Spring 2001

Lon Gorman
Vice Chairman
The Charles Schwab Corporation


Lon Gorman is a vice chairman of The Charles Schwab Corporation and is a member of the Executive Committee. He is president of Schwab Capital Markets, a division of Charles Schwab & Co., Inc. and serves as chairman & chief executive officer of Schwab Capital Markets L.P. (SCMLP, Schwab's NASDAQ and OTC market making subsidiary).

Mr. Gorman operates from Schwab's Capital Markets' headquarters in Jersey City, NJ. His responsibilities include SCMLP, institutional brokerage and research, fixed income sales and trading, options trading and the Specialist businesses on the Boston and Cincinnati Stock Exchanges, as well as routing decisions for all Schwab order flow.

Under Mr. Gorman's leadership, and during a period of tremendous change in the market place, division revenues tripled, market share increased over 50%, and SCMLP strengthened its position as the second largest market maker in NASDAQ securities. Mr. Gorman was also instrumental in several key Schwab acquisitions and partnerships, including the REDIBook ECN, CyBerCorp, and Epoch Partners.

Prior to joining Schwab in June 1996, Mr. Gorman was managing director and head of global equity trading at Credit Suisse First Boston (CSFB). He was with CSFB for sixteen years, from 1980 to 1996. Previously, he was a partner at F. Eberstadt & Co., Inc., with responsibility for institutional sales and trading.

Mr. Gorman attended Adelphi University. He serves as vice chairman of the board of directors of the Securities Industry Association (SIA), and as a board member of CyBerCorp, REDIBook ECN, the National Organization of Investment Professionals (NOIP) and Pace University's Lubin School of Business Advisory Board. He is chairman of the SIA Market Transparency Committee, a co-chairman of the SIA Market Structure Committee as well as a member on the SIA Public Trust & Confidence and NASDAQ Quality of Markets Committees. Mr. Gorman is a featured speaker at numerous industry forums and an outspoken advocate for the interests of Schwab's customers on industry and market structure issues.

Executive in Residence Vice Chairman Lon Gorman Proud of Schwab's Commitment to Customers

"Everything we do, everything we say, everything that we think about — strategy, results, etc.— reflects our obsession with our customer," said Lon Gorman, Lubin's Executive in Residence on March 1, 2001, regarding Charles Schwab & Company's commitment to its clients. Even with today's economic uncertainty, Gorman, vice chairman of the Charles Schwab Corporation and president of Schwab Capital Markets, said he is confident that the value Schwab provides its employees, and the industry as a whole, will continue to reflect positively on the company.


  [Lon Gorman]
Lon Gorman in discussion with students at a reception in his honor

> During his day on the New York campus, Gorman, also a Lubin School Advisory Board member, focused particularly on the change and consolidation that is taking place in today's capital markets as he addressed both faculty and students at a luncheon, met with student leaders, and lectured to undergraduate and graduate students.

Corporate Culture Is Key
Corporate culture is seldom a factor in determining the effectiveness of assessing a company, Gorman said, as he spoke about a part of the business world one normally does not pay too much attention to in accessing a company's worth beyond profits and losses. According to Gorman, things are different at Schwab, where the company places a great deal of emphasis on the importance of culture. The company was founded in 1974 as a result of the de-regulation of commission rates and was the first discount brokerage firm in the United States.

Gorman, who has been in the securities industry for 33 years, spoke of his motivation for joining Schwab by describing it as "the company that had perfect alignment with my vision and my values." He recounted a study indicating the research done on corporate culture: "companies that display specific facets of corporate culture grow ten times faster than companies that don't, the average net sales growth of high culture companies is 141 percent compared to 9 percent growth at low culture companies." This value system, embracing both corporate culture and customer needs, is highly valued by Schwab, said Gorman . It is also the first lesson learned by new employees who are taught the acronym FERSTT (pronounced first), Fair, Empathetic, Responsive, Striving, Teamwork, and Trust. "These a re very much ingrained in employees' minds and in their hearts. We are a company that prides itself on having no conflicts and thinks culture has a lot to do with our success." Gorman spoke of it as being a value system not only fostered by senior executives but one that has truly been adopted by the employees, as exemplified by employees' recent willingness to take unpaid time off to give Schwab the opportunity to meet profit margins during the current economic slowdown. "We have a history and a legacy with our employees for doing the right thing, taking care of people." This is evidenced by their economic performance and by awards Schwab has earned in recent years from such influential magazines as Fortune, Working Woman, and Business Ethics for their efforts to provide men and women with the FERSTT opportunities to succeed.

"The Times, They Are A-Changin"
Gorman used the title of a Bob Dylan song, "The times, they are a-changin," to explain the need to redirect a corporation in the changing economy. "People in this kind of economic downturn want someone to hold their hand; they want to look at human beings face to face, they don't want to be on the Internet. They are watching their portfolios meltdown and they want to have someone guide them with wisdom." He says the key will be to provide support to the client who no longer feels comfortable executing trades alone on the Internet.

Gorman said he believes there will be a tremendous amount of consolidation in many industries as a result of "becoming too comfortable and as a consequence of over spending last year." Indicating the 140 online brokerage firms in existence today, he said he believes that number could shrink to about 20 because " there are only two companies who make money."

When asked about who he thinks will survive the shock taking place in today's capital markets, Gorman responded, "We think the next generation of survivors of financial services are not people who are solely web dependent; it is a combination of high tech and high touch. Reinvention is a necessity in today's business." Touching the customer and its employees is the way the Charles Schwab Corporation and its subsidiaries have reinvented the model of change. "It is not always about results, it is about a company with a heart and a conscience," he concluded.

Lon Gorman attended Adelphi University. Prior to joining Schwab in June 1996, he was managing director and head of global equity trading at Credit Suisse First Boston (CSFB). He currently serves as vice chairman of the board of directors of the Securities Industry Association (SIA), and as a board member of CybBerCorp, REDIBook ECN, and the National Organization of Investment Professionals.