PBRSU award agreements contain provisions for accelerated vesting and payment of target awards due to a change in control, death, or disability. These accelerated amounts are included in the amounts shown for “change in control” or “death or disability.” PBRSU award agreements 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. |
| (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 |
| (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 the December 31, |
| (4) | Under equity award agreements, if the employee meets the eligibility criteria for retirement at the time of termination, stock options and RSUs 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 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 during the severance period after termination, and continued vesting of PBRSU awards that may vest during the severance period after termination. |
| (8) | Under Mr. Schwab’s employment agreement, includes 36 months of salary (at the December 31, |
| (9) | Under Mr. Schwab’s employment agreement, unvested stock options fully vest upon an involuntary separation from service other than for cause. |
| (10) | Under Mr. Schwab’s employment and license agreements, includes annual installments of |
63
| (11) | Under Mr. Schwab’s employment agreement, represents a lump-sum death benefit payable to Mr. Schwab’s estate in an amount equal to five times annual salary (at the December 31, |
| (12) | Under Mr. Schwab’s license agreement, represents annual installments of |
| (13) | Under Mr. Schwab’s employment agreement, represents 36 months of annual salary (at the December 31, |
| (14) | Under Mr. Schwab’s employment agreement, represents 60 monthly installments of |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 61 |
EXECUTIVE COMPENSATION TABLES
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 Severance 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 herthe officer’s 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 eligible for severance benefits under the Severance 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 officer’s 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 herthe officer’s 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.
| 62 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION TABLES
64
OUTSTANDING EQUITY AWARDS AS OF DECEMBEROutstanding Equity Awards as of December 31, 20212023
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||||||
| NAME | NUMBER OF EXERCISABLE | NUMBER OF UNEXERCISABLE | OPTION ($) | OPTION EXPIRATION DATE | NUMBER SHARES NOT (#) | MARKET ($) | EQUITY (#) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED1 ($) | ||||||||||||||||||||||||||||||||
Walter W. Bettinger II | | 464,629 324,924 214,422 202,593 90,439 | | 71,474 202,594 271,319 271,618 | 2 3 4 5 | | 26.39 42.99 52.05 46.81 41.98 64.10 | | 3/1/2026 3/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 | | 148,226 | 9 | 12,465,807 | 280,02210,11 | 23,549,850 | |||||||||||||||||||||||||
Peter B. Crawford | | 17,292 14,963 22,910 29,977 28,670 11,191 23,825 25,324 12,920 | | 7,942 25,325 38,760 86,470 | 2 3 4 5 | | 23.12 28.44 34.70 26.39 42.99 39.70 52.05 46.81 41.98 64.10 | | 11/1/2023 11/3/2024 8/3/2025 3/1/2026 3/1/2027 6/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 | 18,529 | 9 | 1,558,289 | 62,05410,11 | 5,218,741 | ||||||||||||||||||||||||||
Joseph R. Martinetto | | 53,605 18,455 65,843 27,993 | | 17,869 6,152 65,843 83,980 167,854 | 2 6 3 4 5 | | 52.05 50.41 46.81 41.98 64.10 | | 3/1/2028 4/2/2028 3/1/2029 3/2/2030 3/1/2031 | 48,173 | 9 | 4,051,349 | 125,43110,11 | 10,548,747 | ||||||||||||||||||||||||||
Richard A. Wurster | | 20,486 14,868 26,069 9,474 | | 4,956 26,069 28,425 63,073 | 7 8 4 5 | | 44.42 46.39 41.63 41.98 64.10 | | 11/1/2027 11/1/2028 6/3/2029 3/2/2030 3/1/2031 | 68,099 | 12,13,14 | 5,727,126 | 45,35010,11 | 3,813,935 | ||||||||||||||||||||||||||
65
| OPTION AWARDS | STOCK AWARDS | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NAME | NUMBER OF EXERCISABLE | NUMBER OF UNEXERCISABLE | OPTION ($) | OPTION EXPIRATION DATE | NUMBER SHARES NOT (#) | MARKET ($) | EQUITY (#) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED1 ($) | Number of Exercisable | Number of Unexercisable | Option ($) | Option Expiration Date | Number Shares (#) | Market ($) | Equity (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested1 ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles R. Schwab | | 121,066 77,640 72,047 71,226 67,386 62,345 180,506 179,857 126,147 82,195 74,959 33,591 | | 27,399 74,960 100,776 91,557 | 2 3 4 5 | | 16.40 22.67 23.12 25.86 27.45 28.44 30.17 26.39 42.99 52.05 46.81 41.98 64.10 | | 3/1/2023 8/1/2023 11/1/2023 3/3/2024 8/1/2024 11/3/2024 3/2/2025 3/1/2026 3/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 | | 54,8449 | 4,612,380 | 99,69210,11 | 8,384,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Walter W. Bettinger II | | 464,629 324,924 285,896 405,187 271,318 135,809 76,028 |
| | 90,440 135,809 228,087 332,878 | 2 3 4 5 | | 26.39 42.99 52.05 46.81 41.98 64.10 77.86 77.41 |
| | 3/1/2026 3/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 3/1/2032 3/1/2033 |
| 251,296 | 6 | 17,289,165 | 269,158 | 7,8 | 18,518,070 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter B. Crawford | | 10,963 22,910 29,977 28,670 11,191 31,767 50,649 38,760 43,235 13,417 |
| | 12,920 43,235 40,251 58,368 | 2 3 4 5 | | 28.44 34.70 26.39 42.99 39.70 52.05 46.81 41.98 64.10 77.86 77.41 |
| | 11/3/2024 8/3/2025 3/1/2026 3/1/2027 6/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 3/1/2032 3/1/2033 |
| 80,000 | 6 | 5,504,000 | 47,339 | 7,8 | 3,256,923 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph R. Martinetto | | 71,474 24,607 131,686 83,979 83,927 26,833 |
| | 27,994 83,927 80,502 113,088 | 2 3 4 5 | | 52.05 50.41 46.81 41.98 64.10 77.86 77.41 |
| | 3/1/2028 4/2/2028 3/1/2029 3/2/2030 3/1/2031 3/1/2032 3/1/2033 |
| 155,296 | 6 | 10,684,365 | 93,124 | 7,8 | 6,406,931 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard A. Wurster | | 4,956 26,069 28,424 31,536 31,306 |
| | 9,475 31,537 93,918 145,919 | 2 3 4 5 | | 46.39 41.63 41.98 64.10 77.86 77.41 |
| | 11/1/2028 6/3/2029 3/2/2030 3/1/2031 3/1/2032 3/1/2033 |
| 88,320 | 6,9 | 6,076,416 | 114,600 | 7,8 | 7,884,480 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 63 |
EXECUTIVE COMPENSATION TABLES
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Exercisable | Number of Unexercisable | Option ($) | Option Expiration Date | Number Shares (#) | Market ($) | Equity (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested1 ($) | ||||||||||||||||||||||||
Charles R. Schwab | | 71,226 67,386 62,345 180,506 179,857 126,147 109,594 149,919 100,775 45,778 22,361 |
| | 33,592 45,779 67,085 91,200 | 2 3 4 5 | | 25.86 27.45 28.44 30.17 26.39 42.99 52.05 46.81 41.98 64.10 77.86 77.41 |
| | 3/3/2024 8/1/2024 11/3/2024 3/2/2025 3/1/2026 3/1/2027 3/1/2028 3/1/2029 3/2/2030 3/1/2031 3/1/2032 3/1/2033 |
| 84,706 | 6 | 5,827,773 | 76,309 | 7,8 | 5,250,059 | ||||||||||||||
| (1) | Represents the market value of unvested RSUs or PBRSUs held as of December 31, |
| (2) | These non-qualified stock options |
These non-qualified stock options |
These non-qualified stock options |
These non-qualified stock options |
66
Includes PBRSU awards |
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
| ||||||||||
Name | Vesting Date | Number of Units | ||||||
Walter W. Bettinger II | 3/1/2024 | 251,296 | ||||||
Peter B. Crawford | 3/1/2024 | 80,000 | ||||||
Joseph R. Martinetto | 3/1/2024 | 155,296 | ||||||
Richard A. Wurster | 3/1/2024 | 58,354 | ||||||
Charles R. Schwab | 3/1/2024 | 84,706 | ||||||
| 64 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
EXECUTIVE COMPENSATION TABLES
| (7) | Includes PBRSU awards under the |
Name | Vesting Date | Number of Units | ||||||||||||||
Walter W. Bettinger II | 3/1/ | 127,401 | ||||||||||||||
Peter B. Crawford | 3/1/2025 | 22,483 | ||||||||||||||
Joseph R. Martinetto | 3/1/2025 | 44,965 | ||||||||||||||
Richard A. Wurster | 3/1/2025 | 52,460 | ||||||||||||||
Charles R. Schwab | 3/1/2025 | 37,471 | ||||||||||||||
| (8) | Includes PBRSU awards under the 2022 Stock Incentive Plan with a grant date of March 1, 2023 and vest 100% on the third anniversary of the grant date. Based on a target of 100%, future vesting for the PBRSUs is as follows: |
Name | Vesting Date | Number of Units | ||||||||||
Walter W. Bettinger II | 3/1/2026 | 141,757 | ||||||||||
Peter B. Crawford | 3/1/ | 24,856 | ||||||||||
Joseph R. Martinetto | 3/1/2026 | 48,159 | ||||||||||
| 3/1/ | 62,140 | ||||||||||
Charles R. Schwab | ||||||||||||
| 3/1/2026 | 38,838 | ||||||||||
| ||||||||||||
67
Includes time-based RSUs |
Name | Vesting Date | Number of Units | ||||||||||||||
Richard A. Wurster | 10/25/2024 | 14,983 | ||||||||||||||
| 10/25/2025 | 14,983 | |||||||||||||||
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 65 |
EXECUTIVE COMPENSATION TABLES
2023 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 ($)2 | ||||
Walter W. Bettinger II | — | — | 300,813 | 23,000,914 | ||||
Peter B. Crawford | 7,792 | 258,103 | 42,974 | 3,285,899 | ||||
Joseph R. Martinetto | — | — | 93,109 | 7,119,347 | ||||
Richard A. Wurster | — | — | 49,488 | 3,307,408 | ||||
Charles R. Schwab | 270,753 | 12,834,402 | 111,730 | 8,543,155 | ||||
| (1) | ||||||||||
| ||||||||||
| ||||||||||
2021 OPTION EXERCISES AND STOCK VESTED TABLE
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||
| NAME | NUMBER OF SHARES ACQUIRED ON EXERCISE (#) | VALUE REALIZED ON EXERCISE ($)1 | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($)2 | ||||||||||||||||
Walter W. Bettinger II | 521,535 | 26,136,949 | 97,047 | 6,186,746 | ||||||||||||||||
Peter B. Crawford | 27,500 | 1,631,695 | 11,581 | 747,125 | ||||||||||||||||
Joseph R. Martinetto | 507,097 | 19,287,227 | 32,595 | 2,116,096 | ||||||||||||||||
Richard A. Wurster | 49,528 | 1,519,287 | 7,440 | 590,747 | ||||||||||||||||
Charles R. Schwab | 871,306 | 45,165,009 | 37,202 | 2,371,628 | ||||||||||||||||
| The value realized on exercise of stock options as shown in this chart was calculated |
68
| (2) | Amounts in this column were calculated by multiplying the number of shares |
2021 NONQUALIFIED DEFERRED COMPENSATION TABLE2023 Nonqualified Deferred Compensation Table
| NAME1 | PLAN | EXECUTIVE CONTRIBUTIONS IN LAST FISCAL YEAR2 ($) | AGGREGATE ($) | AGGREGATE DISTRIBUTIONS ($) | AGGREGATE BALANCE AT LAST FISCAL YEAR-END ($) | ||||||||||||||||||||||||||||||
| Name1 | Plan | Executive Contributions In Last Fiscal Year2 ($) | Aggregate Earnings in Last Fiscal Year3 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal | ||||||||||||||||||||||||||||||
Walter W. Bettinger II | |||||||||||||||||||||||||||||||||||
Walter W. Bettinger II | DCP2 | — | 7,904 | — | 20,937,128 | 4 | DCP2 | — | 3,938,859 | — | 23,920,6424 | ||||||||||||||||||||||||
Peter B. Crawford | DCP2 | — | 430,963 | — | 2,926,366 | ||||||||||||||||||||||||||||||
Peter B. Crawford | DCP2 | — | 477,577 | — | 2,914,070 | ||||||||||||||||||||||||||||||
Charles R. Schwab | DCP1 | — | 6,577,438 | — | 39,938,867 | 5 | |||||||||||||||||||||||||||||
Charles R. Schwab | DCP1 | — | 7,481,901 | — | 39,841,7135 | ||||||||||||||||||||||||||||||
| (1) | Mr. Schwab participates in The Charles Schwab Corporation Deferred Compensation Plan I |
| (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 |
| (4) | For Mr. Bettinger, includes prior executive contributions of $19,746,990 |
| (5) | For Mr. Schwab, includes prior executive contributions of $6,513,138 |
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 company’s non-equity incentive plans (and in some cases, participants can elect to defer a portion of their base salary). All of a participant’s 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
| 66 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
exceptions, deferral accounts are paid or commence payment upon a fixed payment date, as elected by the participant, or upon the participant’s 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 participant’s employment for any reason other than retirement.
2023 CEO Pay Ratio
The following is a reasonable estimate, calculated in accordance with SEC rules, of the ratio of the 2023 annual total compensation of the company’s median employee to the 2023 annual total compensation of Mr. Bettinger, the Chief Executive Officer:
| ◾ | the annual total compensation of the median employee, calculated in accordance with SCT rules, was $117,672; |
69
| ◾ | the annual total compensation of the CEO, as reported in the 2023 SCT, was $23,871,744; and |
| ◾ | the ratio of the annual total compensation of the CEO to the annual total compensation of the median employee was 203 to 1. |
The same median employee was used for 2023 as has been used since 2021, as there was no material change to the employee population or compensation arrangements that would have significantly impacted the pay ratio disclosure.
To identify the company’s median employee in 2021, the company used internal records to determine the employee population as of December 31, 2021, which equaled 31,449 individuals, including full-time, part-time, temporary, and seasonal employees. Of the 31,449 individuals represented on our compensation and benefits platforms, 31,401 were employed in the United States and 48 outside the United States. The company’s 48 non-U.S. employees accounted for less than 5% of the total employee population and were excluded from the analysis. Such employees were located in: Hong Kong (28 employees); Singapore (11 employees); India (one employee); and the United Kingdom (eight employees).
The company used the taxable Medicare wages as reflected in the Company’s payroll records as reported to the Internal Revenue Service on Forms W-2 Box 5 (Taxable Medicare Wages) as the consistently applied compensation measure. The company’s payroll records were used to calculate total Taxable Medicare Wages compensation for each of the 31,400 employees, other than the CEO and non-U.S. employees identified as excluded above. The median employee was then identified by consistently applying this compensation measure to all employees included in the analysis.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 67 |
Year 1 | Summary Compensation Table Total for CEO 2 | Compensation Actually Paid to CEO 3 | Average Summary Compensation Table Total for Other NEOs 2 | Average Compensation Actually Paid to Other NEOs 3 | Value of Initial Fixed $100 Investment Based on: 4 | Net Income 5 (000s) | Adjusted Diluted Earnings Per Common Share (EPS) 6 | |||||||||||||||||||||||||||||||||
Total Shareholder Return | Peer Group Total Shareholder Return | |||||||||||||||||||||||||||||||||||||||
2023 | $23,871,744 | $ 4,173,708 | $8,204,771 | $ 1,878,242 | $153 | $169 | $5,067 | $3.13 | ||||||||||||||||||||||||||||||||
2022 | $24,386,329 | $57,877,151 | $8,355,171 | $18,470,980 | $182 | $149 | $7,183 | $3.90 | ||||||||||||||||||||||||||||||||
2021 | $21,938,404 | $41,631,785 | $9,121,613 | $14,041,967 | $182 | $166 | $5,855 | $3.25 | ||||||||||||||||||||||||||||||||
2020 | $15,959,193 | $20,212,071 | $4,645,494 | $ 5,780,703 | $114 | $118 | $3,299 | $2.45 | ||||||||||||||||||||||||||||||||
( 1) | Walter W. Bettinger II was the CEO and Peter B. Crawford, Joseph R. Martinetto, and Charles R. Schwab were also NEOs for each year presented. Richard A. Wurster was an NEO for 2023, 2022 and 2021 and Jonathan M. Craig was an NEO for 2020. |
( 2) | As reported in or, with respect to the non-CEO NEOs, the average of the amounts reported in, the “Total” column of the SCT (the SCT Total) for the applicable year. See the footnotes to the SCTs for further detail regarding the amounts in this column. |
( 3) | The SCT Total or, with respect to the non-CEO NEOs, the average of the SCT Totals reported for the applicable year, adjusted as follows in accordance with Item 402(v) of RegulationS-K: |
Year | SCT Total Compensation | Minus SCT Equity Awards Total i | Plus Fair Value of Current Year Equity Awards at Year-End ii | Plus Change in Fair Value of Unvested Prior Year Equity Awards ii, iii | Plus Change in Fair Value of Equity Awards Vested in Current Year ii, iii | Plus Dividends Paid on Unvested RSUs | Equals Compensation Actually Paid | |||||||||||||||||||||||||||||||||
2023 | CEO | $ | 23,871,744 | $ | 18,250,034 | $ | 15,132,057 | $ | (13,262,652 | ) | $ | (3,317,407 | ) | N/A | $ | 4,173,708 | ||||||||||||||||||||||||
| | Other NEOs | $ | 8,204,771 | $ | 5,600,035 | $ | 4,646,880 | $ | (4,447,776 | ) | $ | (968,298 | ) | $ | 42,700 | $ | 1,878,242 | |||||||||||||||||||||||
( i) | Amounts in this column reflect the totals or, with respect to the non-CEO NEOs, the average of the totals under the Stock Awards and Option Awards columns in the SCT. See the footnotes to the SCTs for further detail regarding the amounts in this column. |
( ii) | Fair value of equity awards is calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. Fair value of PBRSUs with unsatisfied performance conditions as of the applicable measurement date also reflects the probable outcome of the applicable performance conditions as of that date. Fair value of unvested options is based on the fair value of the options as of the applicable measurement date as determined using an options pricing model. If a vesting event is on a weekend or holiday, the next preceding day’s prices are used for valuation purposes. Dividend equivalents accumulating on unvested PBRSUs are included in the year-end fair value for the year in which the dividends are accrued. |
( iii) | Changes in fair value are measured by comparing fair value as of the end of the applicable year or at vesting, as applicable, to the fair value as of the end of the prior year. |
( 4) | Cumulative total shareholder return (TSR) of the company and the Dow Jones U.S. Investment Services Index, which is the same industry index included in Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities,” furnished on page 24 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, assuming an initial investment of $100 in the company’s common stock on December 31, 2019 and reinvestment of dividends. |
( 5) | Net Income as reported in Part II, Item 8, “Financial Statements and Supplementary Data—Consolidated Statements of Income” on page 66 of the company’s Annual Report on Form10-K for the fiscal year ended December 31, 2023. |
68 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
( 6) | Adjusted Diluted EPS as reported on page 30 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. For a reconciliation of diluted EPS in accordance with GAAP to the non-GAAP financial measure Adjusted Diluted EPS, please see Appendix A beginning on page A-1. |
Measures Schwab Considers Important in Evaluating Executive Pay for Performance |
Adjusted Diluted EPS |
Return on Tangible Common Equity (ROTCE) / Cost of Equity (COE) |
Stock Price |
THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 69 |
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes information as of December 31, 20212023 with respect to equity compensation plans approved and not approved by stockholders (shares in millions):stockholders:
Securities Authorized for Issuance asAs of December 31, 20212023
| PLAN CATEGORY | (A) NUMBER OF SECURITIES OUTSTANDING AND RIGHTS | (B) WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING | (C) NUMBER OF SECURITIES | |||||||||
| Plan Category | Number of Securities Outstanding Options, Warrants, (#) | Weighted-Average Exercise Price of ($) | Number of Securities (#) | |||||||||
Equity compensation plans approved by stockholders | ||||||||||||
Equity compensation plans approved by stockholders | 25.222 | $25.04 | 88.103 | 26,211,6022 | $49.06 | 133,394,1433 | ||||||
Equity compensation plans not approved by stockholders | — | — | — | |||||||||
Equity compensation plans not approved by stockholders | — | — | — | |||||||||
Total4 | 25.22 | $25.04 | 88.10 | |||||||||
Total4 | 26,211,602 | $49.06 | 133,394,143 | |||||||||
| (1) | The weighted-average exercise price does not |
| (2) | Consists of shares of common stock underlying: |
| (3) | Consists of |
| (4) | In accordance with applicable SEC rules, this table does not include information with respect to equity awards that were assumed by the company in connection with the acquisitions of the companies that originally established those plans or agreements and under which we may not make new award grants. The share amounts do not include equity awards granted under the TD Ameritrade Holding Corporation Long-Term Incentive Plan (the TD Ameritrade Plan) that were assumed by the company in connection with the company’s acquisition of TD Ameritrade |
70
APPROVAL OF 2022 STOCK INCENTIVE PLAN
The Board has approved the 2022 Stock Incentive Plan, subject to stockholder approval. The company is requesting approval of the 2022 Stock Incentive Plan because its current plan, the 2013 Stock Incentive Plan, expires in May 2023. Approval of the 2022 Stock Incentive Plan will permit the company to meet its long-term incentive needs without disrupting the company’s normal granting practices. If approved by stockholders, the 2022 Stock Incentive Plan will be the sole plan for future awards, and no further awards will be made under the 2013 Stock Incentive Plan.
All employees, non-employee directors and consultants will be eligible to participate in the 2022 Stock Incentive Plan. As with the predecessor plans, the purpose of the 2022 Stock Incentive Plan is to promote the long-term success of the company and increase stockholder value by:
|
| 70 |
|
|
|
The company is requesting 113.0 million shares for the 2022 Stock Incentive Plan. The 113.0 million shares include approximately 58.0 million shares currently available for issuance under the 2013 Stock Incentive Plan and an additional 55.0 million shares to provide for the company’s long-term incentives. The 2022 Stock Incentive Plan also provides for the issuance of up to 150.0 million additional shares from outstanding awards from predecessor stock incentive plans that are forfeited or cancelled or that are reacquired by the company, e.g., shares withheld for taxes, following the approval of the 2022 Stock Incentive Plan.
When considering the number of shares to reserve for issuance under the 2022 Stock Incentive Plan, the Compensation Committee reviewed potential dilution to the company’s current stockholders from the proposed share reserve as measured by historical burn rate and overhang, and cost of the shares reserved.
|
|
|
71
Stockholder approval of the 2022 Stock Incentive Plan will allow the company to meet its long-term incentive needs for several years. If stockholders do not approve the 2022 Stock Incentive Plan, awards will continue to be made under the existing plan in accordance with its terms until the plan expires in May 2023, including the automatic $185,000 annual equity retainer for non-employee directors.
SUMMARY OF THE 2022 STOCK INCENTIVE PLAN
The following is a summary of the principal features of the 2022 Stock Incentive Plan and its operation. The summary is qualified in its entirety by reference to the 2022 Stock Incentive Plan, a copy of which is attached to this proxy statement as Exhibit C, and which is incorporated by reference.
General Description of the 2022 Stock Incentive Plan
The purposes of the 2022 Stock Incentive Plan are to promote the long-term success of the company and the creation of incremental stockholder value by encouraging non-employee directors, employees and consultants to focus on long-range objectives, encouraging the attraction and retention of non-employee directors, employees and consultants with exceptional qualifications, and linking non-employee directors, employees and consultants directly to stockholder interests by providing them stock options and other equity incentives.
The 2022 Stock Incentive Plan permits the grant of stock options, stock appreciation rights (SARs), restricted stock, RSUs, PBRSUs, performance units and other stock awards. The Compensation Committee may also grant other incentives payable in cash under the 2022 Stock Incentive Plan subject to such terms and conditions as it deems appropriate. As of March 18, 2022, the market value of a share of the company’s common stock was $90.00, based on its closing price on that date.
Administration of the 2022 Stock Incentive Plan
The Compensation Committee administers the 2022 Stock Incentive Plan. The Compensation Committee is responsible for, among other things, approving the aggregate benefits and the individual benefits for executive officers, and recommending benefits for non-employee directors to the board for approval. The Compensation Committee may delegate its authority for certain other matters under the 2022 Stock Incentive Plan in accordance with its terms. Awards are subject to terms and conditions established by the Compensation Committee or its delegates.
Eligibility
Employees, non-employee directors and consultants of the company and its subsidiaries are eligible for awards under the 2022 Stock Incentive Plan. There are approximately 33,400 employees of the company and its subsidiaries and 15 non-employee directors who are eligible for awards under the 2022 Stock Incentive Plan. In addition, consultants to the company and its subsidiaries may be eligible for awards under the 2022 Stock Incentive Plan.
Under the 2022 Stock Incentive Plan, no participant may receive in any fiscal year:
|
|
|
72
The Compensation Committee will adjust these annual limits for any stock split, stock dividend, recapitalization or other similar event.
The Compensation Committee selects the participants and establishes the terms and conditions of the awards, in its discretion.
Shares Available for Issuance
The aggregate number of shares of common stock that may be issued under the 2022 Stock Incentive Plan may not exceed:
|
|
|
|
Shares related to awards under the 2022 Stock Incentive Plan will be deducted from the share limits described above on a one-to-one basis. If there is a lapse, expiration, termination or cancellation of a 2022 Stock Incentive Plan award prior to the issuance of shares related to the award or if shares are issued for an award and thereafter are reacquired by Schwab, the shares related to those awards and the reacquired shares shall be added back to the shares available for issuance under the 2022 Stock Incentive Plan. Awards paid in cash will not count against the share limits described above.
The Compensation Committee will adjust the limit on the number of shares to account for any stock split, stock dividend, recapitalization or other similar event.
Awards
Stock Options
Stock options awarded under the 2022 Stock Incentive Plan provide a right to acquire common stock at an exercise price at least equal to the fair market value of the company’s common stock on the date of grant. Stock options include nonqualified and incentive stock options. Incentive stock options are intended to qualify for special tax treatment. Stock options vest according to a schedule established by the Compensation Committee. The 2022 Stock Incentive Plan permits the payment of the stock option exercise price by cash, check, other shares of common stock (with some restrictions), broker-assisted same-day sales, or any other form of consideration permitted by applicable law. The term of an option cannot exceed ten years. The 2022 Stock Incentive Plan prohibits the repricing of outstanding options and the exchange of underwater options for cash or other awards.
Stock Appreciation Rights
SARs allow the recipient to receive the appreciation, if any, in the fair market value of the company’s common stock between the grant date and the exercise date and may be granted in tandem with stock options at the Compensation Committee’s discretion. In addition, the Compensation Committee may substitute SARs for stock options. The Compensation Committee determines the terms of SARs, including when such rights become exercisable and whether to pay the increased appreciation in cash or in shares of our common stock. The grant price of free-standing SARs is equal to the fair market value of our common stock on the grant date and the term of any SAR may not exceed ten years. The 2022 Stock Incentive Plan prohibits the repricing of outstanding SARs and the exchange of underwater SARs for cash or other awards.
73
Restricted Stock
Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions established by the Compensation Committee. The Compensation Committee will determine the number of shares of restricted stock granted to any employee. The Compensation Committee sets vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of shares to be released to the employee. Shares of restricted stock that do not vest are subject to a right of repurchase by the company or forfeiture.
Restricted Stock Units
RSUs represent the right to receive shares of the company’s common stock after satisfying the vesting conditions established by the Compensation Committee. RSUs may be settled in cash, stock, or a combination of cash and stock. The Compensation Committee sets vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of RSUs that will be paid out to the employee. The Compensation Committee, in its discretion, may permit or require the participant to defer the receipt of the award.
Performance-Based Awards
Performance-based awards, including among other things units, RSUs and stock, are awards that will result in a payment to a participant only if performance goals established by the Compensation Committee are achieved and the awards otherwise vest. The Compensation Committee determines the number of units, RSUs or shares, the performance period and other terms and conditions of these awards, including whether the award is to be paid in cash or common stock.
For performance-based awards, the Compensation Committee will select the participants for the performance period, set the objective performance goal or goals for each participant, define each applicable performance goal, determine the maximum amount payable and threshold level of attainment before any award may be paid (subject to the participant limits described above) and how performance will be measured against a goal.
Awards under the 2022 Stock Incentive Plan may be made subject to the attainment of performance goals relating to one or more business criteria as set forth in the 2022 Stock Incentive Plan, a copy of which is attached to this proxy statement as Exhibit C.
Performance goals of any of the criteria permitted under the 2022 Stock Incentive Plan also may be measured by changes between years or periods or by reference to relative performance of the company as a whole, part of the company or against a peer group or index.
The 2022 Stock Incentive Plan provides that, in determining whether any performance goals have been satisfied, the Compensation Committee has the discretion to exclude unusual or nonrecurring items (such as charges associated with restructurings of the company). It may also equitably adjust performance goals for a specific year to take into account unusual or one-time events (such as changes in tax law or extraordinary corporate transactions) specified at the time the award’s targets are established.
In addition, the 2022 Stock Incentive Plan provides that the Compensation Committee has complete discretion to reduce the amount of any award, including to zero or to pay all or a portion of an award based on other facts when a performance goal has not been achieved.
74
Other Awards
In addition, the Compensation Committee may grant other incentives payable in stock and cash under the 2022 Stock Incentive Plan subject to such terms and conditions as it deems appropriate.
Awards to Non-Employee Directors
Upon recommendation by the Compensation Committee and approval of the board, the 2022 Stock Incentive Plan establishes an annual compensation limit of $1.0 million for non-employee directors and $2.0 million for the first calendar year upon joining the board. The $1.0 million annual compensation limit in the 2022 Stock Incentive Plan replaces the automatic $185,000 annual equity retainer for non-employee directors currently granted under the 2013 Stock Incentive Plan to provide flexibility with non-employee director compensation.
Upon recommendation by the Compensation Committee, the board also approved an automatic annual equity retainer for each non-employee director of $215,000 pursuant to the 2022 Stock Incentive Plan, an increase of $30,000 from the $185,000 annual equity retainer for non-employee directors currently granted under the 2013 Stock Incentive Plan. The $215,000 automatic equity grants will be granted 40% in stock options and 60% in RSUs. The number of stock options would be calculated by dividing $86,000 by the fair value of an option as valued by a stock option pricing model on the date of grant and the RSUs would be calculated by dividing $129,000 by the fair market value of a share of common stock on the date of grant. The automatic equity grants to directors vest 25% on the first and second anniversaries of the grant date and 50% on the third anniversary of the grant date. These awards vest in full upon a director’s death, disability or retirement, which is defined as resignation or removal from the board at any time after attaining age 70 or completing five years of service as a non-employee director. If the 2022 Stock Incentive Plan does not receive stockholder approval, non-employee directors will receive the $185,000 annual equity retainer under the 2013 Stock Incentive Plan for 2022.
The 2022 Stock Incentive Plan also provides that non-employee directors may elect to receive annual cash retainers from the company in the form of nonqualified stock options, restricted stock, RSUs, other stock awards or a combination of them.
Deferral of Awards
Subject to the requirements of section 409A of the Internal Revenue Code, the Compensation Committee may permit or require a participant to have cash or shares that otherwise would be paid under the 2022 Stock Incentive Plan credited to a deferred compensation account. The account may be credited with interest or other forms of investment return, as determined by the Compensation Committee, consistent with the requirements of section 409A of the Internal Revenue Code.
Federal Tax Consequences
Stock Options. When options are granted, there are no federal income tax consequences to the company or the option holder. On the exercise of a nonqualified stock option, the option holder generally will have ordinary income. The amount of the income will be equal to the fair market value of the shares on the exercise date minus the aggregate option exercise price. The income will be subject to tax withholding. Generally, in the same year that the option holder has income from the option exercise, the company will be able to realize a tax deduction in the amount of that income. In contrast, the exercise of incentive stock options generally will not result in taxable income to the option holder at that time, nor will the company be entitled to a tax deduction. However, the exercise generally will result in an amount that is included in computing the option holder’s alternative minimum taxable income. This amount will be equal to the fair market value of the shares on the exercise date minus the aggregate option exercise price.
75
If the holder of an incentive stock option exercises the options, holds the shares for the period required by law, and then sells the shares, the difference between the sale price and the exercise price generally will be taxed as long-term capital gain or loss. If the option holder does not hold the shares for the period required by law, he or she generally will have ordinary income at the time of the sale. The amount of ordinary income will be equal to the fair market value of the stock on the exercise date (or, if less, the sale price) minus the option exercise price. The company generally will be entitled to a tax deduction in that same amount. Any additional gain upon the sale generally will be taxed as a capital gain.
Stock Appreciation Rights. No taxable income is reportable when a SAR is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received or the fair market value of any shares of stock received. The company generally will be entitled to a tax deduction in the same amount as the participant recognizes ordinary income. Any additional gain or loss recognized upon any later disposition of the shares received, if any, would be capital gain or loss.
Restricted Stock. Unless the recipient of restricted stock elects to be taxed when the shares are granted, there will be no federal income tax consequences to the recipient or to the company while the restricted shares have vesting restrictions. Upon vesting, the recipient will have ordinary income equal to the fair market value of the shares on the vesting date. The income will be subject to tax withholding. The company generally will be entitled to a tax deduction in the amount of the recipient’s income. Upon any subsequent sale of the shares, any additional gain or loss recognized by the holder generally will be a capital gain or loss.
Restricted Stock Units. There are no immediate tax consequences of receiving an award of RSUs, including PBRSUs. A participant who is awarded RSUs will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the administrator or a participant. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss. The company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the vesting or settlement date.
Performance-Based Awards. A participant generally will not recognize income upon the grant of a performance share or performance unit award. Upon the settlement or payment of such awards, participants normally will recognize ordinary income equal to the cash received and the fair market value of any shares received. The company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the payment date.
If the participant is an employee, the ordinary income generally is subject to withholding of income and employment taxes.
Section 409A. Section 409A of the Internal Revenue Code provides additional tax rules governing non-qualified deferred compensation. Generally, Section 409A will not apply to awards granted under the 2022 Stock Incentive Plan, but may apply in some cases to RSUs, including those that are deferred by a participant as described above. For awards subject to Section 409A, for certain officers of the company there may be a delay of six months in the settlement of the awards.
Benefits Awarded to Employees, Consultants and Directors under 2022 Stock Incentive Plan
The benefits that employees and consultants will receive under the 2022 Stock Incentive Plan cannot be determined in advance because all awards under the 2022 Stock Incentive Plan are discretionary.
76
The table below sets forth the total dollar value of proposed annual equity grants to non-employee directors as a group under the 2022 Stock Incentive Plan.
| TOTAL DOLLAR VALUE OF PROPOSED ANNUAL GRANTS TO NON-EMPLOYEE DIRECTORS2 | ||||||||||
| 2022 STOCK INCENTIVE PLAN BENEFITS1 | OPTIONS ($) | RESTRICTED STOCK UNITS ($) | ||||||||
All current directors who are not executive officers, as a group (15) | 1,290,000 | 1,935,000 | ||||||||
Information regarding securities authorized for issuance under the company’s equity compensation plans is provided in the section “Compensation Information – Securities Authorized for Issuance Under Equity Compensation Plans” of this proxy statement.
77
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, the directors, the NEOs, and directors and executive officers as a group, as of the close of business on March 18, 20224, 2024 or as noted otherwise.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
| PERCENT OF SHARES | Amount and Nature of Beneficial Ownership | Percent of Shares | |||||||||||||||||||||||||||||||||
| NAME OF BENEFICIAL OWNER | SHARES OWNED1 | STOCK OPTIONS EXERCISABLE WITHIN 60 DAYS2 | TOTAL BENEFICIAL OWNERSHIP3 | |||||||||||||||||||||||||||||||||
Name of Beneficial Owner | Shares Owned1 | Right to Acquire Within 60 Days2 | Total Beneficial Ownership3 | Percent of Shares | ||||||||||||||||||||||||||||||||
The Toronto-Dominion Bank | 175,882,915 | 4 | - | 175,882,915 | 9.7 | % | ||||||||||||||||||||||||||||||
The Toronto-Dominion Bank | ||||||||||||||||||||||||||||||||||||
The Toronto-Dominion Bank | ||||||||||||||||||||||||||||||||||||
The Toronto-Dominion Bank | 175,703,653 | 4 | — | 175,703,653 | 9.9 | % | ||||||||||||||||||||||||||||||
The Vanguard Group | ||||||||||||||||||||||||||||||||||||
The Vanguard Group | ||||||||||||||||||||||||||||||||||||
The Vanguard Group | ||||||||||||||||||||||||||||||||||||
The Vanguard Group | 119,918,442 | 5 | — | 119,918,442 | 6.8 | % | ||||||||||||||||||||||||||||||
Charles R. Schwab | 119,487,329 | 5 | 1,270,325 | 120,757,654 | 6.6 | % | ||||||||||||||||||||||||||||||
Charles R. Schwab | ||||||||||||||||||||||||||||||||||||
Charles R. Schwab | ||||||||||||||||||||||||||||||||||||
Charles R. Schwab | 105,984,431 | 6 | 1,146,311 | 107,130,742 | 6.0 | % | ||||||||||||||||||||||||||||||
The Vanguard Group | 116,756,598 | 6 | - | 116,756,598 | 6.4 | % | ||||||||||||||||||||||||||||||
BlackRock, Inc. | ||||||||||||||||||||||||||||||||||||
BlackRock, Inc. | ||||||||||||||||||||||||||||||||||||
BlackRock, Inc. | ||||||||||||||||||||||||||||||||||||
BlackRock, Inc. | 105,444,116 | 7 | - | 105,444,116 | 5.8 | % | 96,697,577 | 7 | — | 96,697,577 | 5.4 | % | ||||||||||||||||||||||||
John K. Adams, Jr. | 29,041 | 41,013 | 70,054 | * | ||||||||||||||||||||||||||||||||
John K. Adams, Jr. | ||||||||||||||||||||||||||||||||||||
John K. Adams, Jr. | ||||||||||||||||||||||||||||||||||||
John K. Adams, Jr. | 40,323 | 47,891 | 88,214 | * | ||||||||||||||||||||||||||||||||
Walter W. Bettinger II | ||||||||||||||||||||||||||||||||||||
Walter W. Bettinger II | ||||||||||||||||||||||||||||||||||||
Walter W. Bettinger II | ||||||||||||||||||||||||||||||||||||
Walter W. Bettinger II | 318,730 | 8 | 1,628,122 | 1,946,852 | * | 815,280 | 8 | 2,281,383 | 3,096,663 | * | ||||||||||||||||||||||||||
Marianne C. Brown | 522 | 1,873 | 2,395 | * | ||||||||||||||||||||||||||||||||
Marianne C. Brown | ||||||||||||||||||||||||||||||||||||
Marianne C. Brown | ||||||||||||||||||||||||||||||||||||
Marianne C. Brown | 7,678 | 11,174 | 18,852 | * | ||||||||||||||||||||||||||||||||
Joan T. Dea | ||||||||||||||||||||||||||||||||||||
Joan T. Dea | ||||||||||||||||||||||||||||||||||||
Joan T. Dea | ||||||||||||||||||||||||||||||||||||
Joan T. Dea | 14,505 | 19,087 | 33,592 | * | 20,113 | 25,965 | 46,078 | * | ||||||||||||||||||||||||||||
Christopher V. Dodds | 439,792 | 7,053 | 446,845 | * | ||||||||||||||||||||||||||||||||
Christopher V. Dodds | ||||||||||||||||||||||||||||||||||||
Christopher V. Dodds | ||||||||||||||||||||||||||||||||||||
Christopher V. Dodds | 458,900 | 13,931 | 472,831 | * | ||||||||||||||||||||||||||||||||
Stephen A. Ellis | ||||||||||||||||||||||||||||||||||||
Stephen A. Ellis | ||||||||||||||||||||||||||||||||||||
Stephen A. Ellis | ||||||||||||||||||||||||||||||||||||
Stephen A. Ellis | 39,475 | 119,340 | 158,815 | * | 106,409 | 131,756 | 238,165 | * | ||||||||||||||||||||||||||||
Mark A. Goldfarb | 20,865 | 25,312 | 46,177 | * | ||||||||||||||||||||||||||||||||
Mark A. Goldfarb | ||||||||||||||||||||||||||||||||||||
Mark A. Goldfarb | ||||||||||||||||||||||||||||||||||||
Mark A. Goldfarb | 29,610 | 32,190 | 61,800 | * | ||||||||||||||||||||||||||||||||
William S. Haraf | 26,641 | 25,312 | 51,953 | * | ||||||||||||||||||||||||||||||||
Frank C. Herringer | ||||||||||||||||||||||||||||||||||||
Frank C. Herringer | ||||||||||||||||||||||||||||||||||||
Frank C. Herringer | ||||||||||||||||||||||||||||||||||||
Frank C. Herringer | 200,293 | 9 | 66,582 | 266,875 | * | 213,168 | 9 | 196,852 | 410,020 | * | ||||||||||||||||||||||||||
Brian M. Levitt | 21,926 | 10 | 1,407 | 23,333 | * | |||||||||||||||||||||||||||||||
Brian M. Levitt | ||||||||||||||||||||||||||||||||||||
Brian M. Levitt | ||||||||||||||||||||||||||||||||||||
Brian M. Levitt | 23,040 | 10 | 5,890 | 28,930 | * | |||||||||||||||||||||||||||||||
Gerri K. Martin-Flickinger | ||||||||||||||||||||||||||||||||||||
Gerri K. Martin-Flickinger | ||||||||||||||||||||||||||||||||||||
Gerri K. Martin-Flickinger | ||||||||||||||||||||||||||||||||||||
Gerri K. Martin-Flickinger | 293 | 1,873 | 2,166 | * | 6,149 | 7,753 | 13,902 | * | ||||||||||||||||||||||||||||
Bharat B. Masrani | 80 | 1,407 | 1,487 | * | ||||||||||||||||||||||||||||||||
Bharat B. Masrani | ||||||||||||||||||||||||||||||||||||
Bharat B. Masrani | ||||||||||||||||||||||||||||||||||||
Bharat B. Masrani | 1,194 | 11,843 | 13,037 | * | ||||||||||||||||||||||||||||||||
Todd M. Ricketts | ||||||||||||||||||||||||||||||||||||
Todd M. Ricketts | ||||||||||||||||||||||||||||||||||||
Todd M. Ricketts | ||||||||||||||||||||||||||||||||||||
Todd M. Ricketts | 520,144 | 11 | 1,407 | 521,551 | * | 535,326 | 11 | 5,890 | 541,216 | * | ||||||||||||||||||||||||||
Charles R. Ruffel | 20,954 | 30,402 | 51,356 | * | ||||||||||||||||||||||||||||||||
Charles R. Ruffel | ||||||||||||||||||||||||||||||||||||
Charles R. Ruffel | ||||||||||||||||||||||||||||||||||||
Charles R. Ruffel | 22,863 | 50,285 | 73,148 | * | ||||||||||||||||||||||||||||||||
Arun Sarin | ||||||||||||||||||||||||||||||||||||
Arun Sarin | ||||||||||||||||||||||||||||||||||||
Arun Sarin | ||||||||||||||||||||||||||||||||||||
Arun Sarin | 16,465 | 46,737 | 63,202 | * | 21,210 | 53,615 | 74,825 | * | ||||||||||||||||||||||||||||
Paula A. Sneed | 114,571 | 25,312 | 139,883 | * | ||||||||||||||||||||||||||||||||
Paula A. Sneed | ||||||||||||||||||||||||||||||||||||
Paula A. Sneed | ||||||||||||||||||||||||||||||||||||
Paula A. Sneed | 112,398 | 61,923 | 174,321 | * | ||||||||||||||||||||||||||||||||
Carolyn Schwab-Pomerantz | ||||||||||||||||||||||||||||||||||||
Carolyn Schwab-Pomerantz | ||||||||||||||||||||||||||||||||||||
Carolyn Schwab-Pomerantz | ||||||||||||||||||||||||||||||||||||
Carolyn Schwab-Pomerantz | 2,312,654 | 37,428 | 2,350,082 | * | ||||||||||||||||||||||||||||||||
Peter B. Crawford | ||||||||||||||||||||||||||||||||||||
Peter B. Crawford | ||||||||||||||||||||||||||||||||||||
Peter B. Crawford | ||||||||||||||||||||||||||||||||||||
Peter B. Crawford | 19,225 | 228,713 | 247,938 | * | 66,681 | 344,085 | 410,766 | * | ||||||||||||||||||||||||||||
Joseph R. Martinetto | 211,526 | 292,794 | 504,320 | * | ||||||||||||||||||||||||||||||||
Joseph R. Martinetto | ||||||||||||||||||||||||||||||||||||
Joseph R. Martinetto | ||||||||||||||||||||||||||||||||||||
Joseph R. Martinetto | 260,458 | 547,569 | 808,027 | * | ||||||||||||||||||||||||||||||||
Richard A. Wurster | 21,359 | 34,717 | 56,076 | * | ||||||||||||||||||||||||||||||||
Richard A. Wurster | ||||||||||||||||||||||||||||||||||||
Richard A. Wurster | ||||||||||||||||||||||||||||||||||||
Richard A. Wurster | 101,555 | 245,284 | 346,839 | * | ||||||||||||||||||||||||||||||||
Directors and Executive Officers as a Group (24 Persons)12 | 121,682,820 | 4,545,055 | 126,227,875 | 6.9 | % | |||||||||||||||||||||||||||||||
* Less than 1% | ||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a Group (24 Persons)13 | ||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a Group (24 Persons)13 | ||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a Group (24 Persons)13 | ||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a Group (24 Persons)13 | 111,427,036 | 6,303,181 | 117,730,217 | 6.6 | % | |||||||||||||||||||||||||||||||
Less than 1% |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 71 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
| (1) | This column includes outstanding shares for which the named person has sole or shared voting |
78
| This column excludes RSUs held by directors under the company’s 2004 Stock Incentive Plan, the 2013 Stock Incentive Plan, the 2022 Stock Incentive Plan, and the |
| This column also excludes PBRSUs |
| (2) | Shares that can be acquired through stock option exercises or through settlement of RSUs within 60 days of March |
| (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 |
| (4) | Includes shares held as of December 31, 2023 by TD Bank and its |
| The address of TD Bank is Toronto-Dominion Centre, P.O. Box 1, Toronto, Ontario, Canada M5K IA2. |
| (5) | Includes shares held by The Vanguard Group (Vanguard) as reported on its Schedule 13G/A filed with the SEC on February 13, 2024 and includes 1,875,547 shares for which Vanguard has shared voting power, 113,622,207 shares for which Vanguard has sole dispositive power, and 6,296,235 shares for which Vanguard has shared dispositive power. The address of Vanguard is 100 Vanguard Boulevard, Malvern, PA 19355. |
| (6) | Includes |
| Mr. Schwab’s address is c/o The Charles Schwab Corporation, 3000 Schwab Way, Westlake, TX 76262. |
Includes shares held by |
Includes |
| (9) | Includes 50,625 shares held by Mr. Herringer’s spouse. |
| (10) | Includes 21,846 shares held by a company of which Mr. Levitt is the sole |
| (11) | Includes 7,867 shares held by Mr. Ricketts’ spouse and 295,320 shares held by Mr. Ricketts’ spouse as trustee. |
| (12) | Includes 585,057 shares held by Ms. Schwab-Pomerantz’s spouse as trustee, 2,798 shares held by a limited liability company of which Ms. Pomerantz-Schwab is the sole member and that she controls, and 1,724,799 shares held in trusts for which Ms. Schwab-Pomerantz acts as trustee. |
| (13) | In addition to the officers and directors named in this table, four other executive officers are members of this group. |
DELINQUENT SECTIONDelinquent Section 16(a) REPORTSReports
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)Exchange Act), requires the company’s directors, executive officers, and beneficial owners of more than 10% of the company’s common stock to file reports with the SEC indicating their holdings of, and transactions in, the company’s equity securities. Based solely on a review of copies of these reports and written representations from the company’s executive officers and directors, all of the company’s executive officers, directors, and 10% owners timely complied with all Section 16(a) filing requirements for fiscal 20212023 except for one late Form 34 reporting the holdings of Richard A. Wurster, which was filed two days late, and one Form 5 for Joseph R. Martinetto on January 28, 2022 to report a sale of common stock on October 21, 2021.transactions by Ms. Schwab-Pomerantz.
| 72 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| TRANSACTIONS WITH RELATED PERSONS |
79
TRANSACTIONS WITH RELATED PERSONS
Charles R. Schwab, the company’s Chairman, has a daughter, Carolyn (Carrie) Schwab-Pomerantz, who was employed as President of the Charles Schwab Foundation during 2021 (and presently). Ms. Schwab-Pomerantz earned approximately $915,000 in salary, bonus and benefits during 2021, including a grant of 3,451 RSUs. Ms. Schwab-Pomerantz has been employed by the company for 39 years.
Effective as of the closing of the TD Ameritrade Acquisition, the company entered into a registration rights agreement with Mr. Schwab, certain other stockholders, and TD Bank, which beneficially owns 5% or more of the company’s common stock that among other things provides Mr. Schwab, TD Bank, and the other stockholders party to the agreement up to three “demand” registrations in any 12-month period as well as customary “piggyback” registration rights with respect to all of their shares of company common stock and shares of company common stock issuable upon conversion, exercise, or exchange, as applicable, of any other company equity securities. The registration rights agreement also requires the company to indemnify the stockholders against certain liabilities that may arise under the Securities Act of 1933, as amended. This registration rights agreement replaced for Mr. Schwab the registration rights agreement that he entered into with the company in 1987.
The company and subsidiaries of TD Bank (together, the “Depository Institutions”)TD Depository Institutions) entered into an amended and restated insured deposit account agreement (the “Amended IDA Agreement”), which replaced a previous agreement betweenagreement). In accordance with the Depository Institutions and TD Ameritrade. Under the Amended IDA Agreement, the Depository Institutions make availablewhich became effective October 6, 2020, and was subsequently replaced and superseded by a Second Amended and Restated Insured Deposit Account Agreement dated May 4, 2023, cash held in eligible brokerage client accounts is swept off balance sheet to our clients FDIC-insured (up to specified limits) money market deposit accounts as either designated sweep vehicles or as non-sweep deposit accounts.at the TD Depository Institutions. The company provides marketing, recordkeeping and support services to the TD Depository Institutions with respect to the deposit accounts for which the company receives an aggregate monthly fee. For the period starting with the close of the TD Ameritrade Acquisition through the end of fiscal year 2021,During 2023, the company generated approximately $1.3 billion$798 million in revenue from bank deposit account fees under the Amended IDA Agreement.
Also in connection with the TD Ameritrade Acquisition, the company entered into a stockholder agreement with TD Bank (the “Stockholder Agreement”)Stockholder Agreement) effective as of the closing of the TD Ameritrade Acquisition that governs certain rights and obligations of TD Bank with respect to shares of the company’s voting and non-voting common stock that TD Bank acquired as part of the TD Ameritrade Acquisition. The Stockholder Agreement sets out, among other things, standstill restrictions, a voting agreement, board designation rights, and transfer restrictions.
As a result of the TD Ameritrade Acquisition, the company assumed certain agreements existing between TD Ameritrade and TD Bank and its affiliates. The following describes certain transactions between TD Ameritrade and TD Bank and its affiliates during fiscal year 2021.2023. Unless otherwise disclosed, amounts cited relate to fiscal year 2021.2023.
|
|
Trading Platform Hosting and Services Agreement. |
80
|
Cash Management Services Agreement. TD Bank USA, N.A., a wholly owned subsidiary of TD Bank, provides cash management services to clients of TD Ameritrade, resulting in |
|
|
Sublease Agreements. TD Ameritrade and TD Bank are parties to sublease agreements where TD Ameritrade and TD Bank sublease building space to each other for administrative and operational purposes. Under these sublease agreements, TD Ameritrade generated $0.4 million of sub-lease rental income and recognized |
Trademark License Agreement. TD Ameritrade and TD Bank were party to a trademark license agreement that allowed TD Ameritrade to use certain TD Bank trademarks as part of TD Ameritrade’s corporate identity. Although the agreement terminated upon the TD Ameritrade Acquisition, the company is permitted to continue using the trademarks for a transitionary period. |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 73 |
TRANSACTIONS WITH RELATED PERSONS
In addition, certain brokerage subsidiaries of the company have securities lending agreements with certain subsidiaries of TD Bank. These agreements were entered into in the ordinary course of business and were made on substantially the same terms as those prevailing for comparable securities lending agreements with persons other than related persons and do not involve more than the normal risk of collectability or present other unfavorable features.
As described in Security Ownership of Certain Beneficial Owners and Management, based on information contained in separate Schedule 13G filings with the SEC, each of BlackRock Inc. (BlackRock), and The Vanguard Group (Vanguard) reported that it beneficially owned more than 5% of the outstanding shares of the company’s common stock as of December 31, 2021.2023. The company and its affiliates engage in ordinary course transactions and arrangements with BlackRock or its affiliates including for sub-advisory services for a fund, recordkeeping, administrative, stockholder, educational, and data support services, and a license to use BlackRock’s portfolio management technology platform. The company and its subsidiaries also do and may continue to, in the ordinary course, invest in BlackRock and Vanguard funds and pay related management fees. These transactions are negotiated on an arm’s-length basis and we believe they are on customary terms and conditions.
Some directors, executive officers, and entities with which they are affiliated have credit transactions with the company’s 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
81
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 companycompany’s written Policy Regarding Related Party Transactions, which has policies and procedures regardingbeen approved by the Audit Committee, governs the review and approval of transactions with related party transactions. Such policiespersons. With certain limited exceptions, this policy generally requires Audit Committee review and procedures are in writing and have been approved by the Audit Committee. The transactions covered by the company’s policies and procedures includeapproval of 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 or is expected to exceed $120,000, and a director, nominee for director, or executive officer of the company, an immediate family member of any of the foregoing, or a stockholder owning in excess of 5% of a class of the company’s voting securities has a direct or indirect material interest. The policies and proceduresFor the purposes of the policy, immediate family members include transactions where the directors’ or executive officers’ children, stepchildren, parents, stepparents, spouse,spouses, siblings, mothers-in-law,fathers-in-law,sons-in-law,daughters-in-law,brothers-in-law,sisters-in-law, or members of and any persons sharing their household (other than a tenant or employee) have a personal interest..
Any director orThe policy requires directors and executive officer proposing a transaction covered by the company’s related party transaction policies and procedures mustofficers to promptly notify the company’s compliance department as soon as practicableOffice of Corporate Governance prior to the commencement of any such transaction in which the notifying person has or will have a material interest, and promptly after becoming aware of theany other related person transaction or proposed related person transaction, and mustto provide a description of all material detailsfacts concerning such transaction and his or herthe related person’s interest in such transaction. The Office of Corporate Governance conducts an initial review of any reported transaction and refers all transactions requiring review and approval to the transaction.Audit Committee. The Audit Committee must give reasonable prior review to any related person transaction brought to its attention and will generally consider theany such transaction at its next meeting. The Audit Committee may authorizeHowever, if prior review is not reasonably possible or ratify the transaction only if the Audit Committee determinesotherwise becomes aware of a related person transaction after its commencement, the transaction will be considered at the next regularly scheduled Audit Committee meeting. In the event that it is infeasible or impractical to wait until the next regularly scheduled Audit Committee meeting or convene an Audit Committee meeting to evaluate a related person transaction, the Chair of the Audit Committee, or any two disinterested members of the Audit Committee if
the Chair is an interested party, may review and approve the related person transaction, and any such approval will
| 74 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
TRANSACTIONS WITH RELATED PERSONS
be reported to the Audit Committee as promptly as reasonably practicable. A transaction may be approved only if it is determined that the transaction is fair as tonot inconsistent with the interests of 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.or ratification.
Notice to and approval by the Audit Committee as described above is not required if the transaction involves compensationfor certain transactions not required to an immediatebe disclosed under Item 404 of Regulation S-K, charitable contributions to any tax-exempt organization (other than family member of a director or executive officer, and the employment relationship has been approved in good faithfoundations created by a majority of disinterested members of the Compensation Committee. As in the case of Ms. Schwab-Pomerantz, 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 company’s compensation programs, policies and plans.
82
APPROVAL OF THE BOARD’S PROPOSAL
TO AMEND THE BYLAWS TO ADOPT PROXY ACCESS
The board recommendsrelated person) that stockholders adopt amendments to the Bylaws to include proxy access (the Company Proposal). The proposed amendments (the Proxy Access Amendments), which are attached to this proxy statement as Exhibit D, would amend Sections 2.06, 2.11, and 3.03 of our Bylaws. In addition, the Proxy Access Amendments reflect certain updates to applicable law and immaterial conforming changes. Proxy access allows eligible stockholders who comply with the requirements set forth in the Proxy Access Amendments to include their own nominees for director in the company’s proxy materials along with the candidates nominated by the board. After considering various factors with respect to the implementation of proxy access including, among other things, the provisions of the stockholder proposal set out in Proposal Seven (the McRitchie Proposal) and the views expressed by our stockholders, the board approved the Proxy Access Amendments, subject to approval by stockholders at the annual meeting.
The Proxy Access Amendments represent the board’s view of proxy access that it believes is the most beneficial to all stockholders. The board believes that proxy access should be structured, and has structured its proxy access proposal, in a way that:
|
|
|
|
|
The board believes that proxy access, unless accompanied by meaningful thresholds and procedural requirements, risks damaging the effectiveness of the board and, by extension, the company’s operational performance and long-term growth.
The board determined that proxy access should require a nominating stockholder to own at least 3% of our outstanding shares. Nearly all other public companies have adopted this limitation. In adopting this threshold, the board considered, among other things, the number of outstanding shares, the number of stockholders with disclosed ownership positions of at least 1%, the ownership thresholds used by other public companies, the ownership standards recommended by stockholder advisory groups, and the board’s desire to avoid nominees who could be backed by stockholders with specific interests that may not represent the interests of stockholders generally.
The board also believes that allowing aggregation of not more than 20 stockholders to meet the ownership requirement preserves the possibility of relatively small stockholders having a say in board composition while also alleviating unjustified demands on management’s and the board’s time and resources.
83
In addition, the board determined that proxy access should require a nominating stockholder to have held the qualifying shares for at least three years. The board believes that the interests and goals of stockholders who have demonstrated a long-term financial commitment to the company are more likely to be aligned with the company’s longer-term strategies, which the board believes are essential to the company’s success and beneficial to all stockholders. Granting proxy access to stockholders with holding periods of less than three years could result in a shorter-term focus at the board level that may not promote the best interest of all stockholders.
The following description of the proposed Proxy Access Amendments is only a summary and is qualified in its entirety by reference to the complete text of the Proxy Access Amendments. You are urged to read the Proxy Access Amendments in their entirety.
Eligibility of Stockholders to Nominate Directors Pursuant to the Proxy Access Provisions
A stockholder or group of up to 20 stockholders (such stockholder or stockholder group, an “eligible stockholder”) that has maintained continuous qualifying ownership of at least 3% of the company’s outstanding common stock for at least the previous three years would be permitted to nominate and include up to a specified number of proxy access nominees in the company’s proxy materials for its annual meeting of stockholders provided that the eligible stockholder and proxy access nominee(s) satisfy the requirements of the Bylaws, as amended by the Proxy Access Amendments.
Calculation of Qualifying Ownership
To ensure that the interests of stockholders seeking to include proxy access nominees in the company’s proxy materials are aligned with those of other stockholders, an eligible stockholder would be deemed to own only those outstanding shares of common stock of the company as to which the eligible stockholder possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares. The following shares would not count as “owned” shares for purposes of the Proxy Access Amendments:
|
|
|
Number of Proxy Access Nominees
The maximum number of proxy access nominees that the company would be required to include in its proxy materials woulddo not exceed the greater of (i) two and (ii) 25%$1 million or 2% of the directors in officecharitable organization’s revenues, and transactions involving financial services, other than loans and other extensions of credit, that are provided on substantially the same terms as those prevailing at the time of nomination (rounded downfor comparable services provided to the nearest whole number). If one or more vacancies occur on the board,non-affiliates and the board decides to reduce the size of the board in connection therewith, after the nomination deadline, the proxy access nominee limit would be calculated based on the reduced number of directors. Any proxy access nominee who is either subsequently withdrawn or included in the company’s proxy materials as a nominee of the board, or any nominee included in the
84
company’s proxy materials as unopposed by the company pursuant to an agreement, would be counted against the proxy access nominee limit. Any director currently serving on the board who was a proxy access nominee at any of the two preceding annual meetings and any director currently serving on the board who was a proxy access nominee at the third preceding annual meeting and who the board decides to nominate as a board nominee at the upcoming annual meeting would also be counted against the proxy access nominee limit.
Procedure for Selecting Proxy Access Nominees if Proxy Access Nominee Limit Exceeded
Any eligible stockholder that submits more than one proxy access nominee would be required to provide a ranking of its proposed proxy access nominees. If the number of proxy access nominees exceeds the proxy access nominee limit, the highest ranking qualified individual from the list proposed by each eligible stockholder, beginningotherwise comply with the eligible stockholder with the largest qualifying ownership and proceeding through the list of eligible stockholders in descending order of qualifying ownership, would be selected for inclusion in the proxy materials until the proxy access nominee limit is reached.
Nominating Procedure
In order to provide adequate time to assess proxy access nominees, requests to include proxy access nominees in the company’s proxy materials must be received no earlier than 150 days and no later than 120 days before the anniversary of the date that the company issued its proxy statement for the previous year’s annual meeting of stockholders, subject to adjustment in the event the annual meeting is held more than 30 days before or after the anniversary of the date of the prior year’s annual meeting.
Information Required of All Eligible Stockholders
Each eligible stockholder seeking to include a proxy access nominee in the company’s proxy materials would be required to provide certain information to the company, including, but not limited to:applicable law.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| 75 |
|
|
|
|
Eligible stockholders would also be required to make certain representations and undertakings to the company, including, but not limited to:
|
|
|
|
85
|
|
Information Required of All Proxy Access Nominees
Each proxy access nominee would be required to make certain written representations to and agreements with the company, including, but not limited to:
|
|
|
|
|
Proxy access nominees would also be required, at the request of the company, to submit completed and signed questionnaires required of company directors and officers and provide any additional information necessary for the board’s independence evaluation and determination.
Exclusion of Proxy Access Nominees
The company would not be required to include a proxy access nominee in the company’s proxy materials if, among other things:
|
|
|
|
|
|
|
In addition, the board or the chairman of the annual meeting will declare a proxy access nomination by an eligible stockholder to be invalid, and such nomination would be disregarded, if (i) the proxy access nominee or the eligible
86
stockholder breaches any of their respective obligations under the Bylaws, as amended by the Proxy Access Amendments, or (ii) the eligible stockholder does not appear at the annual meeting in person or by proxy to present the nomination.
Future Disqualification of Proxy Access Nominees
Any proxy access nominee who is included in the company’s proxy materials but subsequently withdraws from or becomes ineligible or unavailable for election at the annual meeting would be ineligible for nomination for the following two annual meetings.
Supporting Statement
Eligible stockholders would be permitted to include in the proxy statement a statement of up to 500 words in support of each proxy access nominee. The company may omit any information or statement that it, in good faith, believes is untrue in any material respect or would violate any applicable law or regulation and may solicit against and include in the proxy statement its own statement relating to any proxy access nominee.
Connection with the McRitchie Proposal
Approval of the Company Proposal is not conditioned on the approval or disapproval of the McRitchie Proposal. The McRitchie Proposal is advisory and non-binding in nature and constitutes only a recommendation by our stockholders to our board.
87
STOCKHOLDER PROPOSALS
We have been notified that stockholder proponents intend to present three proposals for consideration at the annual meeting. The stockholder proposals and supporting statements appears in italicsappear below, and we present the proposals as they were submitted to us. We recommend that you voteagainst the twothree 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 company’s principal executive office no later than December 2, 2022. If you want to submit a proposal for action at next year’s 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, 2023 and no later than March 18, 2023, and such proposal must be, under the Delaware General Corporation Law, an appropriate subject for stockholder action.First Stockholder Proposal
In addition to satisfying the foregoing requirements, to comply with the universal proxy rules under the Exchange Act, stockholdersJing Zhao, 1745 Copperleaf Ct, Concord, California 94519, who intend to solicit proxies in support of director nominees other than our nominees for next year’s annual meeting must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 18, 2023.
The Bylaws contain specific procedural requirements regarding a stockholder’s 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 Officeholds 60 shares of the Corporate Secretary at the address in the “Corporate Governance Information” section of this proxy statement.
FIRST STOCKHOLDER PROPOSAL
John Chevedden, on behalf of James McRitchie, 9295 Yorkship Court, Elk Grove, California 95758, who holds 100 shares of company stock, has submitted the following proposal for consideration at the annual meeting:
Resolved: Shareholders of Charles Schwab Corporation (“Company”) request our Board of directors take the steps necessary to enable shareholders, without limits on group size, to aggregate their shares to equal 3% of our stock owned continuously for 3-years to enable shareholder proxy access with the following essential provisions:
Nominating shareholders and unlimited groups of shareholders must have owned at least 3% of the Company’s outstanding shares of common stock continuously for a period of at least 3-years. Such shareholders shall be entitled to nominate a total of 25% of the number of authorized directors rounded down to the nearest whole number.
The most essential feature requested is that shareholders forming a nominating group not be limited with regard to the number in a nominating group.
88
Supporting Statement: Proxy access enables shareholders to put competing director candidates on the company ballot to see if they can get more votes than some of management’s director candidates. A competitive election is good for everyone. Even if never used, this proposal helps ensure our Board will nominate directors with outstanding qualifications to avoid giving shareholders a reason to exercise access rights.
Proxy Access in the United States: Revisiting the Proposed SEC Rule,1 a cost-benefit analysis by CFA Institute, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140.3 billion. Governance Changes through Shareholder Initiatives: The Case of Proxy Access2 found a 0.5 percent average increase in shareholder value for proxy access targeted firms.
Proxy access has been adopted by major companies, including 78% of the S&P 500. Adoption of this proposal will make our Company more competitive in its corporate governance. Our largest shareholders, BlackRock and Vanguard, voted in favor of 87% and 91% of shareholder proposals, respectively, to establish proxy access during the last 3.5 years.
Adding urgency to this proposal is a recent study finding directors generally do not want to monitor and are not sure they can do so effectively.3 Corporate governance expert Nell Minow offered the following: “Usually directors at least pretend to acknowledge their legal obligation to provide oversight of CEOs on behalf of shareholders.” “This acknowledgment that directors see themselves as corporate cheerleaders instead of skeptics whose job is to push back, question, and insist on better is further proof that shareholders will need to support more Engine No. 1-style challenges.”4
Eliminating group limits would allow employee-shareholders with small holdings to join in nominating groups, opening communication channels between our Board and workers. Proxy access directors nominated by such groups may be more able to effectively monitor than typical outside directors and would bring a host of additional benefits.5
Enhance Shareholder Value, Vote FOR Shareholder Proxy Access – Proposal Seven
1https://www.cfainstitute.org/-/media/documents/article/position-paper/proxy-access-in-united-states-revisiting-proposed-sec-rule.ashx
2 https://ssrn.com/abstract=2635695
3https://corpgov.law.harvard.edu/2021/09/02/corporate-directors-implicit-theories-of-the-roles-and-duties-of-boards/
4https://valueedgeadvisors.com/2021/09/02/corporate-directors-say-its-not-their-job-to-monitor-ceo-study-bloomberg/
5https://www.aspeninstitute.org/publications/new-corporate-boardroom/
|
89
|
|
90
|
91
|
SECOND STOCKHOLDER PROPOSAL
Friends Fiduciary Corporation, 1700 Market Street, Suite 1535, Philadelphia, PA, 19103, which has indicated that it is a beneficial owner of at least $2,000 in market value of company’s common stock, has submitted the following proposal for consideration at the annual meeting:
WhereasShareholder Proposal to Improve Executive Compensation Program
Resolved: shareholders recommend that the Charles Schwab Corporation (the Company) improve the executive compensation program to include the CEO pay ratio factor.
Supporting Statement
The Company’s CEO compensation jumped irregularly, irrationally, and unreasonably from $15,959,193 in 2020 to $21,938,404 in 2021 (+37.5%), to $24,386,329 in 2022 (+11.2%) (2023 Proxy Statement p.54). The CEO pay ratio was 210:1 in 2022 (2023 Proxy Statement p.67). As I am writing the proposal today, the stock price dropped from $80.90 on October 11, 2021 to $74.31 on October 7, 2022 (-8.1%), to $51.52 on October 6, 2023 (-30.7%).
America’s ballooning executive compensation is not sustainable for the economy, and there is no rational methodology or program to decide the executive compensation, particularly because there is no consideration of the CEO pay ratio factor (2023 Proxy Statement pp.36-71). The increase of disparity of income has a direct negative impact on American social instability. For example, one article from Politico.com 09/16/2023 “‘No defensible argument’: Anger boils over at CEO pay” stated: “The historic UAW strike puts an exclamation point on more than a decade of efforts ... to narrow the pay gap between top executives and workers. … And between 1978 and 2021, executive compensation at large American companies increased by more than 1,400 percent.”
The public gives the board a free hand to run the corporate business so there is no organized union in big financial companies, there is no employee representation on board, and the board is nominated without any competition (the number of candidates is the same number of board seats). Adam Smith said: “Wealth, as Mr Hobbes says, is power.” America has a long history to check and balance power. Shareholders in JPMorgan Chase & Co., Intel, Netflix and other big companies rejected sky-high executive pay packages in 2022 and 2023.
The CEO pay ratios of big Japanese and European companies are much less than of big American companies. As a policy recommendation, the Company may refer to Aristotle’s Politiká/Politics, in which he concluded that in a stable polis community, the disparity of land ownership should not be more than 5 times. The Company has the flexibility to reform the Compensation Committee to improve the executive compensation program, such as to include the CEO pay ratio factor.
* * *
| 76 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
Board of Directors’ Recommendation Against and Statement of Opposition to the Stockholder Proposal
Our executive compensation program is designed through thoughtful application of a combination of pay elements to ensure an adept, driven executive team whose incentives square with company and stockholder interests. Our board believes that given the company’s strong existing practices, which have historically received broad stockholder support, the adoption of this proposal is unnecessary, as its implementation would not meaningfully enhance the company’s executive compensation program. For these reasons and the reasons set forth below, after careful consideration, our board unanimously recommends a vote AGAINST this proposal.
Our Executive Compensation Program Has Been Carefully Tailored to Help Our Company Achieve Its Strategic Goals and Align With the Long-Term Interests of Our Stockholders.
As extensively detailed in the section entitled “Compensation Discussion and Analysis” above, our executive compensation program and philosophy are thoughtfully designed and applied, contrary to the erroneous assertion in the proposal that “there is no rational methodology or program to determine the executive compensation.” Our program supports the company’s strategic objectives through a design intended to attract, motivate, and retain talented, highly capable executive officers, reward executive officers for their performance, link pay with company performance, and align executive officers’ incentives with the long-term interests of the company and its stockholders. Our Compensation Committee evaluates our executive compensation practices on an ongoing basis to determine whether they support the company’s strategic objectives and serve these design principles. Our pay decisions take into consideration a wide range of factors, including competitive pay analysis of peer companies, the company’s performance, the economic environment, and market trends. As described in more detail under “Compensation Discussion and Analysis,” a significant portion of our executive compensation is performance-based and dependent upon the success of the company in creating long-term value for its shareholders. In addition, our executive compensation practices are tailored to account for each executive’s experience, responsibilities, changes in job scope, individual performance, and pay relative to internal peers. We believe this approach helps us attract and retain the most talented employees to drive innovation, creativity, growth, and long-term value for our stockholders. The proposal would interfere with this carefully designed executive compensation program, which we believe in fullis not only effective but integral to our success.
CEO Pay Ratios Provide Little Comparative Value for Our Executive Compensation Program.
Although SEC rules require annual disclosure of The Charles Schwab Corporation’s (“Schwab”) directthe CEO pay ratio, our Compensation Committee does not believe that the ratio should define or drive our compensation principles or practices. CEO pay ratios vary widely across companies, as different companies have different employment and indirect lobbying activitiescompensation practices, depending on the nature of their workforce, their business, and expendituresvarious other factors. According to assess whether its lobbyingthe SEC, the purpose of CEO pay ratio disclosures is consistentnot to facilitate comparisons among companies, and conformity or comparability of pay ratios across companies is not necessarily achievable given the variety of factors that could cause ratios to differ, as companies may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. As a result, the utility of CEO pay ratio as a comparative metric at the company, industry-wide, and across industries is limited.
Stockholders Have Overwhelmingly Supported Our Executive Compensation Practices.
Our board and management team value the opinions and feedback of our stockholders, which is why we have regular, ongoing engagement with its expressed goalsour stockholders throughout the year regarding a variety of topics, including our executive compensation program and stockholder interests.
Resolved,philosophy. Our board and management team regularly discuss our stockholders’ feedback.In addition, our stockholders of Schwab requesthave consistently and overwhelmingly endorsed the preparation of a report, updated annually, disclosing:company’s pay practices—since 2010, each year our advisory proposal to approve the company’s executive compensation has
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 77 |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
received support from at least 91% of the votes cast. Most recently, at the 2023 annual meeting of stockholders, stockholders approved our advisory proposal to approve the company’s executive compensation by approximately 92% of the votes cast, similar to the levels of support expressed at our 2022 (93%) and 2021 (94%) annual meetings of stockholders.
Summary
For these reasons, the Board has determined that support for this stockholder proposal is unwarranted and believes that our current compensation program is appropriate and designed in a manner that our Compensation Committee – which is best positioned to evaluate and determine the design of our executive compensation program – believes is in the best interest of the company and our stockholders.
For these reasons, we recommend a vote against the stockholder proposal.
| 78 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
Second Stockholder Proposal
Inspire Investing LLC, 3597 E. Monarch Sky Lane, Suite 330, Meridian, Idaho 83646, which holds 4,048 shares of the company’s common stock, has submitted the following proposal for consideration at the annual meeting:
Report on Respecting Workforce Civil Liberties Supporting Statement:
Supporting Statement:
Charles Schwab is one of the largest companies in the United States and employs over 30,000 people. As a major employer, Charles Schwab should respect the free speech and religious freedom of its employees. Charles Schwab is legally required to comply with many laws prohibiting discrimination against employees on a variety of factors, including religion and sometimes political affiliation.
Respecting diverse views also allows Charles Schwab to attract the most qualified talent, promote a healthy and innovative business culture, serve its diverse customer base, and contribute to a healthy economic market and marketplace of ideas.
Despite this, the 2023 edition of the Viewpoint Diversity Score Business Index1 found that 91% of scored companies promote divisive training concepts like critical race theory (CRT) that replace rich cultural and ideological diversity with a monolithic focus on group identity. These concepts label employees as “oppressed” or “oppressors” based on the color of their skin, biological sex, or religious status. While companies often push concepts like CRT under the guise of promoting “diversity, equity, and inclusion,” such efforts often have the opposite effect. Instead of creating workplaces that afford equal opportunity based on individual merit, DE&I too often leads to hostility, polarization, and partiality.
Many companies also alienate their own employees by taking divisive stances on political issues. For example, many companies have adopted radical stances and policies on abortion. The 2023 Index also found that 78% of scored companies discriminate against religious nonprofits in their charitable giving and 63% give money to legislation that undermines fundamental First Amendment freedoms. According to the Freedom at Work survey, 60% of employees were concerned that their company would punish them for expressing their religious or political views at work, and 54% said they feared the same for sharing these views even on their private social media accounts.2
Companies may also face additional legal liability for DE&I programs that make distinctions based on race, per the recent Supreme Court decisions in Students for Fair Admission v. Harvard and Groff v. DeJoy. In light of these risks, the Company must take immediate steps to assess potential shortcomings and act to remedy these concerns.
Resolved: Shareholders request the Board of Directors conduct an evaluation and issue a civil rights and non-discrimination report within the next year, at a reasonable cost and excluding proprietary information and disclosure of anything that would constitute an admission of pending litigation, evaluating how Charles Schwab’s policies and practices impact employees and prospective employees based on their race, color, religion (including religious views), sex, national origin, or political views, and the risks those impacts present to Charles Schwab’s business.
* * *
| 1 |
|
| 2 | 2023 Freedom at Work Survey, VIEWPOINT DIVERSITY SCORE (last accessed Sept. 14, 2023). |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 79 |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
Board of Directors’ Recommendation Against and Statement of Opposition to the Stockholder Proposal
Our firm was founded on the belief that the investment industry needed to be more inclusive – that more people from Main Street should be able to enjoy the same benefits as those on Wall Street. That spirit of inclusiveness continues to be a guiding principle, and we believe that by cultivating a diverse, inclusive workplace, we gain a wider range or perspectives and experiences, which supports our business strategy.
As such, given the company’s strong commitment to inclusiveness, as further discussed below, the board believes that the adoption of this proposal is unnecessary as its implementation would not meaningfully enhance the company’s already established policies and practices. Moreover, at last year’s annual meeting, our stockholders resoundingly rejected a nearly identical proposal, with over 99% of votes cast against the proposal. In light of these facts and after careful consideration, our board unanimously recommends a vote AGAINST this proposal.
We Respect Everyone’s Rights, Including Those of Our Employees, to Their Viewpoints, However Diverse, on Various Issues.
We believe strongly that everyone is entitled to their individual viewpoints—each and every employee, board director, and client. It is, in fact, our respect for those viewpoints that leads us to believe that our company’s purpose is best realized by declining to take sides in political debates unrelated to our business.1 We never want to be seen attempting to speak for the diverse viewpoints held by our clients or employees nor do we want a company position on political issues to get in the way of our employees serving others, or all of our clients achieving better financial outcomes. That is why each of us is expected to respect the rights of and deal fairly with the company’s clients, competitors, vendors, and personnel. Our success has always been rooted in our commitment to a simple but important principle: serving our clients, stockholders, and all other stakeholders in the way any of us would want to be served. As such, we have established a positive record of inclusion and diversity in the many areas in which we operate. For instance, we support 10 Employee Resource Groups, in which over 13,500 employees participate, extending Schwab’s appeal as an employer and provider of financial services across diverse communities throughout the country.
We are Committed to Continuing to Build a Diverse, Inclusive Workplace and Preventing Discrimination Across the Organization.
We believe that diversity contributes to company performance and that, through diversity, we gain a wider range of perspectives and experiences, which supports our business strategy of seeing the world “Through Clients’ Eyes.” Accordingly, we take seriously our commitment to diversity and inclusion. To bring our commitment to life, we have adopted four key pillars that guide our approach to diversity and inclusion: increase workforce diversity—talent comes from a broad spectrum of human qualities and strengths; build on our inclusive work place—embracing an inclusive culture across the organization; serve a diverse marketplace’s needs—leveraging our differences is important to our clients’ success; support our communities—making a positive impact on the communities where we live and work.
Fundamental to these efforts is a core and abiding principle: we do not tolerate discrimination or harassment of any kind based on an individual’s protected status. To that end, diversity and inclusion at our company transcends ethnicity, race, color, religion, sex, sexual orientation, gender identity, national origin, age, disability, protected veteran status, interests and life stages to include diversity of experiences, strengths, perspectives, and thought.2
| 1 |
|
| 2 | See The Charles Schwab Corporation, “Everyone Counts – Our Commitment to Diversity and |
| 80 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
These enduring values are reflected in The Charles Schwab Corporation Code of Business Conduct and Ethics, as well as in our Equal Employment Opportunity Policy and Preventing Harassment and Discrimination Policy. We are on a long-term journey to continue to enhance our workforce diversity and inclusive culture, better serve our diverse clients, and build stronger connections to our diverse communities. This commitment is reflected in our numerous diversity and inclusion efforts, including but not limited to partnering with Historically Black Colleges and Universities and Hispanic serving institutions for campus recruiting, our endowed scholarship program, and our diversity and inclusion mentorship program. We are proud of our progress and the recognition we have received, including U.S. Veterans Magazine Best of the Best Recognition (recognized since 2012), Forbes 2023 Best Employers for Women, and scoring 100 on the 2023 Disability Equality Index.
It is important for our business that our talent reflects the diverse communities of clients that they serve. The policies and procedures we have in place for our employees are intended to foster diversity and inclusion and promote respect for all people. We are also committed to respecting the dignity of everyone in the workplace and expect everyone to show respect for all of our colleagues, clients, contingent workers, and vendors.
Our Board and Its Committees Oversee Our Workplace Diversity and Inclusion Policies and Practices.
In addition to measures designed to combat discrimination, we have thorough risk management processes to protect against risks to the company, including risks related to the application of our policies. As part of this process, our board and its Nominating and Corporate Governance Committee oversee and monitor our ESG programs and priorities, our Audit Committee oversees policies and procedures for ensuring compliance with the company’s Code of Business Conduct and Ethics, and our Risk Committee reviews reporting guidelines for overseeing conduct risk and reviews reports relating to violations of the Code of Business Conduct and Ethics.
For these reasons, we recommend a vote against the stockholder proposal.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 81 |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
Third Stockholder Proposal
Warren Wilson College, 701 Warren Wilson Rd, Swannanoa, NC 28778, which holds 142 shares of the company’s common stock, has submitted the following proposal for consideration at the annual meeting:
Racial and Gender Pay Gaps
Whereas: Pay inequities persist across race and gender and pose substantial risk to companies and society at large. Black workers’ hourly median earnings represent 81 percent of white wages. The median income for women working full time is 83 percent that of men. Intersecting race, Black women earn 64 percent, Native women 51 percent, and Latina women 54 percent. At the current rate, women will not reach pay equity until 2059, Black women until 2130, and Latina women until 2224.1
Citigroup estimates closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional income. PwC estimates closing the gender pay gap could boost Organization for Economic Cooperation and Development countries’ economies by 2 trillion dollars annually.2
Actively managing pay equity is associated with improved representation, and diversity is linked to superior stock performance and return on equity.3 Minorities represent 37 percent of Charles Schwab’s workforce and 27 percent of management. Women represent 37 percent of Charles Schwab’s workforce and 37 percent of management.4
Best practice pay equity reporting consists of two parts:
| 1. | unadjusted median pay gaps, assessing equal opportunity to high paying roles, |
|
For purposesThe Company continues to ignore unadjusted gaps, which address structural bias women and minorities face regarding job opportunity and pay, particularly when men hold most higher paying jobs. Median pay gaps show, quite literally, how Charles Schwab assigns value to employees through the roles they inhabit and pay they receive. Median gap reporting also provides a digestible and comparable data point to determine progress over time.
Racial and gender median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, Organization for Economic Cooperation and Development, and International Labor Organization. The United Kingdom and Ireland mandate disclosure of median gender pay gaps.
Additionally, Charles Schwab reported statistically adjusted pay gaps in 2023 in response to a shareholder proposal but did not commit to reporting these gaps annually.
Resolved: Shareholders request The Charles Schwab Corporation report on median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information.
Racial/gender pay gaps are defined as the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings (Wikipedia/OECD, respectively).
| 1 | https://static1.squarespace.com/static/5bc65db67d0c9102cca54b74/t/622f4567fae4ea772ae60492/1647265128087/ Racial+Gender+Pay+Scorecard+2022+-+Arjuna+Capital.pdf |
| 2 | Ibid. |
| 3 | Ibid. |
| 4 | https://content.schwab.com/web/retail/public/about-schwab/schwab-2022-esg-report.pdf |
| 82 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
Supporting Statement: An annual report adequate for investors to assess performance could, with board discretion, integrate base, bonus and equity compensation to calculate:
| ◾ | percentage median gender pay gap, globally and/or by country, where appropriate |
| ◾ | percentage median racial/minority/ethnicity pay gap, US and/or by country, where appropriate |
* * *
Board of Directors’ Recommendation Against and Statement of Opposition to the Stockholder Proposal
We believe diversity and inclusion (D&I) are tied to our success and purpose of serving every client with passion and integrity. Our D&I strategy is guided by four key pillars:
| ◾ | Increase Workforce Diversity: talent comes from a broad spectrum of human qualities and strengths |
| ◾ | Build on our Inclusive Workplace: embracing an inclusive culture across the organization |
| ◾ | Serve a Diverse Marketplace’s Needs: leveraging our differences is important to our clients’ success |
| ◾ | Support our Communities: making a positive impact on the communities where we live and work |
Our employees are the foundation of our business, and we are dedicated to fostering a culture that values and reflects the strengths of every employee so that we can be best positioned to support our diverse clients and the communities we serve.
Moreover, a recent pay equity analysis showed that our female employees earn approximately 99.2 cents for every dollar earned by similarly situated male employees, and our employees who identify as people of color earn approximately 99.9 cents for every dollar earned by similarly situated white employees.
Given the company’s strong programs, practices and disclosure, the Board believes that the adoption of this proposal “grassroots lobbying communication” is unnecessary as its implementation would not meaningfully enhance the company’s already established commitment to pay equity as part of our broader commitment to diversity and inclusion. In addition, at our 2023 annual meeting of stockholders, our stockholders agreed with our position that the adoption of a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflectsproposal on this topic is unnecessary by rejecting a view on the legislation or regulation and (c) encourages the recipientnearly identical proposal from a different proponent, with only 24.7% of votes cast in favor of the communication to take action regardingproposal.
For these reasons and the legislation or regulation. “Indirect lobbying” is lobbying byreasons set forth below, after careful consideration, our board unanimously recommends a trade association or other organization of which Schwab is a member.vote AGAINST this proposal.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at local, state and federal levels.We are Transparent About Our Workforce Diversity.
The report shall be presented to the Audit Committee and posted on Schwab’s website.
Supporting Statement
We encourage greater transparency in Schwab’s lobby expenditures. Schwab spent $29,453,000 from 2010 – 2020 on federal lobbying, not including state lobbying expenditures, where Schwab also lobbies but disclosure is uneven or absent.
Schwab fails to disclose memberships in or payments to trade associations and social welfare organizations or the amounts used for lobbying, including grassroots. Companies can give unlimited amounts to third party groups that spend millions on lobbying and often undisclosed grassroots activity. These groups may be spending “at least double
92
what’s publicly reported.”1 Schwab serves on the boards of Investment Company Institute (ICI) and Securities Industry and Financial Markets Association (SIFMA), which spent $127,370,621 on lobbying from 2010- 2020. ICI and SIFMA recently drew attention for their lobbying opposition to close a tax loophole on exchange-traded funds.2
Schwab’s lack of lobbying and trade association disclosure presents reputational risks when its lobbying contradicts company public positions. For example, Schwab supports protecting the interests of investors by holding the financial industry to a high standard, yet Schwab and SIFMA reportedly lobbied “to quash various aspects” of the Department of Labor fiduciary rule to require investment advisers to put their clients’ interests ahead of their own.3 Schwab left the Chamber of Commerce after the January 6 riots.4 While polls show support for wall street tax on trades,5 Schwab, ICI and SIFMA were among top groups lobbying against a financial transaction tax in 2019 and 2020.6
We believe potential reputational damage from misalignment between policy positionsthat diversity contributes to company performance. Through diversity, we gain a wider range of perspectives and lobbying could harmexperiences, which supports our business strategy of seeing the world “Through Clients’ Eyes.” We are on a long-term shareholder value. We urge Schwabjourney to expand its lobbying disclosure.continue enhance our workforce diversity and inclusive culture, better serve our diverse clients, and build stronger connections to our diverse communities. It is important to both our business and our clients that our talent is as broad and diverse as the communities we serve. The ability to hire, retain, and develop a diverse workforce is an important component of our commitment to D&I. To that end, we have a number of measures in place to support diverse representation and belonging.
1https://theintercept.com/2019/08/06/business-group-spending-on-lobbying-in-washington-is-at-least-double-whats-publicly-reported/.
2https://www.marketwatch.com/story/why-the-5-4-trillion-etf-market-faces-its-biggest-crisis-since-inception-11631807333.
3https://theintercept.com/2017/07/16/financial-advisers-want-to-rip-off-small-investors-trump-wants-to-help-them-do-it/
4 https://thehill.com/policy/finance/544540-charles-schwab-leaves-us-chamber-of-commerce.
5 https://theappeal.org/the-lab/polling-memos/poll-majority-of-voters-support-the-wall-street-tax-act/.
6 https://www.citizen.org/article/hypnotized-by-wall-street/.Our board and Executive Council are responsible for establishing our D&I strategy across the organization and supporting our talent acquisition and retention efforts. Our D&I Sponsorship Committee provides centralized oversight and governance to ensure that D&I partner sponsorships align with our four-pillar approach to D&I.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 83 |
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
In addition, to further enhance our transparency regarding our workforce diversity, we make our EEO-1 report publicly available on our website, providing disaggregated information about gender, race, and ethnicity across our workforce.
We are proud of the progress we have made, and we recognize there will be more to do as best practices and the needs of our communities and markets continue to evolve. We are committed to our ongoing efforts to open doors and unlock the human and commercial potential that can flow from a strong focus on D&I across the company.
Our Board and Nominating and Corporate Governance Committee Oversee Our Diversity and Inclusion Efforts.
Our board and its Nominating and Corporate Governance Committee oversee our efforts with respect to pay equity and diversity and inclusion as part of their responsibility for oversight of our ESG programs and priorities. In addition, the Nominating and Corporate Governance Committee and the full board are regularly updated and provide director oversight of our efforts to foster a diverse and inclusive workforce.
We Have Implemented Many Programs and Practices to Foster Diversity and Inclusion.
The company has developed recruiting, training, and compensation programs to foster diversity and inclusion across its workforce. Because we recognize that there is no single solution to expanding diversity in our workforce, we have developed a holistic set of programs and policies to support our efforts. To help build an inclusive culture, we:
| ◾ |
|
93
| ◾ | |
Offer multiple mentoring programs, including a | |
|
94
| ◾ | |
|
| ◾ | Sponsor 10 Employee Resource Groups (ERGs), employee-driven groups developed around specific dimensions of diversity to build and maintain a |
| ◾ | Hold an annual |
| ◾ |
|
| 84 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
95
PROPOSALS FOUR, FIVE, AND SIX: STOCKHOLDER PROPOSALS
PROCEDURES AND PROXIES
We provide additional information about our diversity and inclusion efforts in the 2023 Charles Schwab Corporation Environmental, Social, and Governance Report, available at aboutschwab.com/citizenship.
As a result of our efforts to cultivate a diverse and inclusive workforce, the company has been repeatedly recognized for our efforts and successes, including:
| ◾ | 2023 Disability Equality Index Award: Recognized in “Best Places to Work for Disability Inclusion,” by scoring 100% each year since 2021 |
| ◾ | 2023 America’s Best Employers for Women: Named by Forbes based on a survey of 60,000 workers at companies with at least 1,000 employees |
| ◾ | 2023 Best of the Best Recognition: Recognized annually since 2012 by U.S. Veterans Magazine |
| ◾ | 2023-2024 Equality 100 Award: Received score of 100% on the Human Rights Campaign Foundation’s Corporate Equality Index for LGBTQ+ inclusion since 2004 |
| ◾ | Best Employers for Diversity: Named by Forbes since 2019, based on a survey of 50,000 workers across the U.S. |
| ◾ | 2022 Top 50 Employers Recognition: Being awarded as a top employer by readers of Careers & the disABLED magazine |
| ◾ | Social Impact: Being recognized as a 2023 honoree of The Civic 50 awarded by Points of Light to the 50 most community-minded companies for their corporate citizenship and social impact programs. |
We are Intently Focused on Our Employees’ Well-Being and Success.
The well-being of our people and their families comes first. To help employees and their families navigate life’s everyday challenges, we focus on providing benefits that matter most to them. We have expanded our parental leave benefits and added more family/personal support programs, including backup care for children, adults, and elder family members, guidance throughout the elder caregiving journey, support for children who are experiencing developmental, learning, or emotional hurdles, college coach, tutoring, pet care, and legal assistance for employees’ parents. Recognizing that our employees span many different life stages and have a variety of different work-life needs, the company offers a wide range of resources and benefits to support all employees, including a hybrid work environment, employee sabbatical program, paid parental leave, employee stock purchase plan, tuition reimbursement, and volunteer time off. We have expanded our Employee Assistance Program that supports employee’s emotional and mental well-being with new onsite care at four major locations, and we introduced a new holistic, inclusive wellbeing program focused on financial, physical, emotional, and social well-being where employees can earn well-being rewards by completing activities through a customized website and mobile app.
Summary
The board believes that the adoption of this proposal is unnecessary as it would not meaningfully enhance the company’s commitment to pay equity and diversity and inclusion. As described above, we are committed to pay equity and cultivating diverse representation, and we have strong programs and practices supporting our ongoing commitment. Our current disclosure already provides robust information and implementation of this proposal would not meaningfully enhance the company’s already established commitment to pay equity as part of our broader commitment to diversity and inclusion.
For these reasons, we recommend a vote against the stockholder proposal.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 85 |
| VOTING PROCEDURES AND OTHER INFORMATION |
Voting Procedures and Other Information
How Can I Obtain Proxy Materials?
Pursuant to the “notice and access” rules adopted by the SEC, we have elected to provide stockholders access to our proxy materials over the internet. Accordingly, we are making this proxy statement and our Annual Report to Stockholders, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, available to our stockholders on the internet. On April 5, 2024, we mailed our stockholders a Notice of Internet Availability of Proxy Materials (Notice) containing instructions on how to access our proxy materials, including this proxy statement and our Annual Report to Stockholders. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request these materials. Other stockholders, in accordance with their prior requests, have received email notification of how to access our proxy materials and vote over the internet, or have been mailed paper copies of our proxy materials and a proxy card or a voting instruction form from their bank or broker.
Internet distribution of proxy materials is designed to expedite receipt by stockholders, lower the cost of our annual meeting, and reduce the environmental impact of our annual meeting. However, if you received a Notice by mail and would like to receive a printed copy of our proxy materials, please follow the instructions for requesting such materials contained on the Notice. If you have previously elected to receive our proxy materials electronically for all future meetings, you will continue to receive these materials via email unless you elect otherwise.
How Can I Attend the Annual Meeting?
Stockholders who owned the company’s common stock at the close of business on March 25, 2024 may attend the annual meeting. There were 1,776,057,596 shares of common stock outstanding on March 25, 2024.
This year’s annual meeting will be a virtual event. You will not be able to attend the annual meeting physically in person. We believe that conducting the annual meeting as a virtual meeting will enable higher levels of stockholder attendance while also helping the company reduce its financial and environmental costs associated with the annual meeting. Stockholders attending the meeting will have the same rights as at an in-person meeting, including the rights to vote and to ask questions through the virtual meeting platform.
To attend the annual meeting, please go to:
www.proxydocs.com/SCHW
As part of the attendance process, you must enter the control number contained in your Notice. Upon entry of your control number and other required information, you will receive further instructions via email that provides you access to the annual meeting and to vote and submit questions during the annual meeting. If your shares are held in “street name” (e.g., through a broker, bank, or other nominee) you may also need to provide the registered name on your account and the name of your broker, bank, or other nominee as part of the attendance process.
On May 23, 2024, you will receive an email one hour prior to the start time of the annual meeting containing a unique URL, through which you will be able to log in to the virtual annual meeting. The annual meeting will begin promptly at 11:00 a.m. Central Time. You should ensure that you have a strong internet connection, and we recommend testing your system on the virtual meeting platform.
| 86 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
VOTING PROCEDURES AND OTHER INFORMATION
Should you encounter any difficulties accessing the virtual meeting platform, including any difficulties voting or submitting questions, we will have technicians ready to assist you. Please utilize the link on the meeting portal website at www.proxydocs.com/SCHWtitled “Having trouble? Please view the Meeting Access FAQs Guide,” which will have many FAQs as well as a technical support number that can be called before or during the meeting.
Our virtual meeting platform will allow stockholders to submit questions before and during the annual meeting.Properly submitted questions may be addressed during the question and answer session of the annual meeting. Due to limited time at the annual meeting, we may aggregate questions by topic and may not be able to address all submitted questions. Our Investor Relations team may address submitted questions that are not able to be answered after the annual meeting. Consistent with the company’s approach when the annual meetings were held in person, questions or comments that are not related to the proposals under discussion, are about personal concerns not shared by stockholders generally, or use blatantly offensive language may be ruled out of order.
If you are not a shareholder or do not have a control number, you may still access the annual meeting as a guest but you will not be able to vote or ask questions during the meeting.
What is a Quorum?
A quorum is necessary to hold a valid annual meeting. The presence, in person or by proxy, of the holders of record of a majority in voting interest of the shares of stock of the company entitled to be voted at the annual meetingis necessary to constitute a quorum. Virtual attendance at the annual meeting constitutes presence in person for purpose of a quorum at the meeting.
How Can I Vote?
Stockholders who owned the company’s voting common stock at the close of business on March 25, 2024 may vote in advance of or at the annual meeting. Each share of voting common stock is entitled to one vote.
You may vote in advance of the meeting by internet, telephone, or mail.
| ◾ | Online. You may vote by visiting www.proxydocs.com/SCHW and entering the unique control number found in your Notice. |
| ◾ | Telephone. Call (866) 485-0358 and follow the instructions on your proxy card or your voting instruction form. |
| ◾ | Mail. Sign, date and mail your proxy card or your voting instruction form. |
If you plan to attend and submit your vote at the virtual annual meeting (instead of voting in advance), you will need to provide the unique control number found in your Notice.
If you hold your shares through a broker, bank, or other nominee (that is, in street name), you will receive instructions from your broker, bank or nominee that you must follow in order to submit your voting instructions and have your shares voted at the annual meeting. You may be instructed to obtain a legal proxy from your broker, bank, or other nominee and to submit a copy in advance of the meeting. Further instructions will be provided to you via email.
Even if you plan to attend the annual meeting, we recommend that you submit your proxy or voting instructions in advance of the annual meeting as described above so that your vote will be counted even if you later decide not to attend the meeting.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 87 |
VOTING PROCEDURES AND OTHER INFORMATION
How is my vote counted?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 officerNEO 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 officerNEO 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 Peter J. Morgan III 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):
for the |
for |
|
forthe advisory approval of |
|
|
against the stockholder proposal |
|
according to the best judgment of Mr. Schwab, Mr. Bettinger, and Mr. Morgan if a proposal comes up for a vote at the meeting that is not on the proxy. |
How will my sharesWill My Shares be voted if other businessVoted If Other Business is presentedPresented at the annual meeting?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. Morgan will vote your shares on those matters according to their best judgment.
What ifIf I change my mind afterChange My Mind After I submit my proxy?Submit My Proxy?
YouIf you are a holder of record, you may revoke your proxy and change your vote by:
signing a proxy card with a later date and returning it before the polls close at the |
voting by telephone or on the internet before 11: |
voting at the |
If you hold your shares in “street name,” you must follow the instructions provided by your broker, bank, or nominee to revoke your voting instructions.
96
How many votes mustMany Votes Must the director nominees receiveDirector Nominees Receive to be electedElected as directors?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
| 88 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
VOTING PROCEDURES AND OTHER INFORMATION
until the next annual meeting of stockholders. However, in the event that a director does not receive more “for” than “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 director’s continued service for a holdover term. Under the guidelines, the Nominating and Corporate Governance Committee should consider the following:
the reasons for the director’s failure to receive an affirmative majority of |
the director’s qualifications and skills and contributions to the board and board |
the effect on board composition without the director’s continued service during the holdover term on the board or board |
whether there are qualified candidates to fill a vacancy if the affected director immediately resigned from the board or board |
the guidelines for considering director candidates established by the Nominating and Corporate Governance Committee. |
In making its evaluation, the Nominating and Corporate Governance Committee may determine that:
the director should continue to serve a holdover term on the |
the director should continue service on the board for a predetermined period (but less than a full holdover term) |
the director should continue service on the board for a holdover term or predetermined period but resign from one or more board |
the director should immediately resign from the |
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 hera resignation immediately upon such determination. The Nominating and Corporate Governance Committee’s determination, including the reasons for such determination, will be publicly disclosed on a Form 8-K filed with the SEC.
What happens ifHappens If a director nomineeDirector Nominee is unableUnable to standStand for election?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. Morgan can vote your shares for a substitute nominee. They cannot vote for more than three nominees.
How many votesMany Votes are neededNeeded for the ratificationRatification of independent auditors, the advisory approval of named executive officer compensation,Independent Auditors and the 2022 Stock Incentive Plan?Advisory Approval of NEO Compensation?
The ratification of independent auditors and the advisory approval of named executive officerNEO compensation and the 2022 Stock Incentive Plan 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.
97
How many votesMany Votes are neededNeeded for the approvalApproval of the declassification of the Board of Directors?Stockholder Proposals?
The elimination of the classified structure of the Board of Directors and the annual election of directors would require amendments to (i) Article Sixth of the Certificate of Incorporation and (ii) Sections 3.02, 3.05, and 3.06 of the Bylaws, respectively. Article Twelfth of the Certificate of Incorporation requires the affirmative vote of the holders of 80% of all outstanding shares of common stock to approve an amendment of Article Sixth of the Certificate of Incorporation. Article Fifth of the Certificate of Incorporation and Section 8.04 of the Bylaws require the affirmative vote of the holders of 80% of all outstanding shares of common stock to approve an amendment of Section 3.02, 3.05, or 3.06 of the Bylaws or any provision that is inconsistent with such Sections. As a result, the proposal regarding declassification of the Board of Directors will be approved if 80% of all outstanding shares of common stock vote for approval.
How many votes are needed for the approval of the management proposal on proxy access?
The Proxy Access Amendments include amendments to Sections 2.06, 2.11, and 3.03 of the Bylaws and director nomination procedures that interact with Section 2.06 of the Bylaws. Article Fifth of the Certificate of Incorporation and Section 8.04 of the Bylaws require the affirmative vote of the holders of 80% of all outstanding shares of common stock to approve an amendment of Section 2.06 of the Bylaws or any provision that is inconsistent with Section 2.06. As a result, the management proposal regarding proxy access will be approved if the holders of 80% of all outstanding shares of common stock vote for approval.
How many votes are needed for approval of 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.
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 89 |
VOTING PROCEDURES AND OTHER INFORMATION
What is a “broker non-vote”“Broker Non-Vote”?
A broker non-vote occurs when a brokerage firm holding shares in street name“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 effectEffect of not providing voting instructions if my sharesNot Providing Voting Instructions If My Shares are heldHeld in street name?“Street Name”?
Brokerage firms may 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 company’s proposal to ratify the selection of independent auditors is considered a routine matter, but the election of directors, the approval of declassification of the Board of Directors, the advisory approval of named executive officerNEO compensation, the approval of the 2022 Stock Incentive Plan, the approval of the management proposal regarding proxy access, and the stockholder proposals are not.
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.
98
What is the effectEffect of not submitting my proxy if my sharesNot Submitting My Proxy If My Shares are heldHeld in a retirement plan?Retirement Plan?
A trustee under a retirement plan may be able to vote a participant’s 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 ifDoes It Mean If I receive more than one proxy card?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?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.
| 90 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
VOTING PROCEDURES AND OTHER INFORMATION
Where doDo I find voting resultsFind Voting Results of the meeting?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 SEC’s electronic data system at www.sec.gov. You also may obtain a copy by contacting investor.relations@schwab.com.investor.relations@schwab.com.
Voting results arewill be tabulated and certified by our transfer agent, Equiniti Trust Company.inspector of elections.
Who paysPays the costCost for proxy solicitation?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 $15,000 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”?
“Householding” means that we may deliver a single Notice or, if applicable, 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 Notice or, if applicable, set of proxy materials to each such household, unless we receive contrary instructions.
99
We will promptly deliverIf you are eligible for householding but received multiple Notices or, if applicable, sets of proxy materials and prefer to receive only a single Notice or set for your household, please send a request addressed to our transfer agent, Equiniti Trust Company, at P.O. Box 64856, St. Paul, Minnesota 55164, or call (877) 778-6753.If you are a registered stockholder residing at an address with other registered stockholders and wish to receive a separate Notice or, if applicable, set of proxy materials at the request of any stockholder who is in a household that participatesthis time or in the householdingfuture, we will promptly provide you with a separate Notice or set upon request. To obtain this Notice or set, please contact Equiniti Trust Company as indicated above. If you hold your shares in “street name,” please contact your broker, bank, or other holder of record to request information about householding.
How Do I Submit a Proposal or Nomination for the 2025 Annual Meeting?
Pursuant to Rule 14a-8 under the Exchange Act, some proposals by stockholders may be eligible for inclusion in our proxy statement for the 2025 annual meeting. If you want us to consider including such a proposal in our proxy statement next year, it must comply with SEC rules and it must be (i) submitted to the Corporate Secretary via email at SchwabCorporateSecretary@Schwab.com or (ii) received by mail at the company’s proxy materials. You may callprincipal executive offices directed to the attention of the Office of the Corporate Secretary no later than December 6, 2024.
In addition, under our proxy access bylaw, if you are a stockholder or a group of up to 20 stockholders that has owned at (817) 854-6800least 3% of our outstanding common stock for at least three years, you may submit nominees up to the
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | 91 |
VOTING PROCEDURES AND OTHER INFORMATION
greater of two and 25% of the number of directors then in office for inclusion in our proxy statement for the 2025 annual meeting if the nominations are received by the Corporate Secretary via email or send your requestby mail no earlier than November 6, 2024 and no later than December 6, 2024.
If you want to submit a proposal or nomination for action at next year’s annual meeting that is not to be included in our proxy statement, pursuant to our bylaws, it must be received by the Corporate Secretary via email or by mail no earlier than February 22, 2025 and no later than March 24, 2025, and any such proposal must be, under the Delaware General Corporation Law, an appropriate subject for stockholder action.
In addition to satisfying the foregoing requirements, stockholders who intend to solicit proxies in support of director nominees other than our nominees for next year’s annual meeting pursuant to Rule 14a-19 under the Exchange Act must provide the notice required by Rule 14a-19 via email or by mail postmarked no later than March 24, 2025.
The bylaws contain specific procedural requirements regarding a stockholder’s 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 Office of the Corporate Secretary at the address in the “Corporate Governance Information”Governance” section of this proxy statement.
If you currently receive multiple copies
| 92 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
| APPENDIX A: NON-GAAP FINANCIAL MEASURES |
Appendix A: Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with GAAP, this proxy statement contains references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the company, and facilitate meaningful comparison of the company’s proxy materialsresults in the current period to both historic and would like to participate in householding, please contact the Office of the Corporate Secretary.
100
Amendments to Certificate of Incorporation
Set forth below is the text of the applicable provisions of the Certificate of Incorporation as proposed to be amended by the Declassification Amendments. Proposed additions are indicated by bold underlining, and proposed deletions are indicated by strikethroughs.
***
FIFTH. The Bylaws of the Corporation may be made, altered, amended, or repealed, and new Bylaws may be adopted, by the Board of Directors at any regular or special meeting by the affirmative vote of a majority of those directors present at any meeting of the directors; subject, however, to the right of the stockholders to alter, amend or repeal any Bylaws made or amended by the directors. Notwithstanding the foregoing,after the 1996 Annual Meeting of Stockholders,Sections 2.06, 2.10, 3.02(a), 3.02(b)(1), 3.02(b)(2), 3.02(b)(3), 3.02(c), 3.05, 3.06 and 8.04 of the Corporation’s Bylaws mayfuture results. These non-GAAP measures should not be amended, altered or repealed, nor may any provision inconsistent with such Sections be adopted, except by the affirmative vote of the holders of no less than 80% of the total voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together asconsidered a single class.
SIXTH.
(A) Number, Election and Terms.Except as otherwise fixed by or pursuant to the provisions of Article FOURTH hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the Board of the Corporation shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. Commencing with the 1996 annual meeting of stockholders, the directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1997, the second class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1998, and the third class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1999, with each director to hold office until his or her successor is duly elected and qualified. At each annual meeting of the stockholders of the Corporation, commencing with the 1997 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election, with each director to hold office until his or her director shall have been duly elected and qualified.
(B) Stockholder nomination of director candidates. Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in the Bylaws of the Corporation.Subject to the rights of the holders of preferred stock to elect directors:
(1) From the effectiveness of this Article SIXTH filed with the Secretary of State of the State of Delaware until the election of directors at the 2023 annual meeting of stockholders (each annual meeting of stockholders an “Annual Meeting”), pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, the Board shall be divided into three classes of directors, Class I, Class II and Class III (each class as nearly equal in number as possible), with the directors in the class with the term expiring at the 2023 Annual Meeting being the Class I directors, the directors in the class with the term expiring at the 2024 Annual Meeting being the Class II directors and
A-1
the directors in the class with the term expiring at the 2025 Annual Meeting being the Class III directors, and directors in each class may be removed only with cause pursuant to Section D of this Article Sixth.
(2) Commencing with the election of directors at the 2023 Annual Meeting, pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, the Board shall be divided into two classes of directors,Class I and Class II, with the directors in Class I having a term that expires at the 2024 Annual Meeting and thedirectors in Class II having a term that expires at the 2025 Annual Meeting and directors in each class may be removed only with cause pursuant to Section D of this Article Sixth. The successors of the directors who, immediately prior to the 2023 Annual Meeting, were members of Class I (and whose terms expire at the 2023 Annual Meeting) shall be elected to Class I; the directors who, immediately prior to the 2023 Annual Meeting, were members of Class II and whose terms were scheduled to expire at the 2024 Annual Meeting shall become members of Class I; and the directors who, immediately prior to the 2023 Annual Meeting, were members of Class III and whose terms were scheduled to expire at the 2025 Annual Meeting shall become members of Class II with a term expiring at the 2025 Annual Meeting.
(3) Commencing with the election of directors at the 2024 Annual Meeting, pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, there shall be a single class of directors, Class I, with all directors of such class having a term that expires at the 2025 Annual Meeting and all such directors may be removed only with cause pursuant to Section D of this Article Sixth. The successors of the directors who, immediately prior to the 2024 Annual Meeting, were members of Class I (and whose terms expire at the 2024 Annual Meeting) shall be elected to Class I for a term that expires at the 2025 Annual Meeting, and the directors who, immediately prior to the 2024 Annual Meeting, were members of Class II and whose terms were scheduled to expire at the 2025 Annual Meeting shall become members of Class I with a term expiring at the 2025 Annual Meeting.
(4) From and after the election of directors at the 2025 Annual Meeting, the Board shall cease to be classified as provided in Section 141(d) of the General Corporation Law of the State of Delaware, and the directors elected at the 2025 Annual Meeting (and each Annual Meeting thereafter) shall be elected for a term expiring at the next Annual Meeting and may be removed with or without cause pursuant to Section D of this Article Sixth.
(C) Vacancies.In the event of any increase or decrease in the authorized number of directors at any time during which the Board of Directors is divided into a class or classes:
(1) Each director then serving shall nevertheless continue as a director of the class of which he is a member until the expiration of his term or his prior death, retirement, resignation or removal; and
(2) Except to the extent that an increase or decrease in the authorized number of directors occurs in connection with the rights of holders of preferred stock to elect additional directors, the newly created or eliminated directorships resulting from any increase or decrease shall be apportioned by the Board of Directors among the class or classes so as to keep the number of directors in each class as nearly equal as possible.
(D) Notwithstanding the provisions of Paragraphs B and C of this Article SIXTH, each director shall serve until his successor is elected and qualified or until his death, retirement, resignation or removal. Except as may otherwise be provided pursuant to Article FOURTH hereof with respect to any rights of holders of preferred stock, a director may be removed only by the affirmative vote of the stockholders holding at least 80% of the capital stock entitled to vote for the election of directors.
(E) Subject to applicable law and except as otherwise providedsubstitute for, or fixed by or pursuantsuperior to, the provisions of Article FOURTH hereof relating to the rights of the holders of any class or series of stock having a preference over
A-2
the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of officeof the classto which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors of the Corporation shall shorten the term of any incumbent director.
(F) During any period when the holders of any series of preferred stock have the right to elect additional directors as provided for or fixed pursuant to the provisions of Article FOURTH hereof, then upon commencement and for the duration of the period during which such right continues (i) the then otherwise total and authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such preferred stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his earlier death, disqualification, resignation or removal. Except as otherwise provided by the Board of Directors in the resolution or resolutions establishing such series, whenever the holders of any series of preferred stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, all such additional directors elected by the holders of such stock or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors shall automatically cease to be qualified as directors, the term of office of all such directors shall forthwith terminate and the total and authorized number of directors of the Corporation shall be reduced accordingly.
(G) Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in the Bylaws of the Corporation.
Removal. Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of 80% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class.
TWELFTH.
(A) This Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provisions contained herein, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law, and all rights, preferences, and privileges of whatsoever nature conferred upon shareholders, directors, or any other person whomsoever by or pursuant to the Restated Certificate of Incorporation in its present form or as hereafter are granted, subject to the rights reserved in this Article TWELFTH.
(B) In addition to any requirements of law and any other provisions hereof (and notwithstanding the fact that approval by a lesser vote may be permitted by law or any other provision hereof), the affirmative vote of the holders of 80% or more of the combined voting power of the then-outstanding shares of Voting Stock, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article TWELFTH or Articles FIFTH,SIXTH,NINTH, TENTH and ELEVENTH, and paragraphs (A), (B)(1), (B)(2), (B)(3), (C), (D), (E), (F) and (G) of Article SIXTH hereof.
A-3
Amendments to Bylaws Reflecting Adoption of Declassification Proposal
Set forth below is the text of the applicable provisions of the Bylaws as proposed to be amended by the Declassification Amendments. Proposed additions are indicated by bold underlining, and proposed deletions are indicated by strikethroughs.
***
Section 3.02. Number, Election and Terms.
(a) Except as otherwise fixed by or pursuant to the provisions of Article FOURTH of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the Board of the Corporation shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. Commencing with the 1996 annual meeting of stockholders, the directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1997, the second class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1998, and the third class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1999, with each director to hold office until his or her successor is duly elected and qualified. At each annual meeting of the stockholders of the Corporation, commencing with the 1997 annual meeting, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election, with each director to hold office until his or her successor shall have been duly elected and qualified.
(b) Subject to the rights of the holders of preferred stock to elect directors:
(i) From the effectiveness of Article SIXTH of the Certificate of Incorporation filed with the Secretary of State of the State of Delaware until the election of directors at the 2023 annual meeting of stockholders (each annual meeting of stockholders an “Annual Meeting”), pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, the Board shall be divided into three classes of directors, Class I, Class II and Class III (each class as nearly equal in number as possible), with the directors in the class with the term expiring at the 2023 Annual Meeting being the Class I directors, the directors in the class with the term expiring at the 2024 Annual Meeting being the Class II directors, and the directors in the class with the term expiring at the 2025 Annual Meeting being the Class III directors, and directors in each class may be removed only with cause pursuant to Section 3.05 of this Article III and Section D of Article Sixth of the Certificate of Incorporation.
(ii) Commencing with the election of directors at the 2023 Annual Meeting, pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, the Board shall be divided into two classes of directors, Class I and Class II, with the directors in Class I having a term that expires at the 2024 Annual Meeting and the directors in Class II having a term that expires at the 2025 Annual Meeting, and directors in each class may be removed only with cause pursuant to Section 3.05 of this Article III and Section D of Article Sixth of the Certificate of Incorporation. The successors of the directors who, immediately prior to the 2023 Annual Meeting, were members of Class I (and whose terms expire at the 2023 Annual Meeting) shall be elected to Class I; the directors who, immediately prior to the 2023 Annual Meeting, were members of Class II and whose terms were scheduled to expire
B-1
at the 2024 Annual Meeting shall become members of Class I; and the directors who, immediately prior to the 2023 Annual Meeting, were members of Class III and whose terms were scheduled to expire at the 2025 Annual Meeting shall become members of Class II with a term expiring at the 2025 Annual Meeting.
(iii) Commencing with the election of directors at the 2024 Annual Meeting, pursuant to Section 141(d) of the General Corporation Law of the State of Delaware, there shall be a single class of directors, Class I, with all directors of such class having a term that expires at the 2025 Annual Meeting, and all such directors may be removed only with cause pursuant to Section 3.05 of this Article III and Section D of Article Sixth of the Certificate of Incorporation. The successors of the directors who, immediately prior to the 2024 Annual Meeting, were members of Class I (and whose terms expire at the 2024 Annual Meeting) shall be elected to Class I for a term that expires at the 2025 Annual Meeting, and the directors who, immediately prior to the 2024 Annual Meeting, were members of Class II and whose terms were scheduled to expire at the 2025 Annual Meeting shall become members of Class I with a term expiring at the 2025 Annual Meeting.
(iv) From and after the election of directors at the 2025 Annual Meeting, the Board shall cease to be classified as provided in Section 141(d) of the General Corporation Law of the State of Delaware, and the directors elected at the 2025 Annual Meeting (and each Annual Meeting thereafter) shall be elected for a term expiring at the next Annual Meeting and may be removed with or without cause pursuant to Section 3.05 of this Article III and Section D of Article Sixth of the Certificate of Incorporation.
(c) In the event of any increase or decrease in the authorized number of directors at any time during which the Board of Directors is divided into a class or classes:
(i) Each director then serving shall nevertheless continue as a director of the class of which he is a member until the expiration of his term or his prior death, retirement, resignation or removal; and
(ii) Except to the extent that an increase or decrease in the authorized number of directors occurs in connection with the rights of holders of preferred stock to elect additional directors, the newly created or eliminated directorships resulting from any increase or decrease shall be apportioned by the Board of Directors among the class or classes so as to keep the number of directors in each class as nearly equal as possible.
Section 3.05. Removal.Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, anyNotwithstanding the provisions of Section 3.02(b)-(c) of these Bylaws or the provisions of paragraphs B and C of Article SIXTH of the Certificate of Incorporation, each director shall serve until his successor is elected and qualified or until his death, retirement, resignation or removal. Except as may otherwise be provided pursuant to Article FOURTH of the Certificate of Incorporation with respect to any rights of holders of preferred stock, a director may be removedfrom office at any time, but only for cause andonly by the affirmative vote of the holders ofstockholders holding at least 80% of the combined voting power of the then outstanding shares ofcapital stock entitled to votegenerally infor the election of directors, voting together as a single class.
Section 3.06. Vacancies. Subject to applicable law and except as otherwise provided for or fixed by or pursuant to the provisions of Article FOURTH of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, and unless the Board of Directors otherwise determines, vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the remaining directors, though less than a quorum of the Board of Directors, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of officeof the
B-2
classto which they have been elected expires and until such director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the Board of Directors of the Corporation shall shorten the term of any incumbent director.
Section 8.04. Amendments. These Bylaws may be altered, amended or repealed at any meeting of the Board or of the stockholders, provided notice of the proposed change was given in the notice of the meeting and, in the case of a meeting of the Board, in a notice given not less than two days prior to the meeting; provided, however, that, in the case of amendments by stockholders, notwithstanding any other provisions of these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Corporation required by law, the Certificate of Incorporation or these Bylaws, the affirmative vote of the holders of at least 80% of the total voting power of all the then outstanding shares of Voting Stock of the Corporation, voting together as a single class, shall be required to alter, amend or repeal this Section 8.04 or any provision of Sections 2.06, 2.10, 3.02(a), 3.02(b)(1), 3.02(b)(2), 3.02(b)(3), 3.02(c), 3.05 and 3.06 of these Bylaws.
B-3
THE CHARLES SCHWAB CORPORATION
2022 STOCK INCENTIVE PLAN
(Adopted by the Board on March 29, 2022)
(Approved by Stockholders on May 17, 2022)
TABLE OF CONTENTS
C-i
| ||||
C-ii
THE CHARLES SCHWAB CORPORATION
2022 STOCK INCENTIVE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board of Directors of The Charles Schwab Corporation (the “Board”) on March 29, 2022, subject to stockholder approval on May 17, 2022 (the “Effective Date”). The purposes of The Charles Schwab Corporation 2022 Stock Incentive Plan (the “Plan”) are to promote the long-term success of The Charles Schwab Corporation (“Schwab” or the “Company”) and the creation of incremental stockholder value by (i) encouraging non-employee directors, employees and consultants to focus on long-range objectives, (ii) encouraging the attraction and retention of non-employee directors, employees and consultants with exceptional qualifications, and (iii) linking non-employee directors, employees and consultants directly to stockholder interests by providing them stock options and other stock and cash incentives.
This Plan is a successor to The Charles Schwab Corporation 2013 Stock Incentive Plan and The Charles Schwab Corporation 2004 Stock Incentive Plan (the “Prior Plans”). As of the Effective Date, no further awards shall be made under the Prior Plans. The Prior Plans shall continue to apply to outstanding awards granted to a participant under the Prior Plans prior to the Effective Date. In the event that this Plan is not approved by stockholders, awards shall continue to be made under The Charles Schwab Corporation 2013 Stock Incentive Plan in accordance with its terms.
(a) Committee Composition. The Plan will be administered by a Committee (the “Committee”) of the Board consisting of two or more directors as the Board may designate from time to time. The composition of the Committee shall satisfy such requirements as:
(i) the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 or its successor under the Securities Exchange Act of 1934 (the “Exchange Act”); and
(ii) may be established by the stock exchange or stock market on which Schwab’s common stock may be listed pursuant to the rule-making authority of such stock exchange or stock market.
(b) Committee Administration. The Committee shall have discretionary authority to construe and interpret the Plan and any benefits granted under the Plan, to establish, interpret and amend rules for Plan administration, to change the terms and conditions of options and other benefits at or after grant, and to make all other determinations which it deems necessary or advisable for the administration of the Plan. The determinations of the Committee shall be made in accordance with its judgment as to the best interests of Schwab and its stockholders and in accordance with the purposes of the Plan, and shall be final and conclusive on all persons. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members in person or by telephone. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee, and shall be made in writing signed by all the Committee members. No member of the Committee shall be liable for any action that such member has taken or failed to take in good faith with respect to the Plan or any award under the Plan.
(i) The Committee may, in its discretion, at any time and from time to time, delegate to one or more of its members (but not less than two members with respect to persons subject to section 16 of the Exchange Act) such of its powers as it deems appropriate.
C-1
(ii) The Committee may authorize one or more employees of the Company who are serving as officers of the Company under Delaware law (“officers”) to select employees to participate in the Plan and to determine the number of option shares and other rights to be granted to such participants (other than to the employee making such determination), except with respect to awards to employees subject to section 16 of the Exchange Act, and any reference in the Plan to the Committee shall include such officers or employees.
(iii) Except with respect employees subject to section 16 of the Exchange Act, the Committee may, in its discretion, at any time and from time to time, delegate to one or more persons who are not members of the Committee, including one or more employees or officers if required under Delaware law, any or all of its authority and discretion under this Section, to the full extent permitted by law and the rules of any exchange on which shares of Schwab common stock are traded. Subject to the requirements of applicable law, the Committee may also authorize one or more employees or officers, if required under Delaware law, to administer claims under the Plan.
(iv) Any action by a delegate or an administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee, and references in this Plan to the Committee shall include any administrator, provided that the actions and interpretations of any administrator shall be subject to review and approval, disapproval, or modification by the Committee.
(a) General Rule. Participants may consist of all employees and consultants of Schwab and its subsidiaries, non-employee directors of the Board (“Non-Employee Directors”) and non-employee directors of any subsidiary as determined by the Committee (“Subsidiary Directors”) or its delegate. This determination may also be made by the Board or its delegate. Any corporation or other entity in which a 50% or greater interest is at the time directly or indirectly owned by Schwab shall be a subsidiary for purposes of the Plan. Designation of a participant in any year shall not require the Committee to designate that person to receive a benefit in any other year or to receive the same type or amount of benefit as granted to the participant in any other year or as granted to any other participant in any year. The Committee shall consider all factors that it deems relevant in selecting participants and in determining the type and amount of their respective benefits.
(b) Annual Compensation Limit for Non-Employee Directors. For any one Non-Employee Director for any fiscal year of the Company, the maximum aggregate (i) amount of cash compensation paid in such fiscal year to such Non-Employee Director for such Non-Employee Director’s service as a member of the Board and as a Subsidiary Directorduring such fiscal year, including but not limited to service performed in such fiscal year but for which payment is not made until the following fiscal year, and (ii) grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards granted in such fiscal year to such Non-Employee Director under this Plan or any other stock plan of the Company shall not exceed $1 million ($1,000,000). In the first calendar year upon joining the Board, the maximum aggregate amount of such cash compensation and awards granted to a Non-Employee Director shall not exceed $2 million ($2,000,000).
SECTION 4. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. There is hereby reserved for issuance under the Plan an aggregate of:
(i) 113 million shares of Schwab common stock; plus
(ii) any shares of Schwab common stock subject to outstanding awards under the Prior Plans as of the Effective Date that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in shares); plus
C-2
(iii) any shares of Schwab common stock that were issued under the Prior Plans and are reacquired by Schwab after the Effective Date.
The aggregate maximum number of shares of Schwab common stock available under subparagraphs (ii) and (iii) is 150 million. All or any portion of the maximum number of available shares may be issued pursuant to Incentive Stock Options. To the extent an award is paid in cash, it shall not reduce the limits of this Section 4(a).
(b) Share Usage. If there is a lapse, expiration, termination or cancellation of any award issued under the Plan prior to the issuance of shares under the Plan or if shares of common stock are issued under the Plan and thereafter are reacquired by Schwab, the shares subject to those awards and the reacquired shares shall be added to the shares available for benefits under the Plan. Shares covered by awards granted under the Plan or a Prior Plan shall not be counted as issued unless and until they are actually issued and delivered to a participant. Any shares covered by a Stock Appreciation Right shall be counted as issued only to the extent shares are actually issued to the participant upon exercise of the right. In addition, any shares of common stock exchanged by a participant as full or partial payment to Schwab of the exercise price under any Stock Option exercised under the Plan or a Prior Plan, any shares retained by Schwab pursuant to a participant’s tax withholding election, and any shares covered by a benefit that is settled in cash shall be added to the shares available for benefits under the Plan. All shares issued under the Plan may be authorized and unissued shares, issued shares reacquired by Schwab or other shares that are treasury shares.
(c) Participant Limits. Under the Plan, no participant may be granted in any fiscal year of the Company:
(i) Stock Options or SARs relating to more than 5 million shares of Schwab common stock in the aggregate, and
(ii) Restricted Stock, Restricted Stock Units, Performance Stock, Performance-Based Restricted Stock Units, Performance Units denominated in shares of Schwab common stock, or Other Stock Awards that are subject to the attainment of Performance Criteria described in Section 5(g) relating to more than 1 million shares of Schwab common stock in the aggregate, and
(iii) Performance Units denominated in cash or Other Cash Awards that are subject to the attainment of Performance Criteria described in Section 5(g) that could entitle the participant to more than $10 million in the aggregate from that year’s awards (considering for this purpose the maximum that could be payable, including for above-target performance).
(d) Adjustments. The shares reserved for issuance and the limitations set forth in this Section 4 shall be subject to adjustment in accordance with Section 6.
(a) General. Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock, Performance-Based Restricted Stock Units, Performance Units, and Other Stock or Cash Awards, all as described below. Each award under the Plan shall be evidenced by a written award agreement in paper or electronic form approved by the Committee. Such agreement shall be subject to and incorporate the express terms and conditions, if any, required under the Plan or as required by the Committee for the form of award granted and such other terms and conditions as the Committee may specify.
(b) Stock Options. Stock Options may be granted to participants at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an incentive stock option described in section 422(b) of the Code (an “Incentive Stock Option”); provided that only a common-law employee shall be eligible for the grant of an Incentive Stock Option. No participant may be granted Incentive Stock
C-3
Options (under this Plan or any other Incentive Stock Option plan of the Company and its affiliates) which are first exercisable in any calendar year for shares of Schwab common stock having an aggregate fair market value (determined as of the date an option is granted) that exceeds $100,000; any Stock Option granted under the Plan that exceeds this limit shall be a Nonqualified Stock Option. No Incentive Stock Options may be granted after March 29, 2032. The option price for each option shall be determined by the Committee but shall not be less than 100% of the fair market value of Schwab’s common stock on the date the option is granted (110% in the case of an Incentive Stock Option granted to an individual who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any “parent” or “subsidiary” (within the meaning of Section 424(e) of (f) of the Code) (a “10% Stockholder”). Each option shall expire at such time as the Committee shall determine at the time of grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant (five years in the case of an Incentive Stock Option granted to a 10% Stockholder). The option price, upon exercise of any option, shall be payable to Schwab in full by:
(i) cash payment or its equivalent;
(ii) surrendering, or attesting to the ownership of, shares of Schwab stock that are already owned by the participant;
(iii) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to Schwab the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to Schwab; and
(iv) such other methods of payment as the Committee, at its discretion, deems appropriate; provided, however, that no method of payment will be permitted if it would result in a violation of applicable law, as determined by the Committee in its sole discretion.
Notwithstanding anything in this Section 5(b) to the contrary, Stock Options may be granted only to individuals who provide direct services on the date of grant of the Stock Option to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest within the meaning of Treasury Regulation section 1.409A-1(b)(iii)(E) in each entity in the chain.
(c) Stock Appreciation Rights. Stock Appreciation Rights (“SARs”) may be granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The Committee also may, in its discretion, substitute SARs for outstanding Stock Options. The grant price of a tandem or substitute SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the fair market value of Schwab’s common stock on the date of its grant. An SAR may be exercised upon such terms and conditions and for such term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the option term in the case of a tandem or substitute SAR or ten years in the case of a free-standing SAR and the terms and conditions applicable to a substitute SAR shall be substantially the same as those applicable to the Stock Option which it replaces. Upon exercise of an SAR, the participant shall be entitled to receive payment from Schwab in an amount determined by multiplying the excess of the fair market value of a share of Schwab common stock on the date of exercise over the grant price of the SAR by the number of shares with respect to which the SAR is exercised. The payment may be made in cash or stock, at the discretion of the Committee. Notwithstanding anything in this Section 5(c) to the contrary, SARs may be granted only to individuals who provide direct services on the date of grant of the SAR to the Company or another entity in a chain of entities in which the Company or another such entity has a controlling interest within the meaning of Treasury Regulation section 1.409A-1(b)(iii)(E) in each entity in the chain.
(d) Restricted Stock and Restricted Stock Units. Restricted Stock and Restricted Stock Units may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock and
C-4
Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following (i) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (ii) a requirement that the holder forfeit (or in the case of shares or units sold to the participant resell to Schwab at cost) such shares or units in the event of termination of employment during the period of restriction. All restrictions shall expire at such times as the Committee shall specify. Settlement of vested Restricted Stock Units may be made in the form of (a) cash, (b) shares of Schwab common stock or (c) any combination of both, as determined by the Committee. Restricted Stock Units may be settled in a lump sum or in installments as specified in the applicable award agreement. The distribution may occur or commence when all vesting conditions applicable to the Restricted Stock Units have been satisfied or have lapsed, or it may be deferred to any later date in accordance with Section 9, as provided for in the applicable award agreement.
(e) Performance Awards. The Committee shall designate the participants to whom long-term performance stock (“Performance Stock”), long-term performance-based restricted stock units (“Performance-Based Restricted Stock Units”) or long-term performance units (“Performance Units”) are to be awarded and determine the number of shares or units, the length of the performance period and the other terms and conditions of each such award. Each award of Performance Stock, Performance-Based Restricted Stock Units or Performance Units shall entitle the participant to a payment in the form of shares of common stock or cash (as provided in the award agreement) upon the attainment of performance goals and other terms and conditions specified by the Committee pursuant to Section 5(g) below. The Committee may, in its discretion, make a cash payment equal to the fair market value of shares of common stock otherwise required to be issued to a participant pursuant to a Performance Stock award.
(f) Other Stock or Cash Awards. In addition to the incentives described in paragraphs (b) through (e) of this Section 5, the Committee may grant other incentives payable in cash or in common stock under the Plan as it determines to be in the best interests of Schwab and subject to such other terms and conditions as it deems appropriate.
(i) Awards of Restricted Stock, Restricted Stock Units, Performance Stock, Performance-Based Restricted Stock Units, Performance Units and Other Stock or Cash Awards under the Plan may be made subject to the attainment of performance goals for a specified period of time (a “Performance Period”). When the Committee makes an award subject to a particular performance goal, the Committee shall adopt or confirm a written definition of that performance goal at the time the performance goal is established. The categories of permissible performance goals include: income; operating income; pre-tax income; after-tax income; profit; pre-tax operating profits; pre-tax reported profits; pre-tax operating profit margin; pre-tax reported profit margin; after-tax operating profit margin; after-tax reported profit margin; revenue; revenue growth; operating revenue growth;cash flow; stockholder return; net income; client net new assets; levels of client assets or sales (of products, offers or services); earnings per share; adjusted diluted earnings per share; return on stockholders’ equity; return on stockholders’ common equity; return on tangible stockholders’ common equity; return on investment; earnings; earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); consolidated pre-tax earnings; net earnings; operating cash flow; free cash flow; free cash flow per share; cash flow return; economic value added; market value added; total stockholder return; debt/capital ratio; return on total capital; market share of assets; return on assets; return on net assets; return on capital employed; cost control; Schwab common stock price; capital expenditures; price/earnings growth ratio; sales; sales volume; and book value per share; cost of capital; cost of equity; and changes between years or periods that are determined with respect to any of the above-listed performance criteria (“Performance Criteria”). The Committee may establish other performance measures for awards, including performance criteria measured on a pre-tax, post-tax, operating, reported, consolidated, Generally Accepted Accounting Principles (“GAAP���),
C-5
adjusted GAAP, and/or non-GAAP basis. A performance goal may be measured relative to the performance of the Company as a whole or any business unit, department, division region or function of the Company or any subsidiary in which the participant is employed and may be measured relative to a peer group or index. If more than one performance goal is specified by the Committee for a Performance Period, the Committee shall also specify, in writing, whether one, all or some other number of such performance goals must be attained in order for the performance goals to be satisfied for the applicable award. Notwithstanding satisfaction of any performance goals, the number of shares issued or amounts paid under awards may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine.
(ii) For performance-based awards, the Committee shall determine and certify in writing, for each participant, the extent to which the performance goals have been met and the amount of the award, if any, to be made. The Committee has the absolute and unrestricted discretion to reduce the amount of the award that otherwise would be payable in connection with the attainment of the performance goals applicable to the award. It is expressly permissible to reduce the amount otherwise payable to zero. If a performance goal for a Performance Period is not achieved, the Committee in its sole discretion may pay all or a portion of that award based on such criteria as the Committee deems appropriate, including without limitation individual performance, Company-wide performance or the performance of the specific division, subsidiary, employer, department, region, or function employing the participant.
(iii) In determining whether any performance goals have been satisfied, the Committee may include or exclude any or all items that are unusual or non-recurring, including but not limited to, (A) charges, costs, benefits, gains or income associated with reorganizations or restructurings of the Company, discontinued operations, goodwill, other intangible assets, long-lived assets (non-cash), real estate strategy (e.g., costs related to lease terminations or facility closure obligations), litigation or the resolution of litigation (e.g., attorneys’ fees, settlements or judgments), or currency or commodity fluctuations; and (B) the effects of changes in applicable laws, regulations or accounting principles. In addition, the Committee may adjust any performance goal for a Performance Period as it deems equitable to recognize unusual or non-recurring events affecting the Company, changes in tax laws or regulations or accounting procedures, mergers, acquisitions and divestitures, and any other factors as the Committee may determine. To the extent that a performance goal is based on Schwab common stock, then in the event of any stock dividend, stock split, spin-off, split-off, spin-out, recapitalization or other change in the capital structure of the Company, merger, consolidation, reorganization, combination of shares, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities or any other corporate transaction having an effect similar to any of the foregoing, the Committee shall make or provide for such adjustments in performance goals as the Committee in its sole discretion may in good faith determine to be equitably required in order to prevent dilution or enlargement of the rights of participants.
SECTION 6. ADJUSTMENT OF SHARES.
(a) Adjustments. If Schwab shall at any time change the number of issued shares of common stock by stock dividend, stock split, spin-off, split-off, spin-out, recapitalization, or other change in the capital structure of the Company, merger, consolidation, reorganization, combination, exchange of shares, partial or complete liquidation or other distribution of assets (other than a normal cash dividend), issuance of rights or warrants to purchase securities or any other corporate transaction having an effect similar to any of the foregoing, then, in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, the Committee shall equitably adjust, as it determines to be necessary and appropriate, the total number of shares reserved for issuance under the Plan, the maximum number of shares that may be made subject to an award in any fiscal year, and the number of shares covered by each outstanding award and the price therefor, if any. Any such adjustment to an Incentive Stock Option shall be made in a manner that permits the Incentive Stock Option to
C-6
continue to meet the requirements of Section 422 of the Code, and any such adjustment to a Nonqualified Stock Option shall be made in a manner that permits the Nonqualified Stock Option to remain exempt from Section 409A of the Code (to the extent the Nonqualified Stock Option is intended to be so exempt). The Committee shall also adjust the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in the first sentence of this Section 6(a)) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are needed to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on all participants under the Plan.
(b) Corporate Transactions. In the event that Schwab is a party to a merger or other reorganization, outstanding awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for (i) the continuation of the outstanding awards by Schwab, if Schwab is a surviving corporation, (ii) the assumption of the outstanding awards by the surviving corporation or its parent or subsidiary, (iii) the substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding awards under this Plan, (iv) full exercisability or vesting and accelerated expiration of the outstanding awards or (v) settlement of the full value of the outstanding awards in cash or cash equivalents followed by cancellation of such awards.
(c) Substitution and Assumption of Benefits. Without affecting the number of shares reserved or available hereunder, the Board or the Committee may authorize the issuance of benefits under this Plan in connection with the assumption of, or substitution for, outstanding benefits previously granted to individuals who become employees of Schwab or any subsidiary as a result of any merger, consolidation, acquisition of property or stock, or reorganization, upon such terms and conditions as the Committee may deem appropriate, including but not limited to a Stock Option exercise price or SAR grant price that is less than fair market value, so long as such exercise price or grant price is determined in a manner that complies with the applicable requirements of Section 409A and Section 424 of the Code.
(d) Reservation of Rights. Except as provided in this Section 6, a participant shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by Schwab of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, kind or exercise price of shares subject to a Stock Option or other award. The grant of an award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets (or to undertake any other corporate action described in Section 6(a) above).
(a) Transferability. Except as otherwise determined by the Committee in the case of benefits other than Incentive Stock Options or SARs granted in tandem with Incentive Stock Options, each benefit granted under the Plan shall not be assigned, transferred, pledged or encumbered, either voluntarily or by operation of law, other than by will or the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant’s lifetime only by the participant or, in the event of disability, by the participant’s personal representative. In the event of the death of a participant, the exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the benefit shall pass by will or the laws of descent and distribution.
(b) Change in Control. The Committee (in its sole discretion) may determine at the time of (or at any time after) the grant of an award, that upon a Change in Control of Schwab, that any outstanding Stock Option or SAR shall
C-7
become vested and exercisable; all restrictions on any Restricted Stock or Restricted Stock Unit shall lapse; all performance goals shall be deemed achieved at target levels and all other terms and conditions met; Performance Stock shall be delivered; a Performance-Based Restricted Stock Unit shall be paid out as promptly as practicable; a Performance Unit and Restricted Stock Unit shall be paid out as promptly as practicable; and any Other Stock or Cash Award shall be delivered or paid; provided, however, that this Section 7(b) shall not apply to awards pursuant to which a deferral election has been made in accordance with Section 9. A “Change in Control” shall mean the occurrence of any of the following events:
(i) Upon consummation of a reorganization, merger or consolidation (a “Business Combination”), in each case, unless, following such Business Combination:
(A) the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of Common Stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be; and
(B) no Person (as defined in subparagraph (iii) below) (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such other corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership of Outstanding Common Stock or Outstanding Voting Securities existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(ii) If individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of (A) an actual or threatened election contest with respect to the election or removal of directors; (B) an actual or threatened solicitation of proxies or consents; or (C) any other actual or threatened action by, or on behalf of, any Person other than the Board; or
(iii) Upon the acquisition after the Effective Date by any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then Outstanding Common Stock or (B) the combined voting power of the Outstanding Voting Securities; provided, however, that the following acquisitions shall not be deemed to be covered by this subparagraph (iii): (x) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company, (y) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust)
C-8
sponsored or maintained by the Company or (z) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subparagraph (i) above; or
(iv) The consummation of the sale of all or substantially all of the assets of the Company or approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding anything in this Plan or any award agreement to the contrary, to the extent any provision of this Plan or an award agreement would cause a payment of an award that is not exempt from Section 409A to be made specifically because of – (1) the occurrence of a Change in Control, or (2) a separation from service following a Change in Control (if the payment terms for such a separation from service are different than for other separations), then such payment shall not be made unless such Change in Control also constitutes a “change in the ownership of the Company,” a “change in effective control of the Company” or a “change in the ownership of a substantial portion of the assets of the Company” within the meaning of Section 409A. Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control (and other participant rights that are tied to a Change in Control, such as vesting, shall not be affected by this paragraph).
(c) Taxes. Schwab shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan, after giving the person entitled to receive such payment or delivery notice and Schwab may defer making payment or delivery as to any award, if any such tax is payable until indemnified to its satisfaction. A participant may pay all or a portion of Schwab’s tax withholding obligation at the minimum statutory withholding rates (or at any greater rates that will not result in adverse accounting, tax or section 16 of the Exchange Act treatment, as determined by the Committee) arising in connection with the exercise of a Stock Option or SAR or the receipt or vesting of shares hereunder by electing to have Schwab withhold shares of common stock having a fair market value equal to such amount. The Committee may permit a participant to pay the withholding obligation applicable to an award by delivery to the Company of shares of Schwab common stock owned by the participant having a fair market value equal to the amount of such taxes or permit cashless exercise.
(d) Effective Date, Amendment and Termination. The Plan is effective on the Effective Date and shall automatically terminate one day before the 10th anniversary of the Effective Date. The Board or the Committee may alter, amend or suspend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant’s consent unless such action is necessary or desirable (i) for the continued validity of the Plan or its compliance with Rule 16b-3 of the Exchange Act or any other applicable law, rule or regulation or pronouncement, or (ii) to avoid any adverse consequences under Section 409A of the Code or any requirement of a securities exchange or association or regulation or self-regulatory body. Stockholder approval shall be obtained for any Plan amendment to the extent necessary or desirable to comply with applicable laws, regulations or rules.
(e) Fair Market Value. The fair market value of a share of Schwab common stock on a given determination date shall equal:
(i) The closing sales price of a share as reported on the New York Stock Exchange (NYSE) on the applicable determination date (except in the case of a share of Restricted Stock or a Restricted Stock Unit, which shall be the average of the high and low price of a share as reported on NYSE on the applicable determination date), or
(ii) If no sales of shares are reported for such date, the mean between the bid and asked price of a share on NYSE at the close of the market on such date, or
C-9
(iii) If the day is not a trading day, and as a result, paragraphs (i) and (ii) above are not applicable, the fair market value of a share shall be determined as of the next preceding day on which sales were made on the NYSE;
(iv) In the event that the method for determining fair market value described in clauses (i), (ii) and (iii) is not practicable, as determined by the Committee in its discretion, the fair market value of a share determined in accordance with any other reasonable method as the Committee, in its discretion, may deem equitable, or as required by applicable law or regulation, which method shall be one that is deemed to constitute fair market value for purposes of Section 409A of the Code to the extent it is used with respect to a Stock Option or SAR.
(f) Dividend Equivalents. Any participant selected by the Committee, in its sole discretion, may be granted dividend equivalents based on the dividends declared on shares that are subject to any award, to be credited as of dividend payment dates, during the period between the date the award is granted and the date the award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing, no dividend equivalents will be paid contingent on the exercise of a Stock Option or SAR.
(g) Other Provisions. The award of any benefit under the Plan may also be subject to other provisions (whether or not applicable to the benefit awarded to any other participant) as the Committee determines appropriate, including provisions intended to comply with applicable securities laws and stock exchange or stock market requirements, understandings or conditions as to the participant’s employment, requirements or inducements for continued ownership of common stock after exercise or vesting of benefits, forfeiture of awards in the event of termination of employment shortly after exercise or vesting, or breach of noncompetition or confidentiality agreements following termination of employment, or provisions permitting the deferral of the receipt of a benefit for such period and upon such terms as the Committee shall determine.
(h) Non-U.S. Employees. In the event any benefit under this Plan is granted to an employee who is employed or providing services outside the United States and who is not compensated from a payroll maintained in the United States, the Committee may, in its sole discretion, modify the provisions of the Plan as they pertain to such individuals to comply with applicable law, regulation or accounting rules.
(i) Governing Law. The Plan and any actions taken in connection herewith shall be governed by and construed in accordance with the laws of the state of Delaware (without regard to applicable Delaware principles of conflict of laws).
(j) Section 409A. At all times, this Plan shall be interpreted and operated (i) with respect to awards subject to Section 409A of the Code (“Section 409A”), in accordance with the requirements of Section 409A and the regulatory guidance thereunder unless an exemption from Section 409A is available and applicable, and (ii) to maintain the exemptions from Section 409A of Stock Options, SARs and Restricted Stock and any awards designed to meet the short-deferral exception under Section 409A. To the extent there is a conflict between the provisions of the Plan relating to compliance with Section 409A and the provisions of any award agreement issued under the Plan, the provisions of the Plan control. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to an award that is subject to Section 409A to the extent such discretionary authority would conflict with Section 409A. In addition, to the extent required to avoid a violation of the applicable rules under Section 409A by reason of Section 409A(a)(2)(B)(i), any payment under an award shall be delayed until the earliest date of payment that will result in compliance with the rules of Section 409A(a)(2)(B)(i) (regarding the required six-month delay for distributions to specified employees that are related to a separation from service). In the event
C-10
that any award shall be deemed not to comply with Section 409A, then neither the Company, the Board, the Committee nor its or their designees or agents, nor any of their affiliates, assigns or successors (each a “protected party”) shall be liable to any award recipient or other person for actions, inactions, decisions, indecisions or any other role in relation to the Plan by a protected party if made or undertaken in good faith or in reliance on the advice of counsel (who may be counsel for the Company), or made or undertaken by someone other than a protected party.
(k) Recoupment/Clawback. Notwithstanding any other provisions in this Plan, the Company may cancel any award, require reimbursement of any award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time. In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an award agreement, in accordance with the Company policies. By accepting an award, the Participant is agreeing to be bound by the applicable Company policies, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law, government regulation or stock exchange listing requirement).
(l) Whistleblower Protection. Nothing contained in this Plan or any award agreement (i) shall be deemed to prohibit any participant from responding to a subpoena or order of a court or other governmental authority to testify or give evidence or engaging in conduct otherwise protected by the Sarbanes-Oxley Act; (ii) shall be deemed to prohibit any participant from providing truthful information in good faith to any federal, state, or local governmental body, agency, or official investigating an alleged violation of any antidiscrimination or other employment-related law or otherwise gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding; (iii) is intended in any way to intimidate, coerce, deter, persuade, or compensate any participant with respect to providing, withholding, or restricting any communication whatsoever to the extent prohibited under 18 U.S.C. §§ 201, 1503, or 1512 or under any similar or related provision of state or federal law; and (iv) is intended to require any participant to provide notice to the Company or any subsidiary or their attorneys before reporting any possible violations of federal law or regulation to any governmental agency or entity (“Whistleblower Disclosures”) or to provide notice to the Employer or its attorneys after any participant has made any such Whistleblower Disclosures.
(m) Prohibition on Repricing. Except for adjustments as provided in Section 6 or in connection with a Change in Control (as defined in Section 7(b)), the terms of outstanding awards may not be amended to reduce the option/grant price of outstanding awards or to cancel outstanding Stock Options/SARs, with per share option/grant prices that are more than the fair market value at the time of such cancellation, in exchange for cash, other awards, or Stock Options or SARs with an option/grant price that is less than the option/grant price of the original Stock Options/SARs without shareholder approval.
SECTION 8. PAYMENT OF DIRECTORS’ FEES DEFERRALS IN SECURITIES.
In the event a Non-Employee Director or Subsidiary Director (if the Committee has approved participation by Subsidiary Directors in Schwab’s deferred compensation plan for directors) elects pursuant to and in accordance with the terms of Schwab’s Directors’ Deferred Compensation Plan II (or any predecessor or successor to such plan) to defer receipt of the payment of his or her annual cash retainer from Schwab in the form of Restricted Stock Units, Nonqualified Stock Options, Restricted Stock, Other Stock Awards or a combination thereof, such Nonqualified Stock Options, Restricted Stock Units, Restricted Stock, and Other Stock Awards shall be issued under this Plan. The number and form of each award to be granted to Non-Employee Directors or Subsidiary Directors pursuant to this Section 8 in connection with a deferral election under the Directors’ Deferred Compensation Plan II (or any predecessor or successor to such plan) shall be determined in accordance with the provisions of that plan, but the terms of each such award shall be determined by the Committee or its delegate in accordance with the provisions of this Plan.
C-11
SECTION 9. DEFERRAL OF AWARDS.
Subject to the requirements of Section 409A, the Committee (in its sole discretion) may permit or require a participant to have cash or shares that otherwise would be paid to such participant as a result of the settlement of a restricted stock unit or performance unit award credited to a deferred compensation account established for such participant by the Committee as an entry on Schwab’s books. A deferred compensation account may be credited with interest or other forms of investment return, as determined by the Committee. A participant for whom such an account is established shall have no rights other than those of a general creditor of Schwab. Such an account shall represent an unfunded and unsecured obligation of Schwab and shall be subject to the terms and conditions of the applicable agreement between such participant and Schwab. If the deferral or conversion of awards is permitted or required, the Committee (in its sole discretion) may, consistent with the requirements of Section 409A, establish rules, procedures and forms pertaining to such awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 9 and such rules and procedures shall be set forth in detail in the applicable stock award agreement or other deferral agreement.
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
C-12
Amendments to Bylaws Reflecting Adoption of the Board’s Proxy Access Proposal
Set forth below is the text of the applicable provisions of the Bylaws as proposed to be amended by the Declassification Amendments. Proposed additions are indicated by bold underlining, and proposed deletions are indicated by strikethroughs.
***
Section 2.06. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of meeting, (B) by or at the direction of the Board or (C) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Bylaw, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw or (D) with respect to nominations, in accordance with Section 2.11 of these Bylaws.
(ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlierthan the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or re-election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (2) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of the Corporation is increased and there
D-1
is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board or (ii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (a)(ii) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.
(c) General. (i) Only such persons who are nominated in accordance with the procedures set forth in this Bylaw Section 2.06 or Section 2.11 of these Bylaws shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this BylawSection 2.06. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or business is not in compliance with this Bylaw, to declare that such defective proposal or nomination shall be disregarded.
(iii) For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iiiii) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (B) of the holders of any series of Preferred Stock to elect directors under specified circumstances.
Section 2.11. Proxy Access.
(a)Whenever the Board solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 2.11, the Corporation shall include in its proxy statement, on its
D-2
form proxy and on any ballot distributed at such annual meeting, in addition to any persons nominated for election by the Board or any committee thereof, the name, together, in the case of the proxy statement, with the Required Information (as defined below), of any person nominated for election (the “Stockholder Nominee”) to the Board by a stockholder or group of no more than twenty (20) stockholders that satisfies the requirements of this Section 2.11 (such stockholder or stockholder group, including each member thereof to the extent the context requires, the “Eligible Stockholder”), and who expressly elects at the time of providing the notice required by this Section 2.11 (the “Notice of Proxy Access Nomination”) to have its nominee included in the Corporation’s proxy materials pursuant to this Section 2.11. For purposes of this Section 2.11, in calculating the number of stockholders in a group seeking to qualify as an Eligible Stockholder, two (2) or more funds that are (i) under common management and investment control, (ii) under common management and funded primarily by the same employer, or (iii) a “group of investment companies” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended, shall be counted as one stockholder. In the event that the Eligible Stockholder consists of a group of stockholders, any and all requirements and obligations for an individual Eligible Stockholder that are set forth in these Bylaws, including the Minimum Holding Period (as defined below), shall apply to each member of such group; provided, however, that the Required Ownership Percentage (as defined below) shall apply to the ownership of the group in the aggregate. For purposes of this Section 2.11, the “Required Information” that the Corporation will include in its proxy statement is the information provided to the Secretary of the Corporation concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement by the regulations promulgated under the Exchange Act, and if the Eligible Stockholder so elects, a written statement of the Eligible Stockholder (or, in the case of a group, a written statement of the group), not to exceed 500 words, in support of each Stockholder Nominee’s candidacy (the “Statement”). Notwithstanding anything to the contrary contained in this Section 2.11, the Corporation may omit from its proxy materials any information or Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law or regulation, and the Corporation may solicit against, and include in the proxy statement its own statement relating to, any Stockholder Nominee.
(b)To be timely, the Notice of Proxy Access Nomination must be addressed to the Secretary of the Corporation and received by the Secretary of the Corporation no earlier than one hundred fifty (150) days and no later than one hundred twenty (120) days before the anniversary of the date that the Corporation issued its definitive proxy statement for the previous year’s annual meeting of stockholders; provided, however, that in the event the annual meeting is more than thirty (30) days before or after the anniversary date of the previous year’s annual meeting, or if no annual meeting was held in the preceding year, to be timely, the Notice of Proxy Access Nomination must be received at the principal executive offices of the Corporation no earlier than one hundred fifty (150) days before such annual meeting and no later than the later of one hundred twenty (120) days before such annual meeting or the tenth (10th) day following the day on which public announcement (as defined in Section 2.06(c)(ii) above) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting, commence a new time period (or extend any time period) for the giving of the Notice of Proxy Access Nomination as described above.
(c)The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two (2) and (ii) 25% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 2.11 (the “Final Proxy Access Nomination Date”). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the maximum number ofStockholder Nominees included in the Corporation’s proxy materials shall be calculated based on the number of
D-3
directors in office as so reduced. The following individuals shall be counted as one of the Stockholder Nominees for purposes of determining when the maximum number of Stockholder Nominees provided for in this Section 2.11 has been reached: (i) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 2.11 whom the Board decides to nominate as a nominee of the Board, (ii) any individual nominated by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 2.11 but whose nomination is subsequently withdrawn, (iii) any director currently serving on the Board who was a Stockholder Nominee at any of the two preceding annual meetings, (iv) any director currently serving on the Board who was a Stockholder Nominee at the third preceding annual meeting and who the Board decides to nominate as a Board nominee at the upcoming annual meeting and (v) any director in office or director candidate who, in each case, will be included in the Corporation’s proxy materials with respect to such annual meeting as an unopposed (by the Corporation) nominee pursuant to an agreement, arrangement or understanding between the Corporation and a stockholder or group of stockholders (other than such agreement, arrangement or understanding entered into in connection with an acquisition of stock by such stockholder, or group of stockholders, from the Corporation). Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 2.11 shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.11 exceeds the maximum number of nominees provided for in this Section 2.11. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.11 exceeds the maximum number of nominees provided for in this Section 2.11, the highest ranking Stockholder Nominee who meets the requirements of this Section 2.11 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of the Corporation’s outstanding common stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to the Corporation. If the maximum number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 2.11 from each Eligible Stockholder has been selected, this process will continue as many times as necessary, following the same order each time, until the maximum number is reached. Following such determination, if any Stockholder Nominee who satisfies the eligibility requirements of this Section 2.11 (y) thereafter is nominated by the Board or (z) thereafter is not included in the Corporation’s proxy materials or is not submitted for election as a director, in either case, as a result of the Nominating Stockholder becoming ineligible or withdrawing its nomination, the Stockholder Nominee becoming unwilling or unable to serve on the Board or the Eligible Stockholder or the Stockholder Nominee failing to comply with the provisions of this Section 2.11, no other nominee or nominees shall be included in the Corporation’s proxy materials or otherwise submitted for director election in substitution thereof.
(d)For purposes of this Section 2.11, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of common stock of the Corporation as to which the stockholder possesses both:
(i)the full voting and investment rights pertaining to the shares; and
(ii)the full economic interest in (including the opportunity for profit from and risk of loss on) such shares;
provided that the number of shares calculated in accordance with clauses (i)GAAP, and (ii) shallmay not include any shares:be comparable to non-GAAP financial measures presented by other companies.
(A)sold by such stockholder or anyThe company’s use of its affiliates in any transaction that has not been settled or closed, including any short sale;
(B)borrowed by such stockholder or anynon-GAAP measures is reflective of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuantcertain adjustments made to an agreement to resell; or
D-4
(C)subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, or if exercised by either party would have, the purpose or effect of:
(1)reducing in any manner, to any extent or at any timeGAAP financial measures as shown below. Beginning in the future, such stockholder’s or its affiliates’ full right to vote or direct the votingthird quarter of any such shares; and/or
(2)hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.
A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in2023, these adjustments also include restructuring costs, which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on five (5) business days’ notice. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the common stock of the Corporation are “owned” for these purposes shall be determined by the Board or any committee thereof, in each case, in its sole discretion. For purposes of this Section 2.11, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Exchange Act. An Eligible Stockholder shall include in its Notice of Proxy Access Nomination the number of shares it is deemed to own for the purposes of this Section 2.11.
(e)In order to make a nomination pursuant to this Section 2.11, an Eligible Stockholder must have owned the Required Ownership Percentage of the Corporation’s outstanding common stock (the “Required Shares”) continuously for the Minimum Holding Period (as defined below) as of both the date the Notice of Proxy Access Nomination is received by the Secretary of the Corporation in accordance with this Section 2.11 and the record date for determining the stockholders entitled to vote at the annual meeting and must continue to own the Required Shares through the meeting date. For purposes of this Section 2.11, the “Required Ownership Percentage” shall be 3% or more, based on the number of shares of common stock outstanding of the Corporation as publicly reported in the Corporation’s most recently filed Form 10-K or Form 10-Q. For purposes of this Section 2.11, the “Minimum Holding Period” is three (3) years. Within the time period specified in this Section 2.11 for delivering the Notice of Proxy Access Nomination, an Eligible Stockholder must provide the following information in writing to the Secretary of the Corporation:
(i)one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven (7) calendar days prior to the date the Notice of Proxy Access Nomination is received by, the Secretary of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date;
(ii)a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Exchange Act;
D-5
(iii)the information, representations and agreements that are the same as those that would be required to be set forth in a stockholder’s notice of nomination pursuant to Section 2.06 of these Bylaws;
(iv)the consent of each Stockholder Nominee to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected;
(v)a representation that the Eligible Stockholder:
(A)acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and does not presently have such intent;
(B)presently intends to maintain qualifying ownership of the Required Shares through the date of the annual meeting;
(C)has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s);
(D)has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board;
(E)agrees to comply with all applicable laws and regulations with respect to any solicitationcompany began incurring in connection with the meeting or applicableits previously announced plans to the filingstreamline its operations to prepare for post-integration of TD Ameritrade.
The company uses ROTCE, which represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets – net, and use, if any,related deferred tax liabilities. The company also uses adjusted diluted EPS and ROTCE as components of soliciting material;performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee maintains discretion in evaluating performance against these criteria.
(F)will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omitThe following tables present reconciliations of GAAP measures to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and
(G)as to any two or more funds whose shares are aggregated to count as one stockholdernon-GAAP measures for the purpose of constituting an Eligible Stockholder, within five (5) business days after the date of the Notice of Proxy Access Nomination, will provide to the Corporation documentation reasonably satisfactory to the Corporation that demonstrates that the funds satisfy the requirements of the second sentence of subsection (a) of this Section 2.11;
(vi)an undertaking that the Eligible Stockholder agrees to:
(A)assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Corporation or out of the information that the Eligible Stockholder provided to the Corporation;
(B)indemnifytwelve months ended December 31, 2023 (in millions, except ratios and hold harmless the Corporation and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.11; and
(C)file with the SEC any solicitation with the Corporation’s stockholders relating to the meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or whether any exemption from filing is available thereunder; andper share amounts):
D-6
(vii)in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all such members with respect to the nomination and matters related thereto, including withdrawal of the nomination.
(f)Within the time period specified in this Section 2.11 for delivering the Notice of Proxy Access Nomination, a Stockholder Nominee must deliver to the Secretary of the Corporation (which shall be deemed to be part of the Stockholder Notice for purposes of this Section 2.11):
(i)the information required with respect to persons whom a stockholder proposes to nominate for election or reelection as a director by Section 2.06 of these Bylaws;
(ii)a written representation and agreement that such person:
(A)will act as a representative of all of the stockholders of the Corporation while serving as a director;
(B)is not and will not become a party to (I) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (II) any Voting Commitment that could limit or interfere with such Stockholder Nominee’s ability to comply, if elected as a director of the Corporation, with such Stockholder Nominee’s fiduciary duties under applicable law;
(C)is not or will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Corporation;
(D)will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation, as well as the applicable provisions of these Bylaws and the rules and regulations of the SEC and any stock exchange applicable to the Corporation; and
(E)will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading).
At the request of the Corporation, the Stockholder Nominee(s) must submit all completed and signed questionnaires required of directors and officers of the Corporation. The Corporation may request such additional information as necessary to permit the Board to determine if each Stockholder Nominee satisfies the requirements of this Section 2.11 or if each Stockholder Nominee is independent under the listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing the independence of the Corporation’s directors.
(g)In the event that any information or communications provided by the Eligible Stockholder or the Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify
| 2023 Amount | 2023 % of Total Net Revenues | |||
Income before taxes on income (GAAP), Pre-tax profit margin (GAAP) | $6,378 | 33.9% | ||
Acquisition and integration-related costs1 | 401 | 2.1% | ||
Amortization of acquired intangible assets | 534 | 2.9% | ||
Restructuring costs2 | 495 | 2.6% | ||
Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP) | $7,808 | 41.5% | ||
D-7
the Secretary of the Corporation of any defect in such previously provided information and of the information that is required to correct any such defect it being understood that providing any such notification shall not be deemed to cure any defect or limit the Corporation’s rights to omit a Stockholder Nominee from its proxy materials as provided in this Section 2.11.
(h)The Corporation shall not be required to include, pursuant to this Section 2.11, a Stockholder Nominee in its proxy materials for any meeting of stockholders, any such nomination shall be disregarded and no vote on such Stockholder Nominee will occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation:
(i)if the Secretary of the Corporation receives a notice (whether or not subsequently withdrawn) that a stockholder has nominated any person for election to the Board pursuant to the advance notice requirements for stockholder nominees for director set forth in Section 2.06 of these Bylaws;
(ii)who is not independent under the listing standards of each principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing independence of the Corporation’s directors, in each case as determined by the Board in its sole discretion;
(iii)whose election as a member of the Board would cause the Corporation to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the principal U.S. exchanges upon which the common stock of the Corporation is traded, or any applicable state or federal law, rule or regulation;
(iv)who is or has been, within the past three (3) years, (i) an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914 or (ii) a management official of a depository organization as defined for purposes of the Depository Institution Management Interlocks Act and applicable rules and regulations;
(v)who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten (10) years;
(vi)who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
(vii)if such Stockholder Nominee or the applicable Eligible Stockholder shall have provided information to the Corporation in respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading, as determined by the Board or any committee thereof, in each case, in its sole discretion; or
(viii)the Eligible Stockholder or applicable Stockholder Nominee breaches or fails to comply with its obligations pursuant to these Bylaws, including, but not limited to, this Section 2.11 and any agreement, representation or undertaking required by this Section 2.11.
| (1) | Acquisition and integration-related costs for 2023 primarily consist of $187 million of compensation and benefits, $135 million of professional services, $28 million of occupancy and equipment, and $27 million of other. |
D-8
(i)Notwithstanding anything to the contrary set forth herein, the Board or the chairman of the meeting of stockholders shall declare a nomination by an Eligible Stockholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Corporation, if:
(i)the Stockholder Nominee(s) and/or the applicable Eligible Stockholder shall have breached its or their obligations under this Section 2.11, as determined by the Board or the chairman of the meeting of stockholders, in each case, in its or his sole discretion; or
(ii)the Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting of stockholders to present any nomination pursuant to this Section 2.11.
(j)Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but withdraws from or becomes ineligible or unavailable for election at the annual meeting will be ineligible to be a Stockholder Nominee pursuant to this Section 2.11 for the next two annual meetings. For the avoidance of doubt, this Section 2.11(j) shall not prevent any stockholder from nominating any person to the Board pursuant to and in accordance with Section 2.06 of these Bylaws.
(k)The Board (or any other person or body authorized by the Board) shall have the exclusive power and authority to interpret the provisions of this Section 2.11 of these Bylaws and make, in good faith, all determinations deemed necessary or advisable in connection with this Section 2.11 to any person, facts or circumstances. All such actions, interpretations and determinations that are done or made by the Board (or any other person or body authorized by the Board) shall be binding on the Corporation, the stockholders and all other parties.
(l)No stockholder shall be permitted to join more than one group of stockholders to become an Eligible Stockholder for purposes of nominations pursuant to this Section 2.11 per each annual meeting of stockholders.
(m)This Section 2.11 shall be the exclusive method for stockholders to include nominees for director in the Corporation’s proxy materials.
Section 3.03. Procedure for Election of Directors; Required Vote. Election of directors at all meetings of the stockholders at which directors are to be elected shall be by ballot, and, except as otherwise fixed by or pursuant to the provisions of Article FOURTH of the Certificate of Incorporation relating to the rights to the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, each director to be elected by stockholders shall be elected by the vote of the majority of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this Bylaw, a majority of votes cast shall mean that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Votes cast shall exclude abstentions with respect to that director’s election. Notwithstanding the foregoing, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this Bylaw, a contested election shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected, with the determination thereof being made by the Secretary within 30 days following the closeas of the applicabletenth day preceding the date the Corporation first mails its notice for such meeting to the stockholders of nomination period set forth in Section 2.06 based on whether one or more notices of nomination were timely filed in accordance with said Section 2.06the Corporation (provided that the determination that an election is a “contested election” shall be determinative only as to the timeliness of a notice of nomination made pursuant to Section 2.06 or Section 2.11 of these Bylaws and not otherwise as to its validity). If, prior to the time the Company mails its initial proxy statement in connection with such election of directors, one or more notices of nomination are withdrawn such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be considered a contested election.
| (2) | Restructuring costs for 2023 primarily consist of $292 million of compensation and benefits, $17 million of occupancy and equipment, and $181 million of other. |
| THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT | A-1 |
D-9
APPENDIX A: NON-GAAP FINANCIAL MEASURES
“
| 2023 Amount | 2023 Diluted EPS | |||
Net income available to common stockholders (GAAP), Diluted EPS (GAAP) | $4,649 | $ 2.54 | ||
Acquisition and integration-related costs1 | 401 | 0.22 | ||
Amortization of acquired intangible assets | 534 | 0.29 | ||
Restructuring costs2 | 495 | 0.27 | ||
Income tax effects3 | (338) | (0.19) | ||
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP) | $5,741 | $ 3.13 | ||
| (1) | Acquisition and integration-related costs for 2023 primarily consist of $187 million of compensation and benefits, $135 million of professional services, $28 million of occupancy and equipment, and $27 million of other. |
| (2) | Restructuring costs for 2023 primarily consist of $292 million of compensation and benefits, $17 million of occupancy and equipment, and $181 million of other. |
| (3) | The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs on an after-tax basis. |
| 2023 Amount | ||
Return on average common stockholders’ equity (GAAP) | 16% | |
Average common stockholders’ equity | $29,334 | |
Less: Average goodwill | (11,951) | |
Less: Average acquired intangible assets – net | (8,524) | |
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets – net | 1,805 | |
Average tangible common equity | $10,664 | |
Adjusted net income available to common stockholders1 | $5,741 | |
Return on tangible common equity (non-GAAP) | 54% | |
| (1) | See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP). |
| A-2 | THE CHARLES SCHWAB CORPORATION 2024 PROXY STATEMENT |
"Always put the client first.”
" Chuck SchwabSinceSchwabSince day one, we’vewe've set out to challenge the status quo, looking for ways to offer our clients more value and a better experience. We’reWe're confident our approach can help people take ownership of their financial futures.Wefutures.We believe in the power of investing, which helps turn earners into owners. Investing can be truly transformative when investors actively engage and when they work collaboratively with the right financial provider.Weprovider.We are champions of investors and those who serve them. We look at the world through our clients’clients' eyes and keep that perspective at the heart of everything we do.Wedo.We offer investors a contemporary, full-service approach to build and manage their wealth. We help investors either directly as Schwab clients or through one of the thousands of independent advisors and employers we serve.Thisserve.This is how we help investors, advisors, employers, and employees take ownership of their futures.Thefutures.The Charles Schwab Corporation
3000 Schwab Way, Westlake, TX 76262
(817) 859-5000
Schwab.com | AboutSchwab.comfacebook.com/AboutSchwab.comfacebook.com/CharlesSchwab
instagram.com/CharlesSchwab
linkedin.com/company/Charles-Schwab
twitter.com/CharlesSchwab
youtube.com/user/CharlesSchwab@CharlesSchwabPrinted on recycled paper.(C)2024 The Charles Schwab Corporation. All rights reserved.LGL13902-25 (03/24)00297004
charles SCHWAB CORPORATION EQ Shareowner Services P.O. Box 64945 St. Paul, MN 55164-0945 Address Change?BOX 8016, CARY, NC 27512-9903 Your vote matters! Have your ballot ready and please use one of the methods below for easy voting: Your control number Have the 12 digit control number located in the box above available when you access the website and follow the instructions. Scan QR for digital voting The Charles Schwab Corporation Annual Meeting of Stockholders For Stockholders of Record as of March 25, 2024 Thursday, May 23, 2024 11:00 AM, Central Time Annual Meeting to be held live via the Internet—please visit www.proxydocs.com/SCHW for more details. YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: 11:00 AM, Central Time, May 23, 2024. Internet: www.proxypush.com/SCHW Cast your vote online Have your Proxy Card ready Follow the simple instructions to record your vote Phone: 1-866-485-0358 Use any touch-tone telephone Have your Proxy Card ready Follow the simple recorded instructions Mail: Mark, box, sign and indicate changes below: TO VOTE BY INTERNET OR TELEPHONE, SEE REVERSE SIDE OF THIS PROXY CARD. Thedate your Proxy Card Fold and return your Proxy Card in the postage-paid envelope provided Virtual: You must register to attend the meeting online and/or participate at www.proxydocs.com/SCHW This proxy is being solicited on behalf of the Board of Directors Recommends a Vote “FOR” Proposals 1(a) through 1(f), and 2 through 6, and “AGAINST” Proposals 7 and 8. Election of directors: 1(a) John K. Adams, Jr. 1(b) Stephen A. Ellis 1(c) Brian M. Levitt FOR AGAINST ABSTAIN 1(d) Arun Sarin 1(e)The undersigned hereby appoints Charles R. Schwab, 1(f) Paula A. Sneed FOR AGAINST ABSTAIN Please fold here – Do not separate 2. ApprovalWalter W. Bettinger II and Peter J. Morgan III (the “Named Proxies”), and each or any of amendments to Certificate of Incorporationthem, as the true and Bylaws to declassify the board of directors 3. Ratificationlawful attorneys of the selectionundersigned, with full power of Deloitte & Touche LLPsubstitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of The Charles Schwab Corporation which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as independent auditors 4. Advisorymay be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote to approve named executive officer compensation 5. Approval ofin their discretion on such other matters as may properly come before the 2022 Stock Incentive Plan 6. Approval of the board’s proposal to amend Bylaws to adoptmeeting and revoking any proxy access 7. Stockholder Proposal requesting amendment to Bylaws to adopt proxy access 8. Stockholder Proposal requesting disclosure of lobbying policy, procedures and oversight; lobbying expenditures; and participation in organizations engaged in lobbying For Against Abstain For Against Abstain For Against Abstain For Against Abstain For Against Abstain For Against Abstain For Against Abstain WHENheretofore given. THE SHARES REPRESENTED BY THIS PROXY IS PROPERLY EXECUTED YOUR SHARES WILL BE VOTED: (1)VOTED AS DIRECTED; (2)DIRECTED OR, IF NO DIRECTION IS GIVEN: FOR PROPOSALS 1(a) THROUGH 1(f), AND 2 THROUGH 6, AND AGAINST PROPOSALS 7 AND 8; AND (3) ACCORDINGGIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BEST JUDGMENTBOARD OF CHARLES R. SCHWAB, WALTERDIRECTORS’ RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE Copyright © 2024 BetaNXT, Inc. or its affiliates. All Rights Reserved
The Charles Schwab Corporation Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ON PROPOSALS 1, 2 AND 3 AGAINST ON PROPOSALS 4, 5 AND 6 BOARD OF DIRECTORS RECOMMENDS PROPOSAL YOUR VOTE 1. Election of Five Directors for Three-Year Terms: FOR AGAINST ABSTAIN 1.01 Walter W. BETTINGERBettinger II AND/OR PETER J. MORGAN III IF ANY OTHER MATTER COMES BEFORE THE ANNUAL MEETING FOR A VOTE. Date Signature(s) in Box1.02 Joan T. Dea FOR 1.03 Christopher V. Dodds FOR 1.04 Bharat B. Masrani FOR 1.05 Charles A. Ruffel FOR FOR AGAINST ABSTAIN 2. Ratification of the Selection of Independent Auditors FOR 3. Advisory Approval of Named Executive Officer Compensation FOR 4. Stockholder Proposal Requesting Changes to the Executive Compensation Program AGAINST 5. Stockholder Proposal on Workforce Discrimination Risk Oversight and Impact AGAINST 6. Stockholder Proposal on Pay Equity Disclosure AGAINST Note: Consider any other business properly coming before the meeting. You must register to attend the meeting online and/or participate at www.proxydocs.com/SCHW Authorized Signatures—Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on proxy.your account. 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.Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held jointly) Date
ANNUAL MEETING OF STOCKHOLDERS Tuesday, May 17, 2022 1:30 p.m. (Central Time) www.schwabevents.com/corporation The Annual Meeting of Stockholders 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, 2022: The proxy statement and annual report to security holders are available in the “Investor Relations” section of our website at www.aboutschwab.com. 3000 Schwab Way Westlake, Texas 76262 proxy This proxy is solicited by the Board of Directors for use at the Annual Meeting on May 17, 2022. 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(f), and 2 through 6, and “AGAINST” Proposals 7 and 8. By signing the proxy, you revoke all prior proxies and appoint Charles R. Schwab, Walter W. Bettinger II and/or Peter J. Morgan III 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. Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned your proxy card. INTERNET/MOBILE PHONE MAIL www.proxypush.com/schw 1-866-883-3382 Mark, sign and date your proxy Use the Internet to vote your proxy Use a touch-tone telephone to card and return it in the before 11:59 p.m. (CT) on vote your proxy before 11:59 p.m. (CT) postage-paid envelope provided in May 16, 2022. on May 16, 2022. time to be received by May 16, 2022. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card.