Charles Schwab 2015 Annual Report Download - page 54

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)
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Compensation and Benefits
Compensation and benefits expense includes salaries and wages, incentive compensation, and related employee benefits and
other. Incentive compensation includes variable compensation, discretionary bonuses, and stock-based compensation.
Variable compensation includes payments to certain individuals based on their sales performance. Discretionary bonuses are
based on the Company’s overall performance as measured by EPS, and therefore fluctuate with this measure. Stock-based
compensation primarily includes employee and board of director stock options and restricted stock.
The following table shows a comparison of certain compensation and benefits components and employee data:
 Growth Rate    
Year Ended December 31, 2014-2015 2015
2014 2013
Salaries and wages 1% $ 1,258 $ 1,245 $ 1,110
Incentive compensation 2 % 618 605 599
Employee benefits and other 9%
365 334 318
Total compensation and benefits expense 3 % $ 2,241 $ 2,184 $ 2,027
Full-time equivalent employees (in thousands)
At year end 5 % 15.3 14.6 13.8
Average 6%
15.1 14.2 13.9
Salaries and wages increased in 2015 from 2014 primarily due to higher employee headcount and annual salary increases,
partially offset by a $68 million charge in 2014 for estimated future severance benefits resulting from changes in the
Company’s geographic footprint. Incentive compensation increased in 2015 from 2014 primarily due to the earlier
recognition of certain equity-based incentives due to plan changes offset by a reduction in long-term incentive plan expenses.
Employee benefits and other expense increased in 2015 from 2014 due to increases in healthcare costs and higher employee
headcount.
Salaries and wages increased in 2014 from 2013 primarily due to a $68 million charge in 2014 for estimated future severance
benefits resulting from changes in the Company’s geographic footprint and due to annual salary increases. Incentive
compensation was relatively flat in 2014 from 2013 primarily due to an increase in discretionary bonus costs, offset by a
higher 2013 expense related to a new payout schedule for field incentive plans.
Expenses Excluding Compensation and Benefits
Professional services remained relatively flat in 2015 compared to 2014. Professional services expense increased in 2014
from 2013 primarily due to higher spending on technology services and an increase in fees paid to outsourced service
providers and consultants.
Occupancy and equipment expense increased in 2015 from 2014 primarily due to increased software maintenance expense
relating to the Company’s information technology systems and an increase in property taxes and other expenses attributable
to the changes in the Company’s geographic footprint. Occupancy and equipment expense increased in 2014 from 2013
primarily due to increased software maintenance expenses relating to the Company’s information technology systems.
Advertising and market development increased in 2015 compared to 2014 due to increased electronic and other media
expenses and spending on client promotions, partially offset by a decrease in corporate sponsorships and print ad media
expenses. Advertising and market development expense decreased in 2014 from 2013 primarily due to production costs
incurred in 2013 relating to the development of the Company’s advertising and branding initiative, Own your tomorrow®,
partially offset by higher 2014 spending on client promotions.
Communication expense increased in 2015 compared to 2014 due to increases in news and informational communications,
partially offset by a decrease in postage expenses. Communication expense remained relatively flat in 2014 compared to
2013.