Charles Schwab Corporation (The) | Interfaith Center on Corporate Responsibility

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<h4>Resolution Details</h4>
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<strong>Company:</strong>
<p>Charles Schwab Corporation (The)</p>
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<strong>Year:</strong>
<p>2025 </p>
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<strong>Issue Area:</strong>
<p>Corporate Governance </p>
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<strong>Focus Area:</strong>
<p>Annual Board Election </p>
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<strong>Status:</strong>
<p>Filed</p>
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<h2>Resolution Text</h2>
<p class=”p1″>RESOLVED: Charles Schwab Inc. (“Company” or “Schwab”) shareholders, including James McRitchie of CorpGov.net, ask that our Company take all steps necessary to reorganize the Board of Directors into one class with each director subject to election each year for a one-year term so that all directors are elected annually.</p>
<p class=”p1″>Although our management can adopt this proposal topic in one year, and one-year implementation is a best practice, this proposal allows the option to be phased in.</p>
<p class=”p1″>Supporting Statement: Fully 90% of S&P 500 companies have declassified boards. Annual elections are widely viewed as a best practice. Annual election of each director makes directors more accountable, improving performance and increasing company value.</p>
<p class=”p1″>According to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen, and Allen Ferrell of the Harvard Law School, classified boards like ours are one of six entrenching mechanisms negatively related to company performance.</p>
<p class=”p1″>Diligent’s Market Intelligence database includes the voting record of 24 shareholder resolutions to declassify boards during the period 2020 – 11/1/2024. They averaged 74% support. Only one proposal on this topic out of seven is reported to have received less than 50% of the vote in 2024.</p>
<p class=”p1″>BlackRock states, “Directors should be elected annually to discourage entrenchment and allow shareholders sufficient opportunity to exercise their oversight of the board.” Vanguard generally votes for proposals to declassify an existing board and votes against management or shareholder proposals to create a classified board.</p>
<p class=”p6″>According to Equilar, a trusted leader for corporate leadership data:</p>
<p class=”p8″>A classified board creates concern among shareholders because poorly performing directors may benefit from an electoral reprieve. Moreover, a fraternal atmosphere may form from a staggered board that favors the interests of management above those of shareholders. Since directors in a declassified board are elected and evaluated each year, declassification promotes responsiveness to shareholder demands and pressures directors to perform to retain their seat. Notably, proxy advisory firms ISS and Glass Lewis both support declassified structures.</p>
<p class=”p1″>The annual election of each director gives shareholders more leverage if management performs poorly. For instance, if management approves excessive or poorly incentivized executive pay, shareholders can soon vote against the Chair of the management pay committee instead of waiting for three years under the current setup.</p>
<p class=”p11″>Consider our Company’s overall corporate governance:</p>
<p class=”p12″>According to Diligent’s Market Intelligence, directors can only be removed for cause with an 80% vote, we cannot call special meetings, act by written consent, or nominate directors through proxy access. There is no requirement to have an independent Board Chair or even a Lead Director.</p>
<p class=”p1″>Changing many bylaw provisions requires an 80% vote. Our directors have served an average of 11 years. Minorities constitute 17% of the Board, while women constitute 28%.</p>
<p class=”p13″>Freefloat Analytics estimates Charles Robert Schwab holds 64% of “board influence” and categorizes the board type as “totalitarian.”</p>

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<h3>Lead Filer</h3>
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<div class=”views-field views-field-nothing”><span class=”field-content”> James McRitchie</span></div><div class=”views-field views-field-title views-field-field-shareholder”><span class=”field-content”>Corporate Governance</span></div>
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Resolution Details

Company:

Charles Schwab Corporation (The)

Year:

2024

Issue Area:

Corporate Governance

Focus Area:

Proxy Access, Proxy Voting Disclosure

Status:

Challenged

Resolution Text

RESOLVED: Charles Schwab (“SCHWAB,” or “Company”) shareholders request our Company prepare a report on the reputational and financial risks to the Company of misalignment between proxy votes it casts on behalf of clients and its client’s values and preferences, as well as strategies for addressing such misalignments on important issues. The requested report shall be available to stockholders and investors by October 1, 2024, prepared at reasonable cost and omitting proprietary information.

SUPPORTING STATEMENT:

Controversy over proxy voting – especially over environmental, social, and governance (“ESG”) proposals – is regularly reported on, debated, and enshrined in state law.1

Much debate centers on intermediaries, such as SCHWAB, and their role in casting votes for clients and beneficial owners. Every vote opens SCHWAB to controversy, either for failing to adhere to ESG principles or being too “woke.”

The divergence between the interests of asset managers like SCHWAB and their investors and clients is an issue that has been taken up at the highest levels of government. A proposed bill would require asset managers like SCHWAB to pass votes through to investors under certain conditions.2 President Biden’s first veto was about consideration of ESG factors in retirement plans.3

The landscape has shifted: SCHWAB can only execute votes in clients’ best interests (and avoid controversy) by first soliciting their preferences4 on ESG topics.

Votes are now filed in machine-readable format, which makes it easier for clients to identify votes misaligned with their preferences.5 Reliance on traditional proxy advisors invites further criticism, as their conflicts of interest are scrutinized.6

SCHWAB offers extensive portfolio customization through Schwab Intelligent Portfolios7 and Personalized Indexing,8 but not for proxy voting, a core advisor responsibility subject to fiduciary duties.9 In its commingled funds, SCHWAB does not offer voting choices.

Criticism of BlackRock, Vanguard, and State Street10 led them to provide voting choices. However, these programs are denounced as limited false choices, over-relying on traditional proxy advisors.11 In October 2022, SCHWAB announced piloting a proxy polling solution for three funds.12 However, prospectus materials omit mention of using investor preferences,13 instead describing general policies deferring to management’s recommendations and utilizing traditional proxy advisors ISS and Glass Lewis. New technologies can tailor proxy voting on important issues such as climate change, diversity, executive pay, and political expenditures to the unique preferences of each investor.14

Investors want a voice. Approximately 83% of investors, irrespective of age, life stage, or ideological bent, want managers to consider their preferences when voting on environmental issues.15

Financial services companies that fail to engage clients on important voting preferences will be subject to ever-increasing legal and reputational jeopardy.

Vote FOR Ascertain Client Voting Preferences – Proposal [4*]

1 https://corpgov.law.harvard.edu/2023/03/11/esg-battlegrounds-how-the-states-are-shaping-the-regulatory-landscape-in-the-u-s/

2 https://www.sullivan.senate.gov/newsroom/press-releases/sullivan-introduces-index-act-to-empower- investors-and-neutralize-wall-streets-biggest-investment-firms

3 https://www.nbcnews.com/politics/white-house/biden-issues-first-veto-congress-blocks-new-investment-rule-rcna72997

4 https://ssrn.com/abstract=4360428

5 https://www.sec.gov/news/press-release/2022-198

6 https://www.texasattorneygeneral.gov/sites/default/files/images/press/Utah%20%26%20Texas%20Letter%20to%20Glass%20Lewis%20%26%20ISS%20FINAL.pdf, https://www.wsj.com/articles/blackrocks-false-voting- choice-proxy-esg-ballots-iss-glass-lewis-66652357?mod=opinion_lead_pos1, and https://www.wsj.com/articles/proxy-advisers-errors-accf-study-glass-lewis-iss-sec-gary-gensler-431939c5 7 https://advisorservices.schwab.com/intelligent-advisor/how-to-build-and-manage-your-customized-portfolios

8 https://www.schwab.com/direct-indexing

9 See 14 CFR 275.206(4)-6 and accompanying staff bulletins.

10 https://ssrn.com/abstract=4580206

11 https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357

12 https://www.schwabassetmanagement.com/resource/schwab-asset-management-pilots-new-proxy-polling-solution-to-gain-insight-into-shareholder. The poll asked investors, for example, if they’d rather support independent directors or reduction of “fur production,” a difficult comparison.

13 https://connect.rightprospectus.com/Schwab/TADF/808517106/SP?site=Funds and https://connect.rightprospectus.com/Schwab/TADF/808524664/SP?site=Funds

14 https://ssrn.com/abstract=4360428

15 https://www.gsb.stanford.edu/sites/default/files/publication/pdfs/survey-investors-retirement-savings-esg.pdf

Resolution Details

Company:

Charles Schwab Corporation (The)

Year:

2024

Issue Area:

Inclusiveness

Focus Area:

Race Discrimination

Status:

Filed

Resolution Text

WHEREAS: Pay inequities persist across race and gender and pose substantial risk to companies and society at large. Black workers’ hourly median earnings represent 81 percent of white wages. The median income for women working full time is 83 percent that of men. Intersecting race, Black women earn 64 percent, Native women 51 percent, and Latina women 54 percent. At the current rate, women will not reach pay equity until 2059, Black women until 2130, and Latina women until 2224.1

Citigroup estimates closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional income. PwC estimates closing the gender pay gap could boost Organization for Economic Cooperation and Development countries’ economies by 2 trillion dollars annually.2

Actively managing pay equity is associated with improved representation, and diversity is linked to superior stock performance and return on equity.3 Minorities represent 37 percent of Charles Schwab’s workforce and 27 percent of management. Women represent 37 percent of Charles Schwab’s workforce and 37 percent of management.4

Best practice pay equity reporting consists of two parts:

1. unadjusted median pay gaps, assessing equal opportunity to high paying roles,

2. statistically adjusted gaps, assessing pay between minorities and non-minorities, men and women, performing similar roles.

The Company continues to ignore unadjusted gaps, which address structural bias women and minorities face regarding job opportunity and pay, particularly when men hold most higher paying jobs. Median pay gaps show, quite literally, how Charles Schwab assigns value to employees through the roles they inhabit and pay they receive. Median gap reporting also provides a digestible and comparable data point to determine progress over time.

Racial and gender median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, Organization for Economic Cooperation and Development, and International Labor Organization. The United Kingdom and Ireland mandate disclosure of median gender pay gaps.

Additionally, Charles Schwab reported statistically adjusted pay gaps in 2023 in response to a shareholder proposal but did not commit to reporting these gaps annually.

RESOLVED: Shareholders request The Charles Schwab Corporation report on median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information.

Racial/gender pay gaps are defined as the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings (Wikipedia/OECD, respectively).

SUPPORTING STATEMENT: An annual report adequate for investors to assess performance could, with board discretion, integrate base, bonus and equity compensation to calculate:

· percentage median gender pay gap, globally and/or by country, where appropriate

· percentage median racial/minority/ethnicity pay gap, US and/or by country, where appropriate

1 https://static1.squarespace.com/static/5bc65db67d0c9102cca54b74/t/622f4567fae4ea772ae60492/1647265128087/Racial+Gender+Pay+Scorecard+2022+-+Arjuna+Capital.pdf

2 Ibid.

3 Ibid.

4 https://content.schwab.com/web/retail/public/about-schwab/schwab-2022-esg-report.pdf

Resolution Details

Company:

Charles Schwab Corporation (The)

Year:

2023

Issue Area:

Inclusiveness

Focus Area:

Equal Employment Opportunity (EEO), Workplace Equity

Status:

Vote

Vote Percentage:

24.70%

Resolution Text

Resolved: James McRitchie, of CorpGov.net, requests the Charles Schwab Corp (“Company” or “Schwab”) report annually on unadjusted median and adjusted pay gaps across race and gender globally and/or by country, where appropriate, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy, and legal compliance information.

Racial/gender pay gaps are the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings.

Supporting Statement: Pay inequities persist across race and gender. They pose substantial risks to companies and society. Black workers’ hourly median earnings represent 64% of white wages. Median income for women working full time is 83% of that of men.[1] Intersecting race, Black women earn 63%, Native women 60%, and Latina women 55%.[2] At the current rate, women will not reach pay equity until 2059, Black women 2130, and Latina women 2224.[3]

Citigroup estimated closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional national income.[4] PwC estimates closing the gender pay gap could boost OECD economies by $2 trillion annually.[5] Actively managing pay equity is linked to superior stock performance and return on equity.[6]

Best practice includes:

1. unadjusted median pay gaps, assessing equal opportunity to high-paying roles,
2. statistically adjusted gaps, assessing whether minorities and non-minorities, men and women, are paid the same for similar roles.

Over 20 percent of the 100 largest U.S. employers currently report adjusted gaps, and an increasing number of companies disclose unadjusted gaps to address the structural bias women and minorities face regarding job opportunity and pay.[7] Schwab reports neither.

Racial and gender unadjusted median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, OECD, and International Labor Organization.[8] The United Kingdom and Ireland mandate disclosure of median pay gaps, and the United Kingdom is considering racial pay reporting.

An annual report adequate for investors to assess performance could integrate base, bonus and equity compensation to calculate:
• percentage median and adjusted gender pay gap, globally and/or by country
• percentage median and adjusted racial/minority/ethnicity pay gap, U.S. and/or by country

[1] https://www.nationalpartnership.org/our-work/resources/economic-justice/fair-pay/americas-women-and-the-wage-gap.pdf

[2] https://www.aauw.org/app/uploads/2021/09/AAUW_SimpleTruth_2021_-fall_update.pdf

[3] https://iwpr.org/iwpr-publications/quick-figure/the-gender-pay-gap-1985-to-2020-with-forecast-for-achieving-pay-equity-by-race-and-ethnicity/

[4] https://ir.citi.com/NvIUklHPilz14Hwd3oxqZBLMn1_XPqo5FrxsZD0x6hhil84ZxaxEuJUWmak51UHvYk75VKeHCMI%3D

[5] https://www.pwc.com/hu/en/kiadvanyok/assets/pdf/women-in-work-2021-executive-summary.pdf

[6] https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/promoting-gender-parity-in-the-global-workplace ; https://www.issgovernance.com/file/publications/ISS-ESG-Gender-Diversity-Linked-to-Success.pdf

[7] https://diversiq.com/which-sp-500-companies-disclose-gender-pay-equity-data/

[8]https://static1.squarespace.com/static/5bc65db67d0c9102cca54b74/t/622f4567fae4ea772ae60492/1647265128087/Racial+Gender+Pay+Scorecard+2022+-+Arjuna+Capital.pdf