SAN FRANCISCO — Discount broker Charles Schwab Corp. dumped CEO David Pottruck on Tuesday and replaced him with founder Charles Schwab, hoping the man who created the company can rejuvenate a business that has been sputtering for several years.
The San Francisco-based company made its surprise announcement as it released its second-quarter results. Schwab reported a 10 percent drop in its profit for the three months ended June, reversing a recent streak of improved earnings.
Investors seemed pleased with Schwab's shake-up. The company's shares gained 55 cents, or 6.6 percent, to close at $8.85 on the New York Stock Exchange. Entering Tuesday's trading session, the company's market value had plunged by 30 percent this year, a decline that may have contributed to Pottruck's ouster.
Like other brokers, Schwab's fortunes have been fluctuating with the ups and downs of the stock market. Schwab also has been facing tougher competition from aggressive rivals, such as E-Trade Financial Corp. and Ameritrade Holding Corp., that have been luring away customers by offering lowering commissions.
Even as Schwab was posting a decline in its profit for the latest quarter, Ameritrade, based in Omaha, Neb., reported a 25 percent increase in its profit the the three months ended in June, while E-Trade Financial reported its quarterly profit rose nearly 10-fold.
Hoping to regain market share, Schwab recently lowered its commissions by 33 percent for its average customers and reduced fees even more for wealthier investors.
Pottruck's departure comes 14 months after the company appointed him as its sole CEO. He had shared the CEO job the previous five years with Schwab, continuing a longtime partnership between the two men.
But the company's spotty performance in a volatile stock market apparently prompted the decision to give the reins back to Schwab, who had been acting as chairman, a position he will continue. The board of directors demanded Pottruck's resignation in a board meeting held Monday, according to Christopher Dodds, the company's chief financial officer.
"The last few years have been difficult in the securities markets, and I accept the board's decision that it's time for me to step aside," Pottruck said in a prepared statement. "It's been a great journey."
Pottruck, 55, received a $1 million salary as Schwab's CEO. Last year, he reached incentives qualifying for a $4.75 million bonus but declined to accept it so the money could be paid to other employees. The company didn't disclose Pottruck's severance package in Tuesday's announcement.
No other management changes are planned at Schwab, Dodds said during a Tuesday conference call with analysts and media.
In a prepared statement, Charles Schwab indicated he thinks the company remains well-positioned. "As I see the opportunities ahead for Schwab, I want to underscore my confidence in the strength of our franchise, the value we provide our clients, the dedication of our employees, and the depth of our management team," he said.
Although he is already 66 years old, Charles Schwab plans to remain the company's CEO "indefinitely," Dodds said.