MasterCard 2008 Annual Report Download - page 68

General and Administrative
The major components of general and administrative expenses are as follows:
For the Years Ended December 31,
Dollar
Increase (Decrease)
Percent
Increase (Decrease)
2008 2007 2006 2008 2007 2008 2007
(In millions, except percentages)
Personnel ........................ $1,290 $1,156 $ 966 $134 $190 11.6% 19.7%
Professional fees .................. 217 220 180 (3) 40 (1.4)% 22.2%
Telecommunications ............... 78 71 70 7 1 9.9% 1.4%
Data processing ................... 78 63 59 15 4 23.8% 6.8%
Travel and entertainment ............ 87 106 97 (19) 9 (17.9)% 9.3%
Other ........................... 165 142 133 23 9 16.2% 6.8%
General and administrative expenses . . $1,914 $1,758 $1,505 $155 $253 8.8% 16.8%
* Note that figures in the above table may not sum due to rounding.
• Personnel expense increased in 2008 primarily due to higher costs for new personnel, salary increases
and higher contractor costs. Personnel expense increased in 2007 as additional staff were added to
support customer-facing, technology and product areas and due to increased personnel performance
incentive accruals, as a result of better performance against company objectives.
• Professional fees consist primarily of legal costs to defend our outstanding litigation and third-party
consulting services related to strategic initiatives. Professional fees decreased slightly in 2008 versus
2007 primarily due to lower legal expenses. In 2007, professional fees increased versus 2006 primarily
due to increased legal costs to defend outstanding litigation claims and increased consulting activity
related to strategic objectives.
• Telecommunications expense consists of expenses to support our global payments system infrastructure
as well as our other telecommunication needs. These expenses vary with business volume growth,
system upgrades and usage.
• Data processing consists of expenses to operate and maintain MasterCard’s computer systems. These
expenses vary with business volume growth, system upgrades and usage.
• Travel and entertainment expenses are incurred primarily for travel to customer and regional meetings.
In 2008, these expenses decreased as a result of cost containment initiatives. In 2007, these expenses
increased as a result of increased business activity.
• Other includes rental expense for our facilities, foreign exchange gains and losses and other
miscellaneous administrative expenses. The increase in 2008 is primarily driven by unfavorable
fluctuations in foreign exchange rates and higher rent for office facilities.
Advertising and Marketing
Our brands, principally MasterCard, are valuable strategic assets that drive card acceptance and usage and
facilitate our ability to successfully introduce new service offerings and access new markets globally. Our
advertising and marketing strategy is to increase global MasterCard brand awareness, preference and usage
through integrated advertising, sponsorship, promotional, interactive media and public relations programs on a
global scale. We will also continue to invest in marketing programs at the regional and local levels and sponsor
diverse events aimed at multiple target audiences. Also included within advertising and marketing are costs
associated with offering cardholder benefits, such as insurance and travel assistance, for certain programs.
Advertising and marketing expenses decreased $62 million, or 5.8%, and increased $28 million, or 2.7%, in
2008 and 2007, respectively. The decrease in 2008 was primarily due to cost containment initiatives, partially
offset by approximately 2 percentage points related to the impact of foreign currency fluctuation of the euro and
58