Discover 2009 Annual Report Download - page 46

Our success is dependent, in part, upon our executive officers and other key employees. If we are unable to recruit,
retain and motivate key officers and employees, our business could be materially adversely affected.
Our success depends, in large part, on our ability to retain, recruit and motivate key officers and employees to manage
our business. Our senior management team has significant industry experience and would be difficult to replace. Our
senior management team is relatively small and we believe we are in a critical period of competition in the financial
services and payments industry. The market for qualified individuals is highly competitive, and we may not be able to
attract and retain qualified personnel or candidates to replace or succeed members of our senior management team or
other key personnel.
As a participant in the U.S. Treasury Capital Purchase Program, we are subject to significant restrictions on how we
may compensate our top five senior executive officers (“SEOs”) and our next 20 most highly compensated employees
under the Interim Final Rule issued by the U.S. Treasury pursuant to the EESA. The EESA generally limits the amount of
bonus or incentive compensation payable to our SEOs and our next 20 most highly compensated employees to one-third
of the total amount of their annual compensation and limits the form of such payments to long-term restricted stock that
does not fully vest during the period in which the senior preferred stock is held by the U.S. Treasury. In addition, the EESA
could require the clawback of previously paid compensation to these employees. The EESA also restricts severance
payments for our SEOs and our next five most highly compensated employees except for payments for services performed
or benefits accrued. Several of the companies with which we compete for senior talent did not participate in, or are no
longer participants in, the Capital Purchase Program and, therefore, are not subject to such compensation limitations.
We may be subject to further restrictions under any other future legislation or regulation limiting executive
compensation. For example, in October 2009, the Federal Reserve issued proposed guidance on incentive compensation
policies at banking organizations. These restrictions could negatively impact our ability to compete with other companies
in recruiting and retaining key officers and employees. If we are unable to recruit, retain and motivate key personnel, our
business could be materially adversely affected.
Damage to our reputation could damage our businesses.
Maintaining a positive reputation is critical to our attracting and retaining customers, investors and employees.
Damage to our reputation can therefore cause significant harm to our businesses and prospects. Harm to our reputation
can arise from numerous sources, including, among others, employee misconduct, litigation or regulatory outcomes,
failing to deliver minimum standards of service and quality, compliance failures, and the activities of customers and
counterparties. Further, negative publicity regarding us, whether or not true, may also result in harm to our business
prospects.
We may be unsuccessful in promoting and protecting our brands or protecting our other intellectual property, or third
parties may allege that we are infringing their intellectual property rights.
The Discover, PULSE and Diners Club brands have substantial economic and goodwill value. Our success is dependent
on our ability to promote and protect these brands and our other intellectual property. Our ability to attract and retain
customers is highly dependent upon the external perception of our company and brands. Our brands are licensed for use
to business partners and network participants, some of whom have contractual obligations to promote and develop our
brands. The value of our brands and our overall business success may be adversely affected by actions of our business
partners and network participants that diminish the perception of our brands.
We may not be able to successfully protect our brands and our other intellectual property. If others misappropriate, use
or otherwise diminish the value of our intellectual property, our business could be adversely affected. In addition, third
parties may allege that our marketing, processes or systems may infringe their intellectual property rights. Given the
potential risks and uncertainties of such claims, our business could be adversely affected by having to pay significant
monetary damages or licensing fees and we may have to alter our business practices.
Acquisitions or strategic investments that we pursue could disrupt our business and harm our financial condition.
We may consider or undertake strategic acquisitions of, or material investments in, businesses, products or
technologies. If we do so, we may not be able to successfully finance or integrate any such businesses, products or
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