San Francisco-based Charles Schwab Corp., the nation's largest online brokerage, disclosed Friday that its top two executives received salary increases last year but eschewed annual bonuses and relinquished three years of stock-option grants as the firm continued to struggle in the bear market.
Company founder Charles Schwab was paid $883,334, a 36% jump from the previous year, according to a government filing. David Pottruck, who has been co-chief executive with Schwab and will become sole CEO in May, got salary and other benefits of slightly more than $1 million, a 58% hike.
A Schwab spokesman said their salaries were cut sharply in 2001, so the increases restored their pay to previous levels.
Both went without bonuses for the second year in a row after receiving $8.1 million each in 2000. Schwab and Pottruck also agreed to give up options on 5.4 million shares of stock that were given to them in the last three years.
Schwab has been hit hard as the three-year bear market cut deeply into its core business of executing stock trades for small investors. The firm has undergone three rounds of layoffs in which it has cut its workforce by more than one-third.
Schwab announced this month that it would cease making matching contributions to its employee 401(k) program.
Experts said the executives could be trying to show employees that they also are suffering financially.
The discarded options could have been worth millions in coming years if Schwab's stock were to rebound from its four-year tailspin.
Compensation experts note that those options are underwater -- meaning the prices at which they can be exercised to buy shares of Schwab stock are far above Schwab's $7.48 Friday closing price.
But by giving them up, analysts speculated, the executives could be setting themselves up to receive lower-priced options in the future, without triggering adverse accounting consequences for the company.
"If they really gave them up and they're going to grant those shares to other people, then that is laudable," said George B. Paulin, president of Frederic W. Cook & Co. in Century City. "But it could be a disguised form of [option] repricing."
A Schwab representative said the company intends to redistribute the options to a broad group of employees and "for anyone to suggest that they're trying to reprice [the options] is to stretch credibility."
Paulin pointed out that Schwab retained other options worth almost $22 million, while Pottruck kept options worth more than $40 million.
In another indication Friday of the strains on Wall Street, J.P. Morgan Chase & Co. said it slashed the total pay of its CEO, William Harrison, 48% last year. Harrison's bonus fell 19% to $8.1 million.
On Thursday, Menlo Park-based online brokerage E-Trade Group Inc. said it would pay former CEO Christos Cotsakos a $4-million bonus despite a high-profile pay flap last year in which his compensation was widely criticized as too high.
An E-Trade spokeswoman said Cotsakos was owed the money because the company met certain operating performance measurements.