UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

 

 

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Definitive Proxy Statement

 

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Soliciting Material under §240.14a-12

The Charles Schwab Corporation

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2022
Proxy Statement

 

 

 

April 1, 2022

Dear Fellow Stockholders,

We cordially invite you to attend our 2022 Annual Meeting of Stockholders to be held on Tuesday, May 17, 2022, at 1:30 p.m. Central Time. The annual meeting will be held via the internet at www.schwabevents.com/corporation. 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 2021 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
CHAIRMAN		CHIEF EXECUTIVE OFFICER

TABLE OF CONTENTS

 

Proxy Summary			ii
Notice of 2022 Annual Meeting of Stockholders			vii
Proxy Statement			1
Voting Your Shares			1
Attending the Annual Meeting			1
Corporate Governance			2
The Company			2
The Board of Directors			2
Board Leadership			2
Director Independence			3
Board Structure and Committees			4
Board Qualifications and Composition			7
Environmental, Social, and Governance Practices			10
Proposal One: Election of Directors			11
Members of the Board of Directors			11
Director Nominations			28
Communications with the Board of Directors			28
Director Compensation			29
Proposal Two: Approval of Amendments to Certificate of Incorporation and Bylaws to Declassify the Board			33
Proposal Three: Ratification of the Selection of Independent Auditors			35
Auditor Fees			35
Audit Committee Report			37
Proposal Four: Advisory Approval of Named Executive Officer Compensation			38
Compensation Discussion and Analysis			38
Compensation Committee Report			55
2021 CEO Pay Ratio			55
Executive Compensation Tables			56
2021 Summary Compensation Table			56
2021 Grants of Plan-Based Awards Table			57
Narrative to Summary Compensation and Grants of Plan-Based Awards Tables			58
2021 Termination and Change in Control Benefits Table			62
Outstanding Equity Awards as of December 31, 2021			65
2021 Option Exercises and Stock Vested Table			68
2021 Nonqualified Deferred Compensation Table			69
Securities Authorized for Issuance under Equity Compensation Plans			70
Proposal Five: Approval of 2022 Stock Incentive Plan			71
Security Ownership of Certain Beneficial Owners and Management			78
Transactions with Related Persons			80
Proposal Six: Approval of the Board’s Proposal to Amend the Bylaws to Adopt Proxy Access			83
Proposals Seven and Eight: Stockholder Proposals			88
Information about Voting Procedures and Proxies			96
Exhibit A: Amendments to Certificate of Incorporation			A-1
Exhibit B: Amendments to Bylaws Reflecting Adoption of Declassification Proposal			B-1
Exhibit C: 2022 Stock Incentive Plan			C-i
Exhibit D: Amendments to Bylaws Reflecting Adoption of the Board’s Proxy Access Proposal			D-1

 

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		NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS

 

Date:		Tuesday, May 17, 2022
Time:		1:30 p.m., Central Time
Location:		www.schwabevents.com/corporation
Agenda:		·  elect six directors for three-year terms,   ·  vote for the approval to declassify the Board of Directors,   ·  vote to ratify the selection of independent auditors,   ·  vote for the approval, on an advisory basis, of compensation of named executive officers,   ·  vote for the approval of the 2022 Stock Incentive Plan,   ·  vote for the approval of the board’s proposal on proxy access,   ·  vote on two stockholder proposals, if properly presented, and   ·  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 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.

 

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 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.

 

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PROXY STATEMENT

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).

VOTING YOUR SHARES

Please vote as promptly as possible by following the instructions on your proxy card or voting instruction form. You may vote by internet, telephone or mail in advance of the meeting by following the instructions on your proxy card or voting instruction form.

If you do not vote in advance and plan to submit your vote at the 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.

ATTENDING THE 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.

 

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CORPORATE GOVERNANCE

 

THE COMPANY

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. At December 31, 2021, the company had $8.14 trillion in client assets, 33.2 million active brokerage accounts, 2.2 million corporate retirement plan participants, and 1.6 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 creating 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. 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 LEADERSHIP

The Chairman of the Board of Directors is Mr. Schwab. The Chairman and Chief Executive Officer roles are split, and Mr. Bettinger serves as Chief Executive Officer. The Chairman approves the agenda for board meetings and leads the board in its discussions. Mr. Schwab and Mr. Bettinger, as the only two management directors, do not participate in sessions of non-management directors. As provided in our Corporate Governance Guidelines, non-management

 

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directors meet regularly in executive session without management. The Chair of the Nominating and Corporate Governance Committee, Mr. Herringer, presides over the executive sessions of non-management directors.

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% of the board is composed of independent directors, the board believes that its leadership structure, with the Chairman of the Board of Directors leading board discussions, and the Chair of the Nominating and Corporate Governance Committee leading non-management executive sessions, is appropriate.

DIRECTOR INDEPENDENCE

We have considered the independence of each member of the board in accordance with New York Stock Exchange corporate governance standards. To assist us in our determination, we 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 Exchange corporate governance standards, we have determined that each of the company’s directors, except Mr. Schwab, Mr. Bettinger, and Mr. Masrani, 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, 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.

 

·

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.

 

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BOARD STRUCTURE AND COMMITTEES

The authorized number of directors is currently seventeen and the company has seventeen directors. There are six nominees for election this year and eleven directors will continue to serve the terms described in their biographies.

Directors currently serve staggered terms. Each director who is elected at an annual meeting of stockholders serves a three-year term, and the directors are divided into three classes.

The board held nine meetings in 2021. Each director attended at least 75% of all applicable board and committee meetings during 2021. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. In 2021, all of the then-serving directors attended the annual meeting.

Risk Oversight

As part of its oversight functions, the board is responsible for oversight of risk management at the company. 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. 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 “Part II, Item 7, 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.

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 Exchange corporate governance standards. The Risk Committee is chaired by an independent director and is composed of entirely non-management directors. In addition to these standing committees, the board may from time to time establish ad hoc committees to assist in various matters.

 

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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

∎

X

Joan T. Dea

∎

X

X

Christopher V. Dodds

∎

C

Stephen A. Ellis

∎

X

X

Mark A. Goldfarb

∎

X

William S. Haraf

∎

X

Frank C. Herringer

∎

X

C

Brian M. Levitt

∎

VC

Gerri K. Martin-Flickinger

∎

X

Bharat B. Masrani

X

Todd M. Ricketts

∎

X

Charles A. Ruffel

∎

X

Arun Sarin

∎

X

X

Paula A. Sneed

∎

C

 

AC CC

Audit Committee Compensation Committee

NCGC

Nominating and Corporate Governance Committee

RC

Risk Committee

Committee Member X Committee Chair C Committee Vice Chair VC

 

 

AUDIT COMMITTEE

John K. Adams, Jr. (Chair) • Stephen A. Ellis • Mark A. Goldfarb • William S. Haraf

Gerri K. Martin-Flickinger • Todd M. Ricketts

 

 

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:

 

·

reviews and discusses with management and the independent auditors the company’s annual and quarterly financial statements and the integrity of the financial reporting process,

 

·

reviews the qualifications, independence and performance of the independent auditors,

 

·

reviews the activities and performance of the internal auditors,

 

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·

reviews processes in place to assess and manage major risk exposures, and

 

·

reviews compliance with legal and regulatory requirements.

 

 

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:

 

·

annually reviews and approves corporate goals and objectives relating to compensation of executive officers and other senior officers,

 

·

reviews and determines the compensation of executive officers and other senior officers based on the achievement of performance goals and objectives,

 

·

reviews and approves compensatory arrangements for executive officers and other senior officers,

 

·

approves long-term awards for executive officers and other senior officers,

 

·

reviews and recommends incentive compensation plans for executive officers and all equity plans, and

 

·

oversees risk management of incentive compensation practices.

 

 

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:

 

·

identifies and evaluates individuals qualified to serve on the board,

 

·

oversees environmental, social and governance (ESG) policies, programs, and publications, and reviews reports from management on ESG activities,

 

·

recommends nominees to fill vacancies on the board and each standing committee and recommends a slate of nominees for election or re-election as directors by the stockholders,

 

·

makes recommendations regarding succession planning for the Chief Executive Officer and executive management, and

 

·

assesses the performance of the board and its committees and recommends corporate governance principles for adoption by the board.

 

 

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:

 

·

reviews the company’s overall risk governance and approves the enterprise-wide risk management framework to identify, measure, monitor and control the major types of risk posed by the business of the company,

 

·

reviews the performance and activities of the company’s independent risk management function,

 

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·

reviews capital and liquidity planning and the assessment of capital adequacy, and

 

·

reviews and approves key policies with respect to oversight of specific risks, including capital, compliance, credit, liquidity, market, model, third-party, interest rate, information security, data governance, reputational, strategic, and operational risk.

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 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) 854-6800

BOARD QUALIFICATIONS AND COMPOSITION

The Nominating and Corporate Governance Committee regularly assesses the board’s composition in light of our business operations, strategic direction 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:

 

·

the ability to work together with other directors, with full and open discussion and debate as an effective group,

 

·

current knowledge of and experience in the company’s business or operations, or contacts in the community in which the company does business and in the industries relevant to the company’s business, or substantial business, financial or industry-related experience commensurate with the size, complexity, and risk profile of the company, and

 

·

the willingness and ability to devote adequate time to the company’s business.

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 his or her duties,

 

·

diversity of experience, including the need for financial, business, academic, public sector and other expertise on the board or board committees,

 

·

diversity of background, including race, ethnicity, and gender, 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.

 

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When evaluating a candidate for nomination, the committee does not assign specific weight to any of these factors or believe that all of the criteria necessarily apply to every candidate.

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.

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				·  Financial Services   ·  Banking   ·  Asset Management   ·  Brokerage/Investment Banking   ·  Business Operations   ·  ESG   ·  Ethnic and Gender Diversity
Navigating changes in the financial services industry and responding to competitive pressures and new technologies				·  Strategic Planning   ·  Information Technology/Cybersecurity   ·  Marketing   ·  Academia
Overseeing the integrity of the company’s financial statements and financial reporting process				·  Finance   ·  Accounting   ·  Public Company Executive Experience   ·  Public Company Board Experience
Ensuring compliance with legal and regulatory requirements				·  Regulatory   ·  Government Service   ·  International Business
Implementing the board’s approved risk tolerance, maintaining the company’s risk management and control program, and operating the company’s business in a safe and sound manner				·  Risk Management

 

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The following matrix highlights the qualifications and skills represented on the board:

 

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 her perspective on succession planning, including

 

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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.

As part of board succession planning, the Nominating and Corporate Governance Committee will plan 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 evaluate 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

The company is invested in the success of our clients, employees, and communities. We describe certain of these initiatives more fully on the “Citizenship” section of our website and in our Environmental, Social & Governance Report 2020-2021, our inaugural ESG report, which is available at www.aboutschwab.com/citizenship. Information available on or through our website is not incorporated by reference into and is not part of this proxy statement, and any references to our website are intended to be inactive textual references only.

 

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PROPOSAL ONE:

ELECTION OF DIRECTORS

 

Nominees for directors this year are:

 

·

John K. Adams, Jr.

 

·

Stephen A. Ellis

 

·

Brian M. Levitt

 

·

Arun Sarin

 

·

Charles R. Schwab

 

·

Paula A. Sneed

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 directors and nominees is contained in the following section.

 

 

MEMBERS OF THE BOARD OF DIRECTORS

 

Director since 2015                 Age at Annual                 Meeting: 66                   Independent                 Director                   Committees                 Audit		John K. Adams, Jr.   Mr. Adams is the former Managing Director in the Financial Institutions Group at UBS Investment Bank, a financial services firm, where he served from 2002 until 2013. Prior to joining UBS, Mr. Adams was with Credit Suisse’s Financial Institutions Group from 1985 until 2002. He has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2015. He served as a member of the Board of Directors of Navient Corporation from 2014 to 2018. Mr. Adams is a nominee for election this year.   Mr. Adams has significant experience with respect to the financial services industry, investment banking, capital markets and mergers and acquisitions, having served as head of UBS’ North American banks practice and in Credit Suisse’s Financial Institutions Group.
		Career Experience UBS Investment Bank Managing Director (2002-2013) Credit Suisse Financial Institutions Group (1985-2002)		Qualifications Public Company Board Financial Services Banking Asset Management Brokerage/Investment Banking Strategic Planning Finance Regulatory Environmental, Social, and Governance

 

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Director since 2008                 Age at Annual                 Meeting: 61		Walter W. Bettinger II   Mr. Bettinger has served Chief Executive Officer of The Charles Schwab Corporation and a member of the Board of Directors since 2008. He served as President of the company from 2008 until 2021. He also serves as a member of the Board of Directors of Charles Schwab Bank, SSB, a subsidiary of the company, and as a trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios, Laudus Trust and Schwab Strategic Trust, all registered investment companies managed by an affiliate of the company. Prior to assuming his current role, he served as President and Chief Operating Officer of the company. He also served as Executive Vice President and President – Schwab Investor Services from 2005 until 2007, Executive Vice President and Chief Operating Officer – Individual Investor Enterprise from 2004 until 2005, Executive Vice President and President – Corporate Services from 2002 until 2004 and Executive Vice President and President – Retirement Plan Services from 2000 until 2002. Mr. Bettinger joined the company in 1995 as part of the acquisition of The Hampton Company, which he founded in 1983. Mr. Bettinger’s term expires in 2024.   Mr. Bettinger has significant financial services experience, having served in a senior executive role overseeing sales, service, marketing and operations for over 35 years. As Chief Executive Officer of the company, Mr. Bettinger works closely with the board in evaluating and enhancing the strategic position of the company.
		Career Experience The Charles Schwab Corporation Chief Executive Officer (2008-present) President (2008-2021) President and Chief Operating 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

 

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Director since 2020                 Age at Annual                 Meeting: 63                   Independent                 Director                   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, 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, she was the Chief Executive Officer of the Securities Industry Automation Corporation, a technical services company and subsidiary of the New York Stock Exchange. Ms. Brown began her career at Automatic Data Processing, where she last served as general manager of Brokerage Processing Services, which spun off to become part of Broadridge Financial Services. Ms. Brown has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2021. Ms. Brown has served as a member of the Board of Directors of Northrop Grumman Corporation, an aerospace and defense technology company, since 2015, VMware, Inc., a software and cloud computing company, since 2019, and Akamai Technologies, Inc., a cybersecurity company, since 2020. Ms. Brown’s term expires in 2023.   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

 

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Director since 2017                 Age at Annual                 Meeting: 58                   Independent                 Director                   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 managing director since 2008. She served on the Executive Committee of BMO Financial Group from 2003 to 2008, most recently as Executive Vice President, Strategic Management and Corporate Marketing. She was previously a partner and director at Boston Consulting Group from 1994 to 2003, where she was a leader in the global financial services practice. She has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2011 and Cineplex Inc. since 2006. She served as a member of the Board of Directors of Performance Sports Group from 2015 to 2017 and Torstar Corporation from 2009 to 2015. Ms. Dea’s term expires in 2024.   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

 

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Director since 2014                 Age at Annual                 Meeting: 62                   Independent                 Director                   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 May 2020. Mr. Dodds has also served as a senior advisor at The Cynosure Group, a private equity firm, since 2018. He served as a senior advisor at The Carlyle Group, a private equity firm, from 2008 to 2018. From 1986 to 2007, Mr. Dodds held several key positions at The Charles Schwab Corporation, including Executive Vice President and Chief Financial Officer. He has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2007. He served as a member of the Board of Directors of Investment Technology Group, Inc. from 2008 to 2015. Mr. Dodds’ term expires in 2024.   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 Charles Schwab Bank, SSB since 2007.
		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

 

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Director since 2012                 Age at Annual                 Meeting: 59                   Independent                 Director                   Committees                 Audit                 Nominating and Corporate                     Governance		Stephen A. Ellis   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 served as Chief Executive Officer of Asurion, LLC, a provider of consumer technology protection services, from 2012 through 2014. Prior to Asurion, Mr. Ellis served as Worldwide Managing Director of Bain & Company, a management consulting firm, from 2005 until 2012, and as Managing Partner for Bain’s West Coast offices from 1999 through 2004. Mr. Ellis joined Bain in 1993. Mr. Ellis served as a member of the Board of Directors of e.l.f. Beauty, Inc. in 2019. Mr. Ellis is a nominee for election this year.   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 & Company, Chief Executive Officer of Asurion, LLC, and as a Managing Partner at TPG.
		Career Experience TPG Managing Partner (2015-present) Asurion, LLC Chief Executive Officer (2012-2014) 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

 

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Director since 2012                 Age at Annual                 Meeting: 70                   Independent                 Director                   Committees                 Audit		Mark A. Goldfarb   Mr. Goldfarb is a former Managing Partner of BDO USA, LLP, an accounting and consulting firm, where he served from 2015 to 2021. He was a founder of SS&G, Inc., an accounting and business consulting firm, and served as Managing Partner of SS&G from 1987 until 2012, and as Senior Managing Director of SS&G from 2012 until January 2015, at which time SS&G merged with BDO USA, LLP. Mr. Goldfarb served on the Board of Trustees and as Chairman of the Audit Committee of Schwab Strategic Trust, a registered investment company, from 2009 until 2012. He has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2021. He is also a past president of Cascade Capital Corporation. Mr. Goldfarb’s term expires in 2024.   Mr. Goldfarb brings financial and operational leadership experience to the board, having served as a founder and Senior Managing Director of SS&G and a Managing Partner with BDO USA, LLP.
		Career Experience BDO USA, LLP Managing Partner (2015-2021) SS&G, Inc. Senior Managing Director (2012-2015) Managing Partner (1987-2012)		Qualifications Financial Services Asset Management Brokerage/Investment Banking Strategic Planning Finance Business Operations Marketing Accounting Risk Management

 

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Director since 2015                 Age at Annual                 Meeting: 73                   Independent                 Director                   Committees                 Audit		William S. Haraf   Mr. Haraf is a former Special Advisor for Promontory Financial Group, a financial consulting firm, where he served from 2014 to 2019. He was a Managing Director of Promontory Financial Group from 2012 until 2014. From 2008 until 2012, he served as Commissioner of the California Department of Financial Institutions. Mr. Haraf served as a member of the Financial Stability Oversight Council from 2010 until 2012, as Managing Director of Banc of America Securities from 1999 until 2003 and as Senior Vice President of Strategic Policy Development and Planning at Bank of America from 1994 until 1999. He has served as a member of the Board of Directors of Charles Schwab Bank, SSB since 2015. Mr. Haraf’s term expires in 2023.   Mr. Haraf brings substantial financial services and regulatory experience to the board, having served as Managing Director of Promontory Financial Group, Commissioner of the California Department of Financial Institutions, and a member of the Financial Stability Oversight Council.
		Career Experience Promontory Financial Group Special Advisor (2014-2019) Managing Director (2012-2014) California Department of Financial Institutions Commissioner (2008-2012)		Qualifications Public Company Executive Financial Services Banking Brokerage/Investment Banking Strategic Planning Regulatory Accounting Risk Management Government Service Academia

 

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Director since 1996                 Age at Annual                 Meeting: 79                   Independent                 Director                   Committees                 Compensation                 Nominating and Corporate                     Governance		Frank C. Herringer   Mr. Herringer is the former Chairman of the Board and Chief Executive Officer of Transamerica Corporation, a financial services company. He served as Chairman of the Board of Transamerica from 1996 until 2015, Chief Executive Officer from 1991 until 1999 and President from 1986 until 1999, when Transamerica was acquired by AEGON N.V. From the date of the acquisition until 2000, Mr. Herringer served on the Executive Board of AEGON N.V. and as Chairman of the Board of AEGON USA, Inc. Mr. Herringer served as a member of the Board of Directors of Transamerica Corporation from 1986 to 2018. Mr. Herringer served as a member of the Boards of Directors of Amgen Inc. from 2004 to 2019, Cardax Pharmaceuticals, Inc. from 2006 to 2015, and Safeway, Inc. from 2008 to 2015. Mr. Herringer’s term expires in 2023.   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

 

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Director since 2020                 Age at Annual                 Meeting: 74                   Independent                 Director                   Committees                 Compensation		Brian M. Levitt   Mr. Levitt has served as the Board Chair of The Toronto-Dominion Bank (TD Bank), a Canadian chartered bank, since 2011 and has been a director since 2008. He also served as a member of the Board of Directors of TD Ameritrade from 2016 to 2020. Mr. Levitt previously served as President and then Chief Executive Officer of Imasco Limited, a Canadian consumer products and services company, from 1991 to 2000, and served in various executive and non-executive leadership positions at the law firm Osler, Hoskin & Harcourt LLP from 2001 to 2015, where he most recently served as Vice-Chair. Mr. Levitt has served as a member of the Board of Directors of Xebec Adsorption Inc., a clean energy company, since 2021. He also served as a member of the Board of Directors of Domtar Corporation, a paper manufacturing company, from 2007 to 2021, Stelco Holdings, Inc., a primary steel producer, from 2017 to 2019, and Talisman Energy Inc., an oil and gas producer, from 2013 to 2015. Mr. Levitt is a nominee for election this year.   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 (2011-present) 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

 

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Director since 2020                 Age at Annual                 Meeting: 59                   Independent                 Director                   Committees                 Audit		Gerri K. Martin-Flickinger   Ms. Martin-Flickinger is a former Executive Vice President and Chief Technology Officer of Starbucks Corporation, 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., 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., Network Associates, Inc., and McAfee Associates, Inc. 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 2019, when it was acquired by salesforce.com, inc. Ms. Martin-Flickinger’s term expires in 2023.   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 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

 

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Director since 2020                 Age at Annual                 Meeting: 65                   Committees                 Risk		Bharat B. Masrani   Mr. Masrani has served as Group President and Chief Executive Officer of TD Bank, a Canadian chartered bank, since 2014. He served as Chief Operating Officer of TD Bank from 2013 to 2014. He served as Group Head, U.S. Personal and Commercial Banking, of TD Bank and President and Chief Executive Officer of TD Bank US Holding Company and TD Bank, N.A., subsidiaries of TD Bank, from 2008 until 2013. In 2006, Mr. Masrani became the President of TD Banknorth and, in 2007, President and CEO. From 2003 to 2006, he served as Vice Chair and Chief Risk Officer of TD Bank. Mr. Masrani began his banking career with TD Bank in 1987. From 2013 to 2020, Mr. Masrani served as member of the Board of Directors of TD Ameritrade. Mr. Masrani has served as a member of the Board of Directors of TD Bank since 2014. He has served as a member of the Board of Directors of The Clearing House since 2014 and the Bank Policy Institute since 2018. Mr. Masrani’s term expires in 2024.   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

 

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Director since 2020                 Age at Annual                 Meeting: 52                   Independent                 Director                   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 the parent company of the Chicago Cubs, Chicago Baseball Holdings, LLC, since 2009. Mr. Ricketts’ term expires in 2023.   Mr. Ricketts is the director designated by TD Ameritrade. He brings business management and financial experience to the board through his entrepreneurial and financial services industry experience.
		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

 

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Director since 2018                 Age at Annual                 Meeting: 66                   Independent                 Director                   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 Charles Schwab Bank, SSB since 2018. Mr. Ruffel served as a member of the Board of Directors of Aspire Financial Services, LLC, a financial services and retirement planning company, from 2012 to 2019. Mr. Ruffel’s term expires in 2024.   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

 

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Director since 2009                 Age at Annual                 Meeting: 67                   Independent                 Director                   Committees                 Nominating and Corporate                     Governance                 Risk		Arun Sarin   Mr. Sarin has served as Chairman of Trepont Acquisition Corp I, a special purpose acquisition company, since 2020. He served as Chief Executive Officer of Vodafone Group Plc, a mobile telecommunications company, from 2003 until his retirement in 2008. Beginning in 1984, he held a variety of management positions with Pacific Telesis Group, a telecommunications company, and AirTouch Communications, Inc., a wireless telecommunications company, which was spun off from Pacific Telesis Group in 1994. He was appointed President and Chief Operating Officer of AirTouch in 1997. In 1999, Mr. Sarin was appointed Chief Executive Officer of Vodafone’s US/AsiaPacific region. He left Vodafone in 2000 to become Chief Executive Officer of Infospace, Inc., an information technology company. From 2002 until 2003, he served as Chief Executive Officer of Accel-KKR Telecom, a private equity firm. He served as a non-executive director of the Court of the Bank of England from 2005 until 2009. He served as a member of the Board of Directors of Blackhawk Network Holdings, Inc. from 2009 to 2018, Safeway, Inc. from 2009 to 2015, and Cisco Systems, Inc. from 2009 to 2020. Mr. Sarin has served as a member of the Board of Directors of Accenture PLC, a consulting and information technology services company, since 2015. He has served as Chairman of the Boards of Cerence Inc., an automotive software company, since 2019, and Trepont Acquisition Corp I, since 2020. Mr. Sarin is a nominee for election this year.   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 Communications, Inc. and Chief Executive Officer of Vodafone Group Plc. He brings insights to the board from his service on other public company boards.
		Career Experience Trepont Acquisition Corp I Chairman (2020-Present) 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

 

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Director since 1986                 Age at Annual                 Meeting: 84		Charles R. Schwab   Mr. Schwab has been Chairman and a director of The Charles Schwab Corporation since its incorporation in 1986. Mr. Schwab served as Chief Executive Officer of the company from 1986 to 1997 and from 2004 until 2008. He served as Co-Chief Executive Officer of the company from 1998 to 2003. Mr. Schwab was a founder of Charles Schwab & Co., Inc. in 1971 and served as its Chief Executive Officer from 2004 until 2008. Mr. Schwab is Chairman of Charles Schwab Bank, SSB. Mr. Schwab served as Chairman and trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital Trust, Schwab Annuity Portfolios and Laudus Trust, all registered investment companies, through 2015. He served as a member of the Board of Directors of Yahoo! Inc. from 2014 to 2016. Mr. Schwab is a nominee for election this year.   Mr. Schwab is the founder of the company, was the Chief Executive Officer of the company, and has been the Chairman since its inception. His vision continues to drive the company’s growth.
		Career Experience The Charles Schwab Corporation Chairman (1986-present) 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

 

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Director since 2002                 Age at Annual                 Meeting: 74                   Independent                 Director                   Committees                 Compensation		Paula A. Sneed   Ms. Sneed is Chairman and Chief Executive Officer of Phelps Prescott Group, LLC, a strategy and management consulting firm. She served as Executive Vice President, Global Marketing Resources and Initiatives, of Kraft Foods, Inc., a global food and beverage company, from 2005 until her retirement in 2006; Senior Vice President, Global Marketing Resources and Initiatives from 2004 to 2005; and Group Vice President and President of E-Commerce and Marketing Services for Kraft Foods North America, part of Kraft Foods, Inc., from 2000 until 2004. She joined General Foods Corporation (which later merged with Kraft Foods) in 1977 and held a variety of senior executive positions, including Chief Marketing Officer, Executive Vice President and President eCommerce division, Executive Vice President and President Desserts division, and Senior Vice President and President Food Service division. Ms. Sneed has served as a member of the Board of Directors of Berry Global Group, Inc., a package manufacturing company, since 2018. She served as a member of the Board of Directors of TE Connectivity, Ltd., a manufacturer of engineered electronic components, network solutions, and telecommunications systems, from 2007 to 2020. She served as a member of the Board of Directors of Airgas, Inc. from 1999 to 2016. Ms. Sneed’s is a nominee for election this year.   Ms. Sneed brings marketing skills and general management and executive leadership experience to the board, having served in a variety of senior executive positions at Kraft Foods, and as Chairman and Chief Executive Officer of Phelps Prescott Group. She brings insights to the board through her service on other public company boards.
		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

 

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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 Committee 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.

IDENTIFYING AND EVALUATING CANDIDATES FOR DIRECTOR

The Nominating and Corporate Governance Committee reviews the appropriate skills and characteristics required of board members in the context of the current composition of the board, as well as director qualifications as determined by the board. The Nominating 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, 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 with the acquisition 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.

 

 

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. 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 his or her request.

 

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DIRECTOR COMPENSATION

Mr. Schwab and Mr. Bettinger, who are employed by the company, receive no additional compensation for their service as directors. In 2021, non-employee directors received the following cash retainers and equity grants:

CASH RETAINERS

Each non-employee director received an annual cash retainer in the amount of $100,000. In addition, the Chairs of the Audit Committee and the Risk Committee each received an annual cash retainer of $40,000, and the other members of the Audit Committee and the Risk Committee each received an annual cash retainer of $15,000. The Chair 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.

There are no fees for attendance at board or committee meetings, but the board retains the discretion to establish special committees and to pay a special retainer to the Chair and the members of any special committee.

EQUITY GRANTS

For 2021, each non-employee director received an annual equity grant under the 2013 Stock Incentive Plan with an aggregate value of $185,000. Non-employee directors received this equity grant 60% in restricted stock units (RSUs) and 40% in stock options.

TERMS 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-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 annual grants of RSUs and options vest over the three-year period following the grant date, with 25% vesting on each of the first and second anniversary of the grant date and the remaining 50% on the third anniversary of the grant date. The RSUs and options become 100% vested in the event of the non-employee director’s death, disability or retirement.

 

·

For 2021, the number of RSUs for the 2021 annual grant was determined by dividing 60% of the aggregate value of the annual equity grant by the average of the high and low market price of the company’s common stock on the grant date.

 

·

For 2021, the number of options for the 2021 annual grant of stock options was determined by dividing 40% of the aggregate value of the annual equity grant by the fair value of an option on the grant date.

 

·

Each stock option is designated as a nonqualified stock option and has an exercise price equal to the fair market value of common stock on the grant date.

 

·

Each stock option expires on the earliest of (i) the date ten years after the grant date, (ii) the date three months after termination of service for any reason other than death, disability or retirement, or (iii) the date one year after termination of service because of death or disability.

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 company 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

 

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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.

DIRECTORS’ DEFERRED COMPENSATION PLAN

Non-employee directors also may participate in the Directors’ Deferred Compensation Plan II. This plan allows them to defer receipt of all or a portion of their cash retainers and, at their election, either to:

(1) receive stock options that:

 

·

have a fair value equal to the amounts deferred (as determined under the valuation method used by the company to value stock options at the time of the deferral),

 

·

have an option exercise price equal to the closing price of common stock on the date the deferred amount would have been paid, and

 

·

vest immediately upon grant and generally expire ten years after the grant date,

– or –

 

(2)

receive RSUs that are funded by an equivalent number of shares of common stock to be held in a “rabbi” trust and distributed to the director when he or she ceases to be a director.

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 TABLE

 

Name		Fees Earned or Paid in Cash ($)
		Cash1 ($)				Deferred into Restricted Stock Units or Options2, 5 ($)				Stock Awards3, 5 ($)				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

 

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(1)

This column shows cash amounts earned for retainers. For Mr. Adams, Ms. Brown, Ms. Dea, Mr. Dodds, Mr. Goldfarb, Mr. Haraf, and Mr. Ruffel, the amount in this column includes their cash retainers for service on the Board of Directors of Charles Schwab Bank, SSB.

 

(2)

This column shows the dollar amount of retainers deferred into RSUs or options under the Directors’ Deferred Compensation Plan II. The corresponding RSUs or options were as follows: 7,607 options for Mr. Ellis, 2,061 RSUs for Mr. Herringer, 1,756 RSUs for Mr. Masrani, and 6,999 options for Mr. Ruffel.

 

(3)

The amounts shown in this column represent the grant date fair value of the RSU award. In 2021, non-employee directors who served the full year received an automatic grant of RSUs with a grant date fair value of $111,000.

 

(4)

The amounts shown in this column represent the grant date fair value of the stock option award. In 2021, non-employee directors who served the full year received an automatic grant of stock options with a grant date fair value of $74,000.

 

(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, 2021. This includes stock options and RSUs acquired under the Directors’ Deferred Compensation Plans.

 

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

 

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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.

 

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PROPOSAL TWO:

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:

 

·

From the effective time of the certificate of amendment until the election of directors at the 2023 annual meeting, the board shall be divided into three classes of directors, Class I, Class II, and Class III, 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.

 

·

Commencing with the election of directors at the 2023 annual meeting, 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

 

33

and the directors in Class II having a term that expires at the 2025 annual meeting. 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.

 

·

Commencing with the election of directors at the 2024 annual meeting, 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. 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.

 

·

From and after the election of directors at the 2025 annual meeting, the board shall cease to be classified and the directors elected at the 2025 annual meeting (and each meeting thereafter) shall be elected for a term expiring at the next annual meeting. The proposed amendments would not affect the election of the class of directors at this 2022 annual meeting. Beginning with the 2025 annual meeting, all directors will stand for election at each annual meeting for one-year terms. The proposed amendments would not change the present number of directors or the board’s authority to change that number and to fill any vacancies or newly created directorships.

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 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.

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

PROPOSAL THREE:

RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS

 

The Audit Committee has the sole authority to hire, retain and terminate the independent auditors. The independent auditors report directly to the Audit Committee, and the Audit Committee is directly responsible for oversight of the work of the independent auditors. The Audit Committee oversees fees paid to the independent auditors and pre-approves all audit, internal control-related and permitted non-audit services to be performed by the independent auditors. The Audit Committee evaluates the qualifications, performance and independence of the independent auditors, including the rotation and selection of the lead audit partner and whether it is appropriate to rotate the audit firm itself.

The Audit Committee has selected Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu Limited (collectively referred to as Deloitte) as the company’s independent registered public accounting firm for the 2022 fiscal year. Deloitte has served in this capacity since the company’s inception. The Audit Committee and the Board of Directors believe that the retention of Deloitte for the 2022 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
		(amounts in millions)
Audit Fees1		$	11.2			$	9.2
Audit-Related Fees2			4.5				4.1
Tax Fees3			1.4				0.1
All Other Fees4			—				—
Total		$	17.1			$	13.4

 

(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, merger and acquisition due diligence and related services.

 

(3)

Tax fees include permitted compliance and advisory services such as 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.

 

(4)

All other fees represent fees not included in “audit fees,” “audit-related fees,” and “tax fees.”

 

35

In addition to the services listed above, Deloitte provides audit and tax return review, 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 for 2021 and $3.1 million for 2020. These amounts are not included in the expenses of The Charles Schwab Corporation.

NON-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 arrangement,

 

·

bookkeeping or other services relating to accounting records or financial statements of the audit client,

 

·

broker-dealer, investment advisor, or investment banking services,

 

·

actuarial services,

 

·

management and human resource functions (including executive search services),

 

·

legal services or expert services unrelated to the audit,

 

·

appraisal and valuation services, fairness opinions or contribution-in-kind reports,

 

·

internal audit outsourcing,

 

·

financial information systems design and implementation,

 

·

tax consulting or advice or a tax opinion on an “aggressive” tax position or on a “listed transaction” or a “confidential transaction” as defined by U.S. Department of Treasury regulations, and

 

·

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. Once the dollar limit in each of these three categories is reached, the Audit Committee will decide whether to establish an additional spending limit for the category or specifically pre-approve each additional service in the category for the remainder of the year. The three categories are:

 

·

accounting theory consultation (includes services such as guidance on the application of Generally Accepted Accounting Principles (GAAP) to various transactions and guidance on the effects of new accounting pronouncements),

 

·

assurance and due diligence (includes services such as certain service auditor reports over internal controls, review of SEC filings, consents related to financings that include audited financial statements, merger and acquisition due diligence, audit consultation pertaining to acquisitions or the calculation of gain or loss from dispositions, and employee benefit plan audits), and

 

·

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.

 

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:   ·  reviewed and discussed the audited financial statements with management,   ·  discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Securities and Exchange Commission, and   ·  received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm its independence.   Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for filing with the SEC.   AUDIT COMMITTEE OF THE BOARD OF DIRECTORS   John K. Adams, Jr., Chair Stephen A. Ellis Mark A. Goldfarb William S. Haraf Gerri K. Martin-Flickinger Todd M. Ricketts

 

37

PROPOSAL FOUR:

ADVISORY APPROVAL OF NAMED

EXECUTIVE OFFICER COMPENSATION

 

This proxy statement contains detailed information in the Compensation Discussion and Analysis and executive compensation tables regarding compensation of the named executive officers. The “named executive officers” are those executive officers who are listed in the Summary Compensation Table. We ask that you provide an advisory vote to approve the following, non-binding resolution on named executive officer compensation:

RESOLVED, that the stockholders of The Charles Schwab Corporation approve the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related footnotes, and narrative disclosures.

The advisory approval of named executive officer compensation is required by federal law, and the company currently conducts annual advisory votes on that compensation. Although the vote is not binding on the Board of Directors or the Compensation Committee, the Compensation Committee intends to consider the vote as part of its evaluation of executive compensation programs.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

This 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 our compensation decisions for the company’s named executive officers:

 

Named Executive Officer		Title
Walter W. Bettinger II		Chief Executive Officer
Peter B. Crawford		Managing Director, Executive Vice President and Chief Financial Officer
Joseph R. Martinetto		Managing Director, Senior Executive Vice President and Chief Operating Officer
Richard A. Wurster		President
Charles R. Schwab		Chairman

Key Business Results

The company’s strategy is to put clients’ perspectives, needs, and desires at the forefront by seeing business “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:

 

·

Offers a broad range of products and solutions to meet client needs with a focus on value, service, transparency, and trust,

 

·

Combines its scale and resources with ongoing expense discipline to keep operating costs low and ensure that products and solutions are affordable as well as responsive to client needs, and

 

·

Seeks to build stockholder value over time.

 

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:

 

·

Core net new assets of a record $558.2 billion represents an 8% annual organic growth rate.

 

·

33.2 million active brokerage accounts at year end represents an increase of 12% over year-end 2020.

 

·

Total client assets of $8.14 trillion as of December 31, 2021 represents an increase of 22% from year-end 2020. Of these assets, approximately half ($4.06 trillion) were receiving some form of ongoing advisory service, up 23% from year-end 2020, $3.51 trillion were under the guidance of an independent advisor and $559.2 billion were enrolled in a retail advisory solution.

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:

 

·

Net revenues of $18.5 billion were up 58% over 2020 despite historically low interest rates.

 

·

Net income of $5.9 billion was up 77%.

 

·

Pre-tax profit margin was 41.6% on a GAAP basis and 47.5% on an adjusted basis*.

 

·

Diluted EPS was $2.83 on a GAAP basis and $3.25 on an adjusted basis*.

 

·

ROCE was 11%, while ROTCE was 22%*.

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.

 

*

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 of the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. A discussion of the company’s business, business strategy, and results are contained in its Annual Report on Form 10-K.

Executive Compensation Program

The executive compensation program is intended to support the company’s strategic objectives by:

 

·

attracting, motivating and retaining talented, highly capable executive officers,

 

·

rewarding executives for individual performance,

 

·

linking executive pay with the company’s financial performance, and

 

·

aligning incentives for executive officers with the interests of the company and its stockholders by linking pay with long-term performance.

 

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.

 

 

*

Pay mix is based on amounts in the Summary Compensation Table. Generally, annual cash incentive is the amount reported for the Corporate Executive Bonus Plan under Non-Equity Incentive Plan Compensation. Stock awards are generally the amounts reported for PBRSUs. For Mr. Wurster, annual cash incentive includes amounts paid outside the Corporate Executive Bonus Plan and reported in the Bonus column of the Summary Compensation Table, and stock awards include the $5.0 million promotional grant of time-vested RSUs granted on October 25, 2021.

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 new and existing clients, ultimately driving more revenue and, along with expense discipline, generating earnings growth and building long-term stockholder value.

The Compensation Committee’s decisions for 2021 aligned with this disciplined focus on financial results. For 2021, the Compensation Committee:

 

·

Assessed the competitiveness of executive and director compensation following the acquisition of TD Ameritrade (the TD Ameritrade Acquisition), which closed in October 2020, acknowledging the increased scope of operations and responsibilities for executive roles and the importance of maintaining leadership stability to ensure the successful execution of the integration.

 

·

Selected adjusted diluted EPS as the performance criterion for the Corporate Executive Bonus Plan because it measures profitability and focuses executive officers on operating performance and decisions around capital structure.

 

40

·

Set the target adjusted diluted EPS goal for 100% payout upon achieving the company’s financial plan for 2021 approved by the board.

 

·

Approved annual cash incentive payouts under the Corporate Executive Bonus Plan of 136.62% of the target set by the Compensation Committee based on the company’s financial performance.

 

·

Awarded one-time increases in equity incentives to maintain stability within the leadership team throughout the integration of TD Ameritrade.

 

·

Awarded a mix of equity incentives of 60% PBRSUs and 40% stock options.

 

·

Awarded PBRSUs with cliff-vesting based on a three-year performance period to ensure continued focus on long-term performance and retention.

 

·

Selected the performance criteria of ROTCE for the 2021 PBRSUs (with ROTCE calculated using adjusted net income available to common stockholders and tangible common stockholders’ equity) because ROTCE reflects 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.

 

·

Established the performance goal of ROTCE equaling or exceeding Cost of Equity (COE) for the 2021 PBRSUs, because this measure reflects the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company.

 

·

Used the modified peer group approved in October 2020 as a reference point for assessing the competitiveness of executive and director compensation for periods after 2020.

The Compensation Committee continuously reviews and evaluates the company’s 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:

 

·

Selected adjusted diluted EPS as the performance criterion for the Corporate Executive Bonus Plan and set the target adjusted diluted EPS goal for 100% payout upon achieving the company’s financial plan approved by the board.

 

·

Awarded PBRSUs with cliff-vesting based on a three-year performance period to ensure continued focus on long-term performance and retention.

 

·

Selected ROTCE equaling or exceeding COE as the performance goal for the 2022 PBRSUs because this measure reflects the creation of financial value for stockholders in all phases of the business cycle and measures the earnings power of the company.

 

41

SUMMARY OF THE EXECUTIVE COMPENSATION PROGRAM

The compensation program uses three key elements: base salary, annual cash incentives and long-term incentives. The table below identifies how each of these elements supports the objectives articulated above.

 

		Element of Compensation
Objective		Base Salary				Annual Cash Incentives		Long-Term Incentives
Attract, Motivate and Retain			✓			✓		✓
Reward Executives for Individual Performance						✓		✓
Link Pay with Company Financial Performance						✓		✓
Align Incentives with Long-term Interests of Stockholders								✓
Performance Metric						Adjusted diluted EPS measures profitability and reflects the annual impact of operational actions and decisions around capital structure.		PBRSUs: ROTCE compared to COE measures adjusted net income available to common stockholders on tangible common stockholders’ equity and long-term profitability and ROTCE 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.   Stock options: reward share price appreciation by delivering compensation only when the stock price appreciates above the exercise price.

COMPENSATION PLANNING AND THE DECISION-MAKING PROCESS

The Compensation Committee reviews and approves compensation 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.

The Compensation Committee evaluates as a committee, or together with the other independent directors and the Chairman, the performance and compensation of the Chief Executive Officer. The Compensation Committee also evaluates the performance and compensation of the Chairman. The Compensation Committee also considers:

 

·

recommendations from the Chairman and the Chief Executive Officer regarding compensation for the other executive officers and performance criteria for annual and long-term incentives, developed in consultation with the Managing Director, Head of Human Resources,

 

·

recommendations from the Managing Director, Executive Vice President and Chief Financial Officer regarding performance criteria and goals for annual and long-term incentives,

 

·

advice from the Managing Director, Chief Risk Officer regarding the design and results of incentive compensation programs to ensure consistency with the company’s financial plan, strategic objectives, and risk profile, and

 

·

guidance and advice of its independent compensation consultant, Semler Brossy.

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, the company’s acquisitions, the economic environment, and market trends,

 

·

a competitive pay analysis of peer companies with data from proxy statements and the McLagan 2020 Global Financial Services Executive Management Survey, the McLagan 2020 US Financial Services Digital Survey, and the McLagan 2020 US Asset Management Retirement Plan Services Survey,

 

·

each executive’s experience, responsibilities, changes in job scope, individual performance, and pay relative to internal peers, and

 

·

reports prepared by the independent compensation consultant and the company’s Human Resources Department on each executive’s pay history with:

 

·

actual total compensation from 2018 to 2020,

 

·

proposed 2021 total compensation,

 

·

option exercises, equity vesting amounts, dividend equivalents, 401(k) balances, deferred compensation balances, and other cash compensation (e.g., company match for the 401(k) plan),

 

·

the value and vesting schedule of outstanding long-term awards, and

 

·

each component of pay as a percentage of total compensation.

The Compensation Committee does not use a formula or assign a weighting to various factors considered in setting compensation. It does not target a specific percentage mix between cash compensation and long-term incentives or any specific percentage of total compensation for each compensation component.

Peer Group

The Compensation Committee uses a peer group as a source of market data to assess the competitiveness of compensation and pay practices for executive officers and non-employee directors. The data is not used to set compensation targets. Peers were selected considering the following factors:

 

·

Quantitative: revenue, market capitalization, and number of employees.

 

·

Qualitative: business model, geographic coverage, and competition for customers and/or employees.

The peer group includes a mix 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.

The Compensation Committee periodically reviews the peer group to ensure that it remains relevant as a market reference tool and modifies it as necessary to reflect changes at the company, among peers or within the industry. In October 2020, the Compensation Committee reviewed the peer group 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:

 

·

Inclusion of an appropriately-sized leading financial services firm: Goldman Sachs,

 

·

Removal of two firms that no longer are similarly-sized: Regions Financial Corporation and Invesco,

 

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·

Removal of four firms due to merger and acquisition activity: BB&T Corporation, E*TRADE, SunTrust Banks, Inc., and TD Ameritrade,

 

·

Inclusion of Truist Financial, the successor company to the combined BB&T Corporation and SunTrust Banks, Inc.

The peer group of 20 companies used for compensation analyses for 2021 was:

 

Compensation Consultant

Under its charter, the Compensation Committee is authorized to retain compensation consultants and to approve the terms of the engagement. In 2021, the Compensation Committee engaged Semler Brossy to review pay trends across the financial services industry and in the peer group, advise directly on Chief Executive Officer, 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. Semler Brossy was engaged by the Compensation Committee directly and does not provide other services to the company. In 2021, the Compensation Committee reviewed information regarding potential conflicts of interest with Semler Brossy, including: other services it might provide to the company, fees received from the company as a percentage of 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.

 

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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 incentives 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       Target (% of  salary)		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

 

*

Reflects one-time grants awarded in recognition of the importance of execution of the integration of TD Ameritrade.

 

**

Includes the promotional grant of $5.0 million of time-vested RSUs Mr. Wurster received on October 25, 2021.

Base Salary

Base salaries are established at levels intended to attract, motivate and retain highly capable executive officers. As illustrated by the pay mix charts in the Executive Summary above, executive officers receive a small percentage of their overall compensation in base salary. 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.

 

Executive		2021 Base Salary     Effective March 1, 2021,     except as noted
Walter W. Bettinger II			$	1,400,000
Peter B. Crawford			$	625,000
Joseph R. Martinetto			$	765,000
Richard A. Wurster			$	750,000	*
Charles R. Schwab			$	750,000

 

*

Reflects base salary effective October 15, 2021.

 

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Annual Cash Incentives

Annual cash incentive awards for the named executive officers were made pursuant to the Corporate Executive Bonus Plan. In the first quarter of 2021, the Compensation Committee established the performance criterion, set performance goals, and approved a target bonus award, expressed as a percentage of salary, for each named executive officer. For 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.

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

 

*

Target cash incentive equals base salary earned for 2021 multiplied by target cash incentive percentage approved by the Compensation Committee for each executive.

 

**

In October 2021, Mr. Wurster’s 2021 target cash incentive increased from 200% to 250% effective October 15, 2021 upon his promotion to President. His 2021 target cash incentive is calculated based on his base salary earned from January 1st to October 14th multiplied by 200% and his base salary earned from October 15th to December 31st multiplied by 250%. For Mr. Wurster, $1,748,840 of his 2021 actual cash incentive was paid pursuant to the Corporate Executive Bonus Plan and $109,924 was paid outside of the Corporate Executive Bonus Plan in connection with his promotion. For his target cash incentive, $1,280,077 was pursuant to the Corporate Executive Bonus Plan and $80,460 was outside of the Corporate Executive Bonus Plan.

Adjusted diluted EPS was established as the performance criterion for all named executive officers. The Compensation Committee believes adjusted diluted EPS provides a comprehensive measure of the company’s profitability and focuses executives on operating performance and decisions around capital structure. For purposes of the Corporate Executive Bonus Plan, 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. 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% to 200% of the target bonus award, with a 100% payout assigned to the adjusted diluted EPS goal set by the Compensation Committee based on achieving the company’s financial plan approved by the board. Achieving adjusted diluted EPS of less than 50% of the target adjusted diluted EPS goal would result in no bonus payment;

 

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achieving adjusted diluted EPS between 50% and 100% of the target EPS goal would result in a payout of between 50% and 100% of the target bonus award; and achieving 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 target adjusted diluted EPS was adopted to establish the minimum level of achievement for a bonus payment, and a cap on bonus payout was set at 200% of the target award. When determining whether the performance goals have been achieved, the Compensation Committee reviews unusual gains and losses and whether results have been achieved in a manner consistent with the company’s risk profile. Based on this review, the Compensation Committee may exercise discretion to reduce payouts.

 

 

In 2021, the target adjusted diluted EPS goal was set at $2.3789; the maximum payment was 200% of the target bonus award 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 financial plans approved by the board. For 2021, the Compensation Committee approved payouts based on adjusted diluted EPS of $3.25. For reconciliation of the non-GAAP financial measure adjusted diluted EPS, 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 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 credit risk profile. The Compensation Committee did not apply negative discretion to reduce the cash incentive award for any individual named executive officer and approved funding at 136.62% of target for each of the named executive officers.

Long-Term Incentives

At its January 2021 meeting, the Compensation Committee approved equity awards with a grant date of March 1, 2021 for the named executive officers pursuant to the 2013 Stock Incentive Plan. Of the total target equity awards granted, 40% was granted in stock options and 60% was granted in PBRSUs to align the incentives of executives with the long-term interests of stockholders.

For 2021, 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 and performance conditions.

 

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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

 

*

Includes Mr. Wurster’s $5.0 million promotional grant of time-vested RSUs granted on October 25, 2021.

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-vesting based on the three-year performance period from January 1, 2021 to December 31, 2023. The main features of the 2021 PBRSUs are summarized below.

 

Feature		Comments
Grant Date		·  March 1, 2021
Vesting Schedule		·  100% vesting on the third anniversary of the grant date   ·  All vesting is subject to Compensation Committee certification that the performance goal for the performance period has been met
Performance Period		·  January 1, 2021 to December 31, 2023
Dividend Equivalent Payments		·  Dividend equivalent payments equal to the dividends paid on a share of company stock will accumulate and be paid in cash when, and if, the underlying units vest   ·  If the performance goals for the units are not met, the dividend equivalent payments are forfeited
Payment		·  The number of shares of company stock payable upon vesting will vary based upon performance   ·  200% of the target award is the maximum number of shares of company stock payable for each unit that vests
Performance Criteria		·  ROTCE   ·  COE

 

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The Compensation Committee approved a performance goal based on ROTCE and COE with potential payouts ranging from 100% to 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, the target shares are forfeited. Where ROTCE divided by COE is more than two, the target shares are paid out in a range from 100% to 200% of target. When determining whether the performance goals have been achieved, the Compensation Committee reviews unusual gains and losses and whether results have been achieved in a manner consistent with the 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 Ending December 31, 2021

In January 2019, the Compensation Committee approved the grant of performance-based equity awards with cliff-vesting and a three-year performance period ending December 31, 2021, subject to the Compensation Committee certifying achievement of the applicable performance goals. The Compensation Committee chose ROCE compared to COE as the performance criterion 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, 2021, the Compensation Committee determined the performance goal was met 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%. The Compensation Committee determined the achievement of 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, and the tax impacts of these adjustments in 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 of performance goals for 2021:

 

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

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, which he has not used, parking, and use of fractionally-owned aircraft consistent with company policies.

For named executive officers, the company:

 

·

does not provide financial planning assistance,

 

·

does not gross up payments to cover executives’ personal tax liability,

 

·

does not offer executive retirement or medical plans, and

 

·

does not match contributions to the deferred compensation plan.

Employee Benefit Plans

The company offers no defined benefit plan, special retirement plan for executives, or other nonqualified excess plans to named executive officers. Executive officers may participate in the company’s 401(k) plan and employee stock

 

50