Charles Schwab 2010 Annual Report Download - page 41

THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
Compensation and benefits expense increased by $29 million, or 2%, in 2010 from 2009 primarily due to an increase in incentive
compensation. Compensation and benefits expense decreased by $123 million, or 7%, in 2009 from 2008 primarily due to decreases
in salaries and wages expense and incentive compensation. The following table shows a comparison of certain compensation and
benefits components and employee data:
Salaries and wages were relatively flat in 2010 from 2009 primarily due to increases in persons employed on a contract basis and full-
time employees, offset by severance expense of $58 million in 2009 relating to the Company’s cost reduction measures. Incentive
compensation increased in 2010 from 2009 primarily due to higher variable compensation resulting from product sales performance
in the Company’s branch offices and higher stock-based compensation relating to the amortization of its stock options and restricted
stock units.
Salaries and wages decreased in 2009 from 2008 primarily due to decreases in full-time employees and persons employed on a
contract basis, offset by severance expense of $58 million relating to the Company’s cost reduction measures. Incentive compensation
decreased in 2009 from 2008 primarily due to lower variable compensation as a result of lower product sales performance in the
Company’s branch offices. In addition, incentive compensation in 2008 included long-term incentive plan compensation. The last
performance period under the Company’s long-term incentive program ended on December 31, 2008.
E
xpenses Excluding Compensation and Benefits
Year Ended December 31,
Growth Rate
2009-2010 2010 2009 2008
Salaries and wa
g
es
—
$931 $930 $1,020
Incentive com
p
ensation 9% 386 355 402
Em
p
lo
y
ee benefits and other (1%) 256 259 245
Total com
p
ensation and benefits ex
p
ense 2% $ 1,573 $ 1,544 $ 1,667
Compensation and benefits expense as a percentage of total
net revenues:
Salaries and wa
g
es 22% 22% 20%
Incentive com
p
ensation 9% 8% 8%
Em
p
lo
y
ee benefits and other 6% 7% 4%
Total com
p
ensation and benefits ex
p
ense 37% 37% 32%
Full-time e
q
uivalent em
p
lo
y
ees (in thousands)
At
y
ear end 3% 12.8 12.4 13.4
Avera
g
e 2% 12.6 12.4 13.5
Includes variable com
p
ensation, discretionar
y
bonus costs, and stoc
k
-based com
p
ensation.
Includes full-time, part-time and temporary employees, and persons employed on a contract basis, and excludes employees of
outsourced service
p
roviders.
Professional services expense increased in 2010 from 2009 primarily due to increases in fees relating to technology services and
enhancements, and investment advisor fees relating to the Company’s managed account service programs. Professional services
expense decreased in 2009 from 2008 primarily due to a curtailment of certain technology projects.
Occupancy and equipment expense decreased in 2010 from 2009 and increased in 2009 from 2008, primarily due to facilities charges
of $43 million in 2009 relating to the Company’s cost reduction measures.
Advertising and market development expense decreased in 2009 from 2008 primarily due to lower media spending relating to the
Company’s “Talk to Chuck™” national advertising campaign. Media spending and marketing expense decreased by $39 million and
$13 million, respectively, in 2009 from 2008.
Depreciation and amortization expense decreased in 2010 from 2009 primarily due to certain assets becoming fully depreciated.
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