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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |||||
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||
| x | Definitive Proxy Statement | |||||
| ¨ | Definitive Additional Materials | |||||
| ¨ | Soliciting Material pursuant to §240.14a-12 | |||||
American Express Company
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number or the Form or Schedule and the date of its filing. |
| (1) | Amount previously paid: |
| (2) | Form, Schedule or Registration Statement No.: |
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| OUR VALUES |
Our Blue Box Values reflect who we are and what we stand for as a company. | |
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Customer Commitment
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We develop relationships that make a positive difference in our customers’ lives. | |||
| Quality | We provide outstanding products and unsurpassed service that together, deliver premium value to our customers.
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| Integrity | We uphold the highest standards of integrity in all our actions.
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| Teamwork | We work together, across boundaries, to meet the needs of our customers and to help the company win.
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Respect for People |
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We value our people, encourage their development and reward their performance.
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Good Citizenship
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We are good citizens in communities in which we live and work. | |||
| A Will to Win | We exhibit a strong will to win in the marketplace and in every aspect of our business.
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Personal Accountability |
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We are personally accountable for delivering on our commitments. | |||
| During 2013, American Express produced record earnings in a slow-growth economy. Higher Card Member spending and a focus on cost controls allowed us to invest in opportunities to expand our core business and open new avenues for growth. | ||||||
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AMERICAN EXPRESS COMPANY 200 VESEY STREET NEW YORK, NEW YORK 10285 |
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
| Date and Time | Monday, May 12, 2014, at 9:00 a.m. | |
| Place | American Express Company 200 Vesey Street, 26th Floor New York, New York 10285 | |
| Items of Business | (1) Election of directors proposed by the Company’s Board of Directors for a term of one year, as set forth in this Proxy Statement
(2) Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2014
(3) Advisory resolution to approve executive compensation
(4) Four shareholder proposals if properly presented at the Annual Meeting
(5) Such other business that may properly come before the Annual Meeting | |
| Record Date | Close of business on March 14, 2014 | |
Carol V. Schwartz
Secretary and Corporate Governance Officer
March 21, 2014
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| Inside Back Cover |
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We are providing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors of American Express Company for the 2014 Annual Meeting of Shareholders and for any adjournment or postponement of the meeting. We expect to mail our notice of Internet availability of the proxy materials and to begin mailing our proxy materials on or about March 26, 2014.
Time and Place: We are holding the Annual Meeting at 9:00 a.m. Eastern Time on Monday, May 12, 2014, at our headquarters in New York City, and we invite you to attend in person. Directions are on the inside back cover. If you need special assistance at the meeting, you may contact Carol V. Schwartz, our Secretary, by telephone at 212-640-2000, by e-mail at carol.schwartz@aexp.com, or by writing to her at the company’s principal executive offices at 200 Vesey Street, New York, New York 10285.
Attendance Requirements: We do not require tickets for admission to the meeting but do limit attendance to shareholders on the record date or their proxy holders. Please bring proof of your common share ownership, such as a current brokerage statement, and photo identification. Only shareholders or their valid proxy holders may address the meeting. Please note that cameras, camcorders, videotaping equipment, and other recording devices, and large packages, banners, placards, and signs will not be permitted in the meeting.
Street-Name Holders: If you hold shares in a bank or brokerage account (known as shares held in “street name”), you must obtain a valid “legal proxy,” executed in your favor from the holder of record, if you wish to vote these shares at the meeting.
Webcast: We have arranged for a live audio webcast and a replay of the 2014 Annual Meeting of Shareholders to be accessible to the general public at our website at http://ir.americanexpress.com.*
HOW TO VIEW PROXY MATERIALS ONLINE
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held
on May 12, 2014.
Our Proxy Statement and 2013 Annual Report to Shareholders are available online at http://ir.americanexpress.com.
We will mail to certain shareholders a notice of Internet availability of proxy materials. This notice contains instructions on how to access our Proxy Statement and 2013 Annual Report to Shareholders and vote online. We also offer you the option to receive our proxy materials electronically in the future. You may register to do so at our website.
We encourage you to vote as soon as possible, even if you plan to attend the meeting in person. Your vote is important, and for all items other than ratification of our auditor, if you hold shares in street name, your shares will not be voted by your bank or broker if you do not provide voting instructions. You may vote common shares that you owned as of the close of business on March 14, 2014, which is the record date for the meeting.
You may vote in the following ways:
| BY TELEPHONE | BY INTERNET | BY MAIL | ||
| In the United States or Canada, you can vote your shares by calling 1-800-690-6903. |
You can vote your shares online at www.proxyvote.com. |
You can vote by mail by marking, dating and signing your proxy card or voting instruction form and returning it in the accompanying postage-paid envelope. | ||
| * | Weblinks throughout this document are provided for convenience only. Information from the American Express website is not incorporated by reference into this proxy statement. |
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GENERAL INFORMATION
For telephone and Internet voting, you will need the 12-digit control number included on your notice, on your proxy card or in the instructions that accompanied your proxy materials.
Telephone and Internet voting are available through 11:59 p.m. Eastern Time on Tuesday, May 6, 2014, for shares held in employee plans, and through 11:59 p.m. Eastern Time on Sunday, May 11, 2014, for all other shares.
REVOCATION OF PROXIES
You can revoke your proxy at any time before your shares are voted if you:
| • | Submit a written revocation to our Secretary |
| • | Submit a later-dated proxy or voting instruction form |
| • | Provide subsequent telephone or Internet voting instructions, or |
| • | Vote in person at the meeting |
If you sign and return your proxy card or voting instruction form without any voting instructions with respect to a matter, your shares will be voted as our board recommends.
VOTING AT THE ANNUAL MEETING
The way you vote your shares prior to the meeting will not limit your right to change your vote at the meeting if you attend in person and vote by ballot. If you hold shares in street name and you want to vote in person at the meeting, you must obtain a valid legal proxy from the record holder of your shares at the close of business on the record date indicating that you were a beneficial owner of shares, as well as the number of shares of which you were the beneficial owner on the record date, and appointing you as the record holder’s proxy to vote these shares. You should contact your bank, broker or other intermediary for specific instructions on how to obtain a legal proxy.
Additional information regarding voting procedures and the meeting can be found under Voting Instructions and Information on page 83.
VOTE CONFIRMATION
We are again offering you the opportunity to confirm your vote was cast in accordance with your instructions. Beginning April 27, 2014, and for up to two months after the annual meeting, you may confirm your vote beginning 24 hours after your vote is received, whether it was cast by proxy card, electronically or telephonically. To obtain vote confirmation, log onto www.proxyvote.com using your control number (included on your notice, on your proxy card, or in the instructions that accompanied your proxy materials) and receive confirmation on how your vote was cast. If you hold your shares through a bank or brokerage account, the ability to confirm your vote may be affected by the rules of your bank or broker, and the confirmation will not confirm whether your bank or broker allocated the correct number of shares to you.
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We provide below highlights of certain information in this proxy statement. As it is only a summary, please review the complete Proxy Statement and 2013 Annual Report to Shareholders before you vote.
The company produced record earnings in 2013 driven by healthy Card Member spending growth, continued strong credit performance, effective control of operating expenses and a strong capital position.
| • | We earned a record $5.4 billion in net income for 2013, up 20 percent from last year. |
| • | We achieved $952 billion in worldwide billed business (spending on American Express® Cards, including Cards issued by third parties), an increase of 7 percent (8 percent on an FX-adjusted basis1) over last year. |
| • | Our total revenues net of interest expense rose 4 percent (5 percent on an FX-adjusted basis1) to $33 billion. |
| • | Our credit performance outpaced the industry, and write-off rates remained at historic lows. |
| • | Our total shareholder return for the year was 60 percent, compared to a 32 percent gain for the S&P 500 Index. |
| • | We continued to build the customer base for our new alternative payment products, Bluebird and Serve, while adding a number of innovative features, and our international rewards coalition program, Loyalty Partner, passed the 60 million customer mark. |
Further information on our 2013 performance can be found on pages 20 and 21.
EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program is designed to reward our leadership team for delivering results and building sustainable shareholder value. We believe our program’s performance measures align the interests of our shareholders and senior executives by tying pay outcomes to performance over the short, medium, and long term. Several important features of our executive compensation program are:
| • | Over 84 percent of the total direct compensation delivered for 2013 to our CEO and other Named Executive Officers was variable and tied to performance. |
| • | Our Compensation and Benefits Committee assesses performance using a framework that reviews results relative to our goals and to our competitors, progress against strategic initiatives, and risk/control and compliance goals. This framework is designed to provide a broad and balanced view of performance and discourage imprudent risk taking. |
| • | Our long-term incentive awards include (1) performance-vested restricted stock units whose value is based on achievement of return on equity targets, (2) stock options, and (3) three-year performance period portfolio grant awards whose value is based on the achievement of financial and strategic goals and relative stock performance. |
| • | We require our executive officers to have significant outright ownership of company shares, and we prohibit hedging of their company shares and place limitations on their ability to pledge company shares. |
| • | We made a number of changes to our executive compensation program in recent years to further strengthen the link between pay and performance. For example, we implemented a new framework for determining CEO total direct compensation, added performance vesting to our annual restricted stock unit grants, added a clawback feature to the cash bonus paid to the CEO and eliminated excise tax gross-up in change in control situations for all employees. |
Our Compensation Discussion and Analysis is on pages 20-41, the Report of the Compensation and Benefits Committee is on page 42, and our Summary Compensation Table and the other compensation tables and narrative discussion are on pages 43-57.
| 1 | The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars, making it easier to compare performance in one period to another period without the variability caused by fluctuations in currency exchange rates. Total revenues net of interest expense on an FX-adjusted basis is a non-GAAP measure. |
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PROXY SUMMARY
Item 1—Election of Directors for a Term of One Year (see pages 58-66)
You are being asked to elect 13 directors. Each of our current directors is standing for reelection to hold office until the next annual meeting of shareholders and until his or her successor is duly elected and qualified.
All directors attended over 75 percent or more of the meetings of the board and board committees on which they served in 2013.
All of our directors other than Amb. Barshefsky and Messrs. Chenault and Leonsis are independent under New York Stock Exchange (NYSE) rules. Only independent directors serve on our Audit and Compliance, Compensation and Benefits, Nominating and Governance, and Risk committees.
INFORMATION ABOUT OUR DIRECTOR NOMINEES
| AGE |
DIRECTOR SINCE |
CURRENT OCCUPATION | INDEPENDENT | OTHER PUBLIC BOARDS |
COMMITTEE MEMBERSHIPS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AC | CB | IT | NG | PR | Risk | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Charlene Barshefsky | 63 | 2001 | Senior International Partner, WilmerHale | 3 | M | C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ursula M. Burns | 55 | 2004 | Chairman and CEO, Xerox Corporation | X | 2 | M | M | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Kenneth I. Chenault | 62 | 1997 | Chairman and CEO, American Express Company | 2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Peter Chernin | 62 | 2006 | Founder and Chairman, Chernin Entertainment | X | 2 | M | C | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Anne Lauvergeon | 54 | 2013 | Partner and Managing Director, Efficiency Capital | X | 2 | M | M | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Theodore J. Leonsis | 58 | 2010 | Chairman and CEO, Monumental Sports & Entertainment | 1 | C | M | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Richard C. Levin | 66 | 2007 | President Emeritus, Yale University | X | M | M | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Richard A. McGinn | 67 | 1998 | General Partner, MR Investment Partners | X | 1 | M | M | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Samuel J. Palmisano | 62 | 2013 | Former Chairman, President and CEO, IBM | X | 1 | M | M | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Steven S Reinemund | 65 | 2007 | Dean of Business, Wake Forest School of Business | X | 3 | M | M | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Daniel L. Vasella | 60 | 2012 | Honorary Chairman and Former Chairman and CEO, Novartis AG | X | 1 | C | M | M | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Robert D. Walter | 68 | 2002 | Founder and Former Chairman and CEO, Cardinal Health, Inc. | X | 2 | C | M | M | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ronald A. Williams | 64 | 2007 | Former Chairman and CEO, Aetna, Inc. | X | 3 | M | M | C | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| AC |
Audit and Compliance Committee |
C |
Chair | |||
| CB |
Compensation and Benefits Committee |
M |
Member | |||
| IT |
Innovation and Technology Committee |
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| NG |
Nominating and Governance Committee |
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| PR |
Public Responsibility Committee |
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| Risk |
Risk Committee |
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PROXY SUMMARY
| INFORMATION ABOUT OUR 2013 BOARD AND COMMITTEE MEETINGS |
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| MEMBERS | MEETINGS | |||||||||||||
| Board of Directors | 13 | 10 | ||||||||||||
| Audit, Risk and Compliance (through Sept. 2013) | 5 | 13 | ||||||||||||
| Audit and Compliance (from Oct. 2013) | 4 | 3 | ||||||||||||
| Compensation and Benefits | 5 | 9 | ||||||||||||
| Innovation and Technology | 4 | 3 | ||||||||||||
| Nominating and Governance | 5 | 5 | ||||||||||||
| Public Responsibility | 5 | 3 | ||||||||||||
| Risk (from Oct. 2013)* | 4 | 3 | ||||||||||||
REQUIRED VOTE
Except in a contested election, each director nominee is elected annually by a majority of votes cast.
Our board recommends a vote FOR the election of each of the director candidates nominated by the board.
Item 2—Ratification of Appointment of PricewaterhouseCoopers LLP for 2014 (see pages 67-68)
PricewaterhouseCoopers LLP (PwC) has been our independent registered public accounting firm since 2005.
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Our Audit and Compliance Committee charter requires a comparison of resources available from other audit firms at least every ten years. The most recent review took place in 2004, at which time the committee engaged PwC. |
The fees paid to PwC are detailed on page 67. Tax and Other Fees in 2013 were less than 1 percent of the total fees paid to PwC in 2013.
One or more representatives of PwC will be present at the meeting, will be given the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
Our board recommends a vote FOR this proposal.
Item 3—Advisory Resolution to Approve Executive Compensation (Say on Pay) (see page 69)
We are asking shareholders to approve on an advisory basis our Named Executive Officer compensation. We hold this advisory vote annually.
Our board recommends a vote FOR this proposal.
Items 4-7—Four Shareholder Proposals, if properly presented (see pages 70-78 )
Four shareholder proposals are expected to be presented for a vote.
Our board recommends a vote AGAINST the proposals.
| * | In September 2013 we formed a separate Risk Committee of the board. Before then, risk was overseen by the Audit, Risk and Compliance Committee. |
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AT AMERICAN EXPRESS
OUR CORPORATE GOVERNANCE FRAMEWORK
| Our corporate governance framework is designed to support the company’s brand attributes of trust, security and integrity, and to promote achievement of our financial targets through responsible development and execution of corporate strategy.
Our governance framework enables independent and skilled directors to provide oversight, advice, and counsel to promote the interests of American Express and its shareholders. Key governance policies and processes include our codes of conduct, our comprehensive enterprise-wide risk management program, our commitment to transparent financial reporting, and our systems of internal checks and balances. |
Corporate Governance— Integrity and Trust
At American Express, we seek to achieve strong results for our shareholders. We do this through a commitment to high standards of ethical behavior and integrity, sound governance and risk management practices, a strong ethos of customer service, and a commitment to giving back to the communities in which we work and operate.
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You may view our Corporate Governance Principles, the charters of each of our board committees, and the codes of conduct for our employees and directors at http://ir.americanexpress.com. These documents provide the framework for our governance at the board level. Our directors understand that they serve you as shareholders in carrying out their responsibility to oversee the operation and strategic direction of our company. To do so effectively, our board along with management regularly reviews our Corporate Governance Principles, our charters and practices to assure that they are appropriate and reflect high standards.
AMERICAN EXPRESS CORPORATE GOVERNANCE
| Board Independence |
• Ten out of 13 of our director nominees are independent. | |
| • Our CEO is the only member of management who serves as a director. | ||
| Board Composition |
• Directors may not stand for reelection after age 72. | |
| • Directors regularly review board performance, assess gaps in skills or experience on the board, and periodically bring on new directors to add a fresh perspective and assure continuity and adequate succession planning. We have added three new directors to our board in the last two years. | ||
| Board Committees |
• We have six board committees—Audit and Compliance; Compensation and Benefits; Innovation and Technology; Nominating and Governance; Public Responsibility; and Risk. | |
| • Our Audit and Compliance; Compensation and Benefits; Nominating and Governance; and Risk committees are composed entirely of independent directors. | ||
| • Chairs of our board committees shape the agenda and information presented to their committees. | ||
| • The board and each committee engage in an annual evaluation of its performance. | ||
| • No member of our Audit and Compliance Committee may serve simultaneously on the audit committees of more than two other public companies. | ||
| • Committees may conduct their own investigations into issues related to their responsibilities and retain independent legal, accounting or other advisers. | ||
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Independent Lead Director |
• Our independent directors annually elect an independent lead director.
• Our independent lead director chairs regularly scheduled executive sessions, at which directors can discuss matters without management present, including management performance, succession planning, board information needs and board effectiveness.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
| Board Oversight of Risk and Strategy |
• Enterprise-wide risk management is overseen by our Risk Committee. Key risks are reviewed by this committee and reported to the board. | |
| • Our Audit and Compliance Committee oversees the integrity of our financial reporting process and financial statements and legal and regulatory compliance. | ||
| • Our Compensation and Benefits Committee reviews compensation practices so that they do not encourage imprudent risk taking. | ||
| • Our Public Responsibility Committee reviews political contributions activities. | ||
| • Our board directly oversees and advises management on development and execution of strategy, including through an in-depth review at an annual two-day strategy off-site. | ||
| • Our Risk, Audit and Compliance, and Compensation and Benefits committees have overlapping memberships. | ||
| Accountability |
• All directors are elected annually. | |
| • In uncontested director elections, our directors are elected by a majority of votes cast. | ||
| • Each common share is entitled to one vote. | ||
| • Special meetings may be called by holders of 25 percent of our common shares, in accordance with our by-law procedures. | ||
| • We have regular outreach and engagement with shareholders and all shareholders may also raise concerns to our directors or to our corporate ombudsperson. | ||
| Director Stock Ownership |
• A personal holding of 20,000 shares (including share equivalent units) is recommended for each director, to be acquired within five years of joining the board. | |
| Succession Planning |
• CEO and management succession planning is one of the board’s highest priorities. Our board devotes significant attention to identifying and developing talented senior leaders. | |
| Open Lines of Communication |
• Our board promotes open and frank discussions with senior management. | |
| • Our directors have access to all members of management and other employees on a confidential basis and are authorized to hire outside consultants or experts at the company’s expense. |
CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
Board Independence
Our governance principles provide that a substantial majority of our directors will meet the criteria for independence required by the NYSE. A director is considered independent if the board determines that he or she does not have a material relationship with the company. In making its annual independence determinations, the board considers transactions between each director nominee and the company. Our board has established guidelines to assist it in determining director independence. These guidelines can be found within the corporate governance principles on the “Corporate Governance” link at http://ir.americanexpress.com. They cover, among other things, employment and compensatory relationships, relationships with our auditors, customer and business relationships, and contributions to nonprofit organizations.
Based on our guidelines, on February 24, 2014, the board determined that ten of the board’s 13 director nominees are independent: Mses. Burns and Lauvergeon, and Messrs. Chernin, Levin, McGinn, Palmisano, Reinemund, Vasella, Walter and Williams. The other director nominees, Ambassador Barshefsky, Mr. Chenault and Mr. Leonsis, are not independent under these guidelines.
Our director independence guidelines provide that a material relationship with the company will be deemed to exist if a director is a partner of, or of counsel to, a law firm that performs substantial legal services for the company on a regular basis. Ambassador Barshefsky is a partner of the law firm of WilmerHale, which firm provided legal services to us in 2013 at customary rates. Mr. Leonsis provided consultation services to the company in 2012 and is not independent under our director independence guidelines.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
Board Leadership
CHAIRMAN AND CEO ROLES
Our governance principles provide that ordinarily and in normal circumstances, the chief executive officer will also serve as chairman of our board. Our board believes that our combination of an independent lead director, independent committee chairs, and experienced and committed directors, with Mr. Chenault serving in a unified chairman and chief executive officer role, serves the best interests of American Express at this time. By serving as both chairman and chief executive officer, Mr. Chenault has been able to draw on his knowledge of the daily operations of the company, industry and competitive developments, and the company’s relationships with customers, employees, and business partners to provide our board with leadership in setting its agenda and focusing its discussions. Mr. Chenault’s combined role has also ensured that we present our message and strategy to shareholders, employees and customers with a unified voice, and provides unambiguous accountability.
| INDEPENDENT LEAD DIRECTOR
The Nominating and Governance Committee reviews our board’s leadership structure. In February 2011, at the recommendation of the committee, the board established the position of independent lead director, replacing our past practice of rotating presiding directors. This position was put in place to supplement the leadership that had historically been provided by each of our board committee chairs and the presiding directors. The committee believes that establishing a clearly defined and significant independent lead director role, combined with having active, independent-minded, skilled, and committed directors, provides a framework for effective board oversight.
Our independent lead director, currently Robert D. Walter, was reelected lead director in February 2014 by the independent directors upon the recommendation of the Nominating and Governance Committee.
EXECUTIVE SESSIONS
Executive sessions enable the board to discuss matters, including strategy, management performance, succession planning and board effectiveness without management present. Our non-management directors generally meet in executive session at each regularly scheduled board meeting, including at least one executive session of independent directors only. Any director may request additional executive sessions of non-management or independent directors. Additional meetings of the independent directors may also be called at any time by the lead director. During 2013, our board held seven executive sessions of non-management directors, one of which included independent directors only. |
Duties and Powers of Our Independent Lead Director: • Preside at all meetings of the board at which the chairman is not present, including the executive sessions of the independent directors; and apprise the chairman of the issues considered and decisions reached. • Call additional meetings of independent directors. • Facilitate communication and serve as a liaison between the chairman and the independent directors. • Advise the chairman of the board’s informational needs and review and approve the types of information sent to the board and board meeting agendas. • Review and approve the schedule of board meetings to ensure that there is sufficient time for discussion of all agenda items. • If requested by major shareholders, be available as appropriate for consultation and direct communication. • Perform such other duties as the independent directors may from time to time designate.
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Accountability
MAJORITY VOTING FOR DIRECTORS
Our by-laws provide that directors will be elected by a majority of “for” votes cast in a non-contested election (where the number of nominees is the same as the number of directors to be elected). If a director receives a greater number of votes “against” than votes “for” his or her election, the director is required to immediately submit his or her resignation to the board. Our board of directors, excluding such individual, will decide whether or not to accept such resignation and will promptly disclose and explain its decision in a Form 8-K filed with the Securities and Exchange Commission (SEC) within 90 days after the results of the election are certified.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
In a contested election, the director nominees who receive the plurality of votes cast are elected as directors. Under the plurality standard, the number of persons equal to the number of vacancies to be filled who receive more votes than other nominees are elected to the board, regardless of whether they receive a majority of votes cast. An election is considered contested under our certificate of incorporation if there are more nominees than positions on the board to be filled at the meeting of shareholders as of the 14th day prior to the date on which we file our definitive proxy statement with the SEC.
CALLING OF SPECIAL SHAREHOLDER MEETINGS
Our by-laws allow holders of 25 percent or more of our common shares to call a special meeting of shareholders in accordance with specified procedures. Our board adopted this by-law amendment in 2011 in response to input from our shareholders.
MANAGEMENT SUCCESSION PLANNING
One of our board’s primary responsibilities is to ensure that we have the appropriate management talent to successfully pursue our strategies. Oversight of the management succession process is the responsibility of the Nominating and Governance Committee. Our board believes that the directors and the CEO should collaborate on succession planning and that the entire board should be involved in the critical aspects of the CEO succession planning process, including establishing selection criteria that reflect our business strategies, identifying and evaluating potential internal candidates and making key management succession decisions.
Management succession is regularly discussed by the directors in board meetings and in executive sessions of the board. Our board annually conducts a detailed review of the company’s talent strategies, leadership pipeline and succession plans for key executive positions. Directors become familiar with potential successors for key management positions through various means, including the comprehensive annual talent review, informal meetings, board dinners and presentations to the board.
Open Lines of Communication
INVESTOR OUTREACH
We engage with our shareholders to ensure that both management and the board are aware of and can address the issues that matter most to our shareholders on a timely basis.
COMMUNICATING WITH DIRECTORS
You may communicate with our board or an individual director by letter, e-mail or telephone, directed in care of the company’s Secretary, who will forward your communication to the intended recipients. If you wish to communicate a concern about our financial statements, accounting practices or internal controls, the concern should be directed to the chair of the Audit and Compliance Committee. If the concern relates to the company’s governance practices, business ethics or corporate conduct, the concern should be directed to the chair of the Nominating and Governance Committee. Matters relating to executive compensation may be directed to the chair of the Compensation and Benefits Committee. If you are unsure of the category your concern relates to, you may communicate it to any one of the independent directors or to the lead director. The contact information for the company’s Secretary is on page 1.
Our “whistleblower” policy prohibits American Express or any of its employees from retaliating or taking any adverse action against anyone for raising a concern in good faith. If you nonetheless prefer to raise a shareholder concern to our board in a confidential or anonymous manner, the concern may be directed to the Office of the Ombudspersons at the company’s headquarters or by telephone to 1-800-297-1010. An ombudsperson will refer the concern to the chair of the Audit and Compliance Committee, who will see that the matter is properly investigated.
DIRECTOR ACCESS
All of our directors have access to individual members of management and to other employees on a confidential basis. Directors are authorized to conduct independent investigations and to hire outside consultants or experts at the company’s expense. Directors also have access to company records and files, and directors may contact other directors without informing management of the purpose or even the fact of such contact.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
BOARD MEETINGS AND BOARD COMMITTEES
Director Attendance
ATTENDANCE AT BOARD MEETINGS
During 2013, our board met ten times. All directors attended 75 percent or more of the meetings of the board and board committees on which they served in 2013.
ATTENDANCE AT ANNUAL MEETINGS
In 2013, all of our directors other than Mr. Palmisano were present at the Annual Meeting of Shareholders. Our board encourages all its members to attend the annual meetings but understands there may be situations that prevent such attendance.
COMMITTEE MEMBERSHIP AND MEETINGS HELD IN 2013
Committee memberships and information about our committee meetings held in 2013 is in the Proxy Summary on page 4.
Board Committee Responsibilities
AUDIT AND COMPLIANCE COMMITTEE
All members of the Audit and Compliance Committee are independent directors as required by the listing standards of the NYSE and our governance principles. Our board has also determined that Mr. Williams meets the requirements for being an “audit committee financial expert” as defined by SEC rules.
RESPONSIBILITIES: Assist the board in its oversight of: the integrity of the company’s financial statements and financial reporting processes; internal and external auditing, including the qualifications and the independence of the independent registered public accounting firm and the performance of the company’s internal audit services function; the integrity of the company’s systems of internal accounting and financial controls; and legal and regulatory compliance. The Audit and Compliance Committee meets regularly in executive session with management, the company’s General Auditor, the company’s independent registered public accounting firm, and the company’s Chief Compliance Officer.
The duties of the Audit and Compliance Committee with respect to oversight of the company’s financial reporting process are described in the report of the committee on page 14 under Report of the Audit and Compliance Committee.
COMPENSATION AND BENEFITS COMMITTEE
All members of the Compensation and Benefits Committee are independent directors as required by the listing standards of the NYSE and our governance principles.
RESPONSIBILITIES: Oversight responsibility for the compensation of executive officers and designated key employees of the company, including the applicable compensation plans and arrangements, as well as the company’s employee benefit plans. The Compensation and Benefits Committee may delegate certain of its responsibilities to one or more Compensation and Benefits Committee members or to designated senior executives or committees in accordance with applicable laws, regulations and plan requirements.
As part of this oversight responsibility, among other duties, the committee is responsible for approving an overall compensation philosophy and strategy for the company and its executive officers, including the selection of performance measures aligned with the company’s business strategy, and for reviewing the company’s compensation practices so that they do not encourage imprudent risk taking. The committee is also responsible for evaluating potential conflicts of interest with respect to its advisors. The processes and procedures by which the Compensation and Benefits Committee considers and determines Named Executive Officer compensation are described in the Compensation Discussion and Analysis included in this proxy statement.
Compensation and Benefits Committee Interlocks and Insider Participation
The current members of the Compensation and Benefits Committee are Ms. Burns, Mr. Chernin, Mr. Palmisano, Mr. Walter and Mr. Williams. None of them is a former or current officer or employee of the company or any of its subsidiaries. None of them has any relationship required to be disclosed under this caption under the rules of the SEC.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
INNOVATION AND TECHNOLOGY COMMITTEE
The Innovation and Technology Committee was established by the board in July 2010 to assist the board in its oversight of strategic innovation and technology.
RESPONSIBILITIES: Reviews and makes recommendations to the board on major strategies and plans developed by management relating to technological and commercial innovation; the innovation and technology acquisition process to assure ongoing business growth and the measurement and tracking systems in place to achieve successful innovation.
NOMINATING AND GOVERNANCE COMMITTEE
All members of the Nominating and Governance Committee are independent directors as required by the listing standards of the NYSE and our governance principles.
RESPONSIBILITIES: Considers and recommends candidates for election to the board; advises the board on director compensation; oversees the annual performance evaluations of the board and board committees; advises the board on corporate governance and board leadership; administers the company’s Related Person Transaction Policy and oversees the company’s management succession process.
PUBLIC RESPONSIBILITY COMMITTEE
The board established the Public Responsibility Committee in recognition of the importance of issues that affect the communities in which we work, or the public interest in general.
RESPONSIBILITIES: Reviews legislation and regulation affecting American Express, our philanthropic programs, our political action committee and corporate political contributions, our government relations activities, other policies affecting the communities in which we operate and our environmental programs.
Political Contributions Activities
We communicate with policymakers on public policy issues important to the company. In addition to our advocacy efforts, we participate in the political process through the American Express Political Action Committee (AXP PAC). The AXP PAC does not contribute to presidential campaigns.
We maintain comprehensive compliance procedures to ensure that our activities are conducted in accordance with all relevant laws, and management regularly reports to the Public Responsibility Committee regarding its engagement in the public policy arena and its political contributions. Information regarding our company’s political activities, including annual U.S. political contributions, may be found at http://about.americanexpress.com/news/pap.aspx.
RISK COMMITTEE
All members of the Risk Committee are independent directors under the listing standards of the NYSE and our governance principles.
RESPONSIBILITIES: Assists the board in its oversight of: the company’s enterprise-wide risk management framework; the policies and procedures established by management to identify, assess, measure and manage key risks facing the company; management’s execution of capital management; and liquidity planning. The Risk Committee meets regularly in executive session with the company’s Chief Risk Officer. The charter of the Risk Committee provides that the Chief Risk Officer has express authority to communicate directly at any time with the Chair of the Risk Committee about any significant risk matter involving the company.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
Board’s Role in Risk Oversight
The company uses its comprehensive Enterprise-wide Risk Management (ERM) program to measure, aggregate, monitor and manage risks. The ERM program is designed to enable the board of directors and management to assess the effectiveness of risk management capabilities, policies, processes and controls. It also contributes to the risk-adjusted performance evaluation of the company’s businesses and business leaders. The implementation and execution of the ERM program is headed by the company’s Chief Risk Officer.
Risk management and key risks identified by management are overseen by the company’s board of directors and three of its committees: the Risk Committee, the Audit and Compliance Committee, and the Compensation and Benefits Committee. Each of these committees consists entirely of independent directors and provides regular reports to the board of directors regarding matters reviewed at the committee level. In addition to the risks under the purview of a particular committee, the board of directors monitors the “tone at the top” and risk culture of the company, oversees strategic risk, and reviews specific and significant risks facing the company from time to time. These committees meet regularly in private sessions with the company’s Chief Risk Officer, the Chief Compliance Officer, the General Auditor and other senior management with regard to the company’s risk management processes, controls and capabilities.
The Risk Committee of the company’s board of directors provides risk oversight on risk policies and the risk management performance of the company. The Risk Committee approves key risk management policies and monitors the company’s risk culture, talent, capabilities and risk outcomes. In particular, it approves the company’s ERM policy along with its sub-policies governing individual credit risk, institutional credit risk, market risk, liquidity risk, operational risk, reputational risk and asset/liability risk, as well as the launch of new products and services. The ERM policy sets the company’s risk appetite and defines governance over risk taking and the risk-monitoring processes across the company. Risk appetite defines the overall risk levels the company is willing to accept while operating in full compliance with regulatory and legal requirements. In addition, it establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system of risk limits, escalation triggers and controls designed to ensure that the risks remain within the defined risk appetite boundaries. Furthermore, the policy defines risk management roles and responsibilities.
The Risk Committee also regularly reviews the credit risk profile of the company, risk trends and risk management capabilities. The Risk Committee receives regular updates from the company’s Global Risk Oversight team, which reports to the Chief Risk Officer, on key risks affecting the company, including transaction and exposure level approvals driven by policy-based risk escalations and risk limits.
The Risk Committee reviews enterprise-wide operational risk trends, events and capabilities, with an emphasis on compliance, fraud, legal, process or control failures, information security, and privacy impacts, as well as trends in market, funding, liquidity and reputational risk. The Risk Committee also provides risk oversight of the company’s compliance with Basel capital and liquidity standards and its Internal Capital Adequacy Assessment Process, including its Comprehensive Capital and Review (CCAR) submissions.
As it relates to risk oversight, the Audit and Compliance Committee of the company’s board of directors approves the company’s compliance policies and compliance risk tolerance statement, which reinforces the importance of compliance risk management at the company. In addition, the Audit and Compliance Committee reviews the effectiveness of the company’s Corporate-wide Compliance Risk Management program. More broadly, the Committee is responsible for assisting the board of directors in its oversight responsibilities relating to the integrity of the company’s financial statements and financial reporting process; internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of the company’s internal audit services function; and the integrity of the company’s systems of internal accounting and financial controls.
The Compensation and Benefits Committee of the company’s board of directors works with the Chief Risk Officer to ensure the compensation programs covering risk-taking employees, business units and the company overall appropriately balance risk with incentives such that business performance is achieved without taking imprudent or uneconomic risks. The company‘s Chief Risk Officer is actively involved in the goal-setting process, reviews the current and forward-looking risk profiles of each business unit and provides input into performance evaluation. The Chief Risk Officer meets with the Compensation and Benefits Committee and attests that performance goals and
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actual results have been achieved without taking imprudent risks. The Compensation and Benefits Committee uses a risk-balanced incentive compensation framework to decide on the company’s bonus pools and the compensation of senior executives.
There are several internal management committees, including the Enterprise-wide Risk Management Committee (ERMC), chaired by the company’s Chief Risk Officer, and the Asset-Liability Committee (ALCO), chaired by the company’s Chief Financial Officer, which oversee risks and implementation of risk policies across the company with approval by the appropriate board committee. The ERMC is responsible for overseeing all risks, while the ALCO is responsible for managing market, liquidity, asset/liability risk and the company’s capital position.
As defined in the ERM policy, the company follows the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk taking. Business Unit presidents, the Chief Credit Officer of the company, the Chief Operational Risk Officer and the Chief Market Risk Officer are part of the first line of defense. The second line of defense comprises functions overseeing risk-taking activities of the first line. The Global Risk Oversight (GRO) and Market Risk Oversight (MRO) groups, the ERMC and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The GRO oversees the framework and processes for managing credit, operational and model risks the company faces, and acts as a check to the first line of defense managing these risks. The Internal Audit Group constitutes the third line of defense, and provides independent assurance that the first and second lines of defense operate as intended.
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CORPORATE GOVERNANCE AT AMERICAN EXPRESS
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE
A role of the Audit and Compliance Committee is to assist the board in its oversight of the company’s financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls. The company’s independent auditors are responsible for auditing the company’s financial statements and its internal control over financial reporting, in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), and expressing opinions as to the conformity of the financial statements with accounting principles generally accepted in the United States and the effectiveness of internal control over financial reporting.
In the performance of its oversight function, the Audit and Compliance Committee has reviewed and discussed with management and the independent auditors the company’s audited financial statements. The Audit and Compliance Committee also has discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 16, as adopted by the PCAOB, relating to communications with audit committees. In addition, the Audit and Compliance Committee has received from the independent auditors the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the audit committee concerning independence, has discussed with the independent auditors their independence from the company and its management, and has considered whether the independent auditors’ provision of non-audit services to the company is compatible with maintaining the auditors’ independence.
The Audit and Compliance Committee discussed with the company’s internal auditors and independent auditors the overall scope and plans for their respective audits. The internal auditors are responsible for preparing an annual audit plan and conducting internal audits under the direction of the company’s General Auditor, who is accountable to the Audit and Compliance Committee. The Audit and Compliance Committee met with the internal auditors and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the company’s internal controls, and the overall quality of the company’s financial reporting. In addition, the Audit and Compliance Committee met with the Chief Executive Officer and Chief Financial Officer of the company to discuss the processes that they have undertaken to evaluate the accuracy and fair presentation of the company’s financial statements and the effectiveness of the company’s systems of disclosure controls and procedures and internal control over financial reporting.
Based on the reviews and discussions referred to above, the Audit and Compliance Committee recommended to the board of directors, and the board has approved, that the company’s audited financial statements be included in the company’s 2013 Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.
AUDIT AND COMPLIANCE COMMITTEE
Daniel L. Vasella, Chairman
Anne Lauvergeon
Steven S Reinemund
Ronald A. Williams
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CORPORATE CITIZENSHIP AT AMERICAN EXPRESS
CORPORATE CITIZENSHIP AT AMERICAN EXPRESS
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OWNERSHIP OF OUR COMMON SHARES
The table below shows how many American Express Company common shares certain individuals and entities beneficially owned on February 15, 2014. These individuals and entities include: (1) owners of more than 5 percent of our outstanding common shares; (2) our current directors; (3) the executive officers named in the Summary Compensation Table on page 43; and (4) all current directors and executive officers as a group. A person has beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares, except as we describe below. This table does not include restricted stock units granted to executive officers or stock equivalent units owned by directors, since they are not beneficially owned under SEC rules.
| NAME | NUMBER OF SHARES OWNED(4)(5) |
RIGHT TO ACQUIRE(6) |
PERCENT OF CLASS(%) |
|||||||||
| Warren Buffett Berkshire Hathaway Inc. and subsidiaries 1440 Kiewit Plaza Omaha, NE 68131 |
151,610,700 | (1) | — | 14.3 | % | |||||||
| Capital World Investors 333 South Hope Street Los Angeles, CA 90071 |
65,503,860 | (2) | — | 6.1 | % | |||||||
| BlackRock, Inc. 40 East 52nd Street New York, NY 10022 |
54,524,277 | (3) | — | 5.1 | % | |||||||
| Charlene Barshefsky | 20,134 | — | * | |||||||||
| Ursula M. Burns | 20,000 | — | * | |||||||||
| Jeffrey C. Campbell | — | — | * | |||||||||
| Kenneth I. Chenault(7) | 935,671 | 4,374,144 | * | |||||||||
| Peter Chernin | 18,300 | — | * | |||||||||
| Edward P. Gilligan | 130,826 | 1,280,748 | * | |||||||||
| Daniel T. Henry | 74,952 | 197,409 | * | |||||||||
| Anne Lauvergeon | — | — | * | |||||||||
| Theodore J. Leonsis | 20,000 | — | * | |||||||||
| Richard C. Levin | 2,000 | — | * | |||||||||
| Richard A. McGinn | 20,400 | — | * | |||||||||
| Samuel J. Palmisano | 550 | — | * | |||||||||
| Steven S Reinemund | 20,208 | — | * | |||||||||
| Daniel H. Schulman(8) | 49,695 | 49,647 | * | |||||||||
| Stephen J. Squeri | 155,972 | 777,457 | * | |||||||||
| Daniel L. Vasella | — | — | * | |||||||||
| Robert D. Walter | 230,300 | — | * | |||||||||
| Ronald A. Williams | 27,500 | — | * | |||||||||
| All current directors and executive officers (28 individuals)(9) |
2,171,876 | 9,038,989 | 1.06 | % | ||||||||
| * | Less than 1%. |
| (1) | Based on information contained in a report on Form 13F that Berkshire Hathaway Inc. (Berkshire) filed with the SEC, which contained information as of December 31, 2013. Of the shares listed in the table, National Indemnity Co. and its subsidiaries beneficially owned 120,255,879 shares. National Indemnity Co. is a subsidiary of Berkshire. Mr. Buffett, Berkshire, and certain subsidiaries of Berkshire share voting and investment power over these shares. Based on information provided to the company, Mr. Buffett owned 34.4 percent of the aggregate voting power of the outstanding shares of Berkshire’s Class A Common Stock and Class B Common Stock. As a result of this ownership position in Berkshire, Mr. Buffett may be considered the beneficial owner of the shares that Berkshire beneficially owns. |
| In 1995, we signed an agreement with Berkshire designed to ensure that Berkshire’s investment in our company will be passive. The agreement remains in effect as long as Berkshire owns 10 percent or more of our voting securities. Berkshire made similar commitments to the Board of Governors of the Federal Reserve System (Federal Reserve). Berkshire and its subsidiaries have also agreed to follow our board’s recommendations in voting company common shares they own as long as Mr. Chenault is our chief executive officer and Berkshire owns 5 percent or more of our voting securities. With certain exceptions, Berkshire and its subsidiaries may not sell company common shares to any person who owns more than 5 percent of our voting securities or who attempts to change the control of the company. |
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OWNERSHIP OF OUR COMMON SHARES
| (2) | Based on information contained in a report on Schedule 13G that Capital World Investors filed with the SEC, which contained information as of December 31, 2013. |
| (3) | Based on information contained in a report on Schedule 13G that BlackRock, Inc. filed with the SEC, which contained information as of December 31, 2013. The shares listed in the table are held by BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Deutschland AG, BlackRock Asset Management Ireland Limited, Blackrock Asset Management North Asia Limited, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Management Ireland Limited, BlackRock Fund Managers Ltd., BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd., BlackRock Investment Management, LLC, BlackRock Japan Co. Ltd., and BlackRock Life Limited. |
| (4) | This column includes shares held in RSP accounts on February 15, 2014, as follows: |
| NAME |
NUMBER OF SHARES IN PLAN ACCOUNTS | |||
| K.I. Chenault | 23,332 | |||
| J.C. Campbell | 0 | |||
| E.P. Gilligan | 1,626 | |||
| D.T. Henry | 20 | |||
| D.H. Schulman | 0 | |||
| S.J. Squeri | 111 | |||
| All current executive officers | 53,713 |
| (5) | Does not include directors’ stock equivalent units, which are counted toward satisfying the director stock ownership guideline discussed on page 7. As discussed under Compensation of Directors on page 18, the balance in directors’ SEU accounts at December 31, 2013 was: Ambassador Barshefsky 48,566; Ms. Burns 53,292; Mr. Chernin 26,485; Ms. Lauvergeon 3,041; Mr. Leonsis 10,632; Mr. Levin 22,648; Mr. McGinn 33,621; Mr. Palmisano 3,657; Mr. Reinemund 22,648; Dr. Vasella 4,840; Mr. Walter 42,086; and Mr. Williams 40,441. These amounts represent the aggregate number of SEUs granted under the Share Equivalent Unit Plan for all years of service as a director, additional units credited as a result of the reinvestment of dividend equivalents, and, for directors who participated in the SEU option under our deferred compensation plan for directors, retainer amounts deferred into their SEU account and dividend equivalents thereon. |
| (6) | These are shares that the named individuals have the right to acquire within 60 days upon the exercise of stock options they hold. |
| (7) | Includes 126,690 shares held in family trusts in respect of which Mr. Chenault shares voting and investment power with a directed trustee. Includes 33,480 shares that are beneficially owned by Mr. Chenault and serve as security for a line of credit facility that he may draw on from time to time. The outstanding balance on that facility is zero. The remaining shares that Mr. Chenault beneficially owns, including shares necessary to meet his stock ownership and holding requirements, are not part of this facility. |
| (8) | Mr. Schulman held 7,838 restricted shares on February 15, 2014, which are included in this table. Mr. Schulman may vote the restricted shares, but may not sell or transfer them during the restricted period. These restrictions lapse in 2014. |
| (9) | On February 15, 2014, the current directors and executive officers beneficially owned 11,210,865 shares, or about 1.06 percent of our outstanding shares. No current director or executive officer beneficially owned more than 1 percent of our outstanding shares. |
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The Nominating and Governance Committee reviews director compensation. Our objectives are to compensate our directors in a manner that aligns the interests of directors with those of our long-term shareholders and to attract and retain highly qualified directors. In 2012, the committee engaged an independent compensation advisory firm, Frederic W. Cook & Co., Inc. (Cook), to assist the committee in its review of the competitiveness and structure of the company’s director compensation. The committee recommended an increase in director compensation, effective January 1, 2013. The committee did not change the form of director compensation.
The following table provides information on the compensation of non-management directors who served for all or a part of 2013. We also reimburse directors for reasonable out-of-pocket expenses attendant to their board service.
| NAME | FEES EARNED OR PAID IN CASH ($)(1) |
STOCK AWARDS ($)(2) |
OPTION AWARDS ($)(3) |
CHANGE IN PENSION DEFERRED COMPENSATION EARNINGS ($)(4) |
ALL OTHER COMPENSATION ($)(5) |
TOTAL ($) |
||||||||||||||||||
|
Amb. Barshefsky |
$ | 107,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 40,583 | $ | 303,083 | ||||||||||||
| Ms. Burns |
$ | 111,250 | $ | 155,000 | $ | 0 | $ | 0 | $ | 43,881 | $ | 310,131 | ||||||||||||
| Mr. Chernin |
$ | 115,000 | $ | 155,000 | $ | 0 | $ | 0 | $ | 21,728 | $ | 291,728 | ||||||||||||
| Ms. Lauvergeon |
$ | 102,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 1,349 | $ | 258,849 | ||||||||||||
| Mr. Leonsis |
$ | 107,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 7,835 | $ | 270,335 | ||||||||||||
| Mr. Leschly |
$ | 62,500 | $ | 0 | $ | 0 | $ | 0 | $ | 36,707 | $ | 99,207 | ||||||||||||
| Mr. Levin |
$ | 115,000 | $ | 155,000 | $ | 0 | $ | 0 | $ | 18,452 | $ | 288,452 | ||||||||||||
| Mr. McGinn |
$ | 105,000 | $ | 155,000 | $ | 0 | $ | 0 | $ | 27,822 | $ | 287,822 | ||||||||||||
| Mr. Miller |
$ | 55,000 | $ | 0 | $ | 0 | $ | 0 | $ | 222,744 | $ | 277,744 | ||||||||||||
| Mr. Palmisano |
$ | 97,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 1,568 | $ | 254,068 | ||||||||||||
| Mr. Reinemund |
$ | 117,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 18,452 | $ | 290,952 | ||||||||||||
| Dr. Vasella |
$ | 122,500 | $ | 155,000 | $ | 0 | $ | 0 | $ | 2,402 | $ | 279,902 | ||||||||||||
| Mr. Walter |
$ | 140,000 | $ | 155,000 | $ | 0 | $ | 0 | $ | 51,500 | $ | 346,500 | ||||||||||||
| Mr. Williams |
$ | 140,000 | $ | 155,000 | $ | 0 | $ | 0 | $ | 32,696 | $ | 327,696 | ||||||||||||
| (1) | Annual Retainers. For service in 2013, we paid non-management directors an annual retainer of $90,000 for board service and an additional annual retainer of $20,000 to members (including the chairs) of the Audit and Compliance and Risk committees, $10,000 to members (including the chair) of the Compensation and Benefits Committee, and $5,000 to members (including the chairs) of the Innovation and Technology, Nominating and Governance, and Public Responsibility committees. We also paid an annual retainer to the chair of each of the board committees as follows: Audit and Compliance, Compensation and Benefits, and Risk, $20,000; Innovation and Technology, Nominating and Governance, and Public Responsibility, $10,000. We pay no fees for attending meetings, but the annual retainer for board service of $90,000 is reduced by $20,000 if a director does not attend at least 75 percent of our board meetings and meetings of any committee on which he or she serves. Our independent lead director also receives an annual retainer of $20,000 (provided that if he or she is also the chair of the Nominating and Governance Committee, the lead director will not receive the annual retainer for service as chair of that committee). |
| All the non-management directors, except for Messrs. McGinn and Reinemund, deferred all or a portion of their 2013 retainers into a cash account, a share equivalent unit account, or both, under the deferred compensation plan described below in footnote 2. |
| Messrs. Leschly and Miller retired from board service in April 2013. Included in this column is the portion of the annual retainer for board and board committee service each received in 2013. |
| (2) | Share Equivalent Unit Plan. To align our non-management directors’ annual compensation with shareholder interests, each non-management director is credited with common share equivalent units (SEUs) having a value of $155,000 upon election or reelection at each annual meeting of shareholders. Each SEU reflects the value of one common share. Directors receive additional SEUs as dividend equivalents on the units in their accounts. SEUs do not carry voting rights and must be held at least until a director ends his or her service. Each SEU is payable in cash equal to the then value of one common share at the time of distribution to the director. |
| On April 30, 2013, the date of last year’s annual meeting, each non-management director elected to the board was credited with 2,350 SEUs, based on the market price of company common shares for the 15 trading days immediately preceding such date. We report in this column the aggregate grant date fair value of these SEUs in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation. |
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COMPENSATION OF DIRECTORS
| As of December 31, 2013, the SEU balance in each individual’s account was: Ambassador Barshefsky 48,566; Ms. Burns 53,292; Mr. Chernin 26,485; Ms. Lauvergeon 3,041; Mr. Leonsis 10,632; Mr. Leschly 31,257; Mr. Levin 22,648; Mr. McGinn 33,621; Mr. Miller 49,687; Mr. Palmisano 3,657; Mr. Reinemund 22,648; Dr. Vasella 4,840; Mr. Walter 42,086; and Mr. Williams 40,441. These amounts represent the aggregate number of SEUs granted under the Share Equivalent Unit Plan for all years of service as a director, additional units credited as a result of the reinvestment of dividend equivalents, and, for directors who participated in the SEU option under our deferred compensation plan for directors, retainer amounts deferred into their SEU account and dividend equivalents thereon. |
| Deferred Compensation Plan for Directors. Non-management directors may defer the receipt of up to 100 percent of their annual cash retainer fees into either: (1) a cash account in which amounts deferred will be credited at the rate of 120 percent of the applicable federal long-term rate for December of the prior year, and/or (2) their SEU account. Under either alternative, directors will receive cash payments and will not receive shares upon payout of their deferrals. |
| (3) | Option Awards. We have not granted stock options to directors since April 2002. |
| (4) | Retirement Benefits. We offer no retirement benefits to non-management directors who began their board service after March 31, 1996. |
| (5) | Insurance. We provide our non-management directors with group term life insurance coverage of $50,000. The group life insurance policy is provided to the directors on a basis generally available to all company employees. This column includes the premium paid for such coverage. |
| Dividend Equivalents. Dividend equivalents are reinvested in additional units for all directors based upon total SEUs held at the time of company quarterly dividend payment dates. This column includes the fair market value of the dividend equivalents received by the directors during 2013 in these amounts: Ambassador Barshefsky $40,535; Ms. Burns $43,833; Mr. Chernin $21,680; Ms. Lauvergeon $1,309; Mr. Leonsis $7,786; Mr. Leschly $26,691; Mr. Levin $18,403; Mr. McGinn $27,773; Mr. Miller $42,428; Mr. Palmisano $1,527; Mr. Reinemund $18,403; Dr. Vasella $2,354; Mr. Walter $35,002; and Mr. Williams $32,647. |
| Directors’ Charitable Award Program. We maintain a Directors’ Charitable Award Program for directors elected prior to July 1, 2004. To fund this program, we purchased joint life insurance on the lives of participating directors, including Mr. Chenault. The death benefit of $500,000 funds a donation to a charitable organization that the director recommends. In 2013, the company paid premiums for policies as follows: Mr. Walter, $16,450. |
| Matching Gift Program. Directors are eligible to participate in the company’s Matching Gift Program on the same basis as company employees. Under this program, the American Express Foundation matches gifts to approved charitable organizations up to $8,000 per calendar year. |
| Consulting Agreement. Subsequent to his retirement from the board of directors, Mr. Leschly was retained as an advisor to the company for five months, pursuant to which he received compensation of $10,000, which is included in this column. |
| Subsidiary Bank Director Compensation. Mr. Miller was elected to the board of directors of the company’s subsidiary, American Express Centurion Bank (Centurion), on August 1, 2012. Mr. Miller earned an aggregate of $180,300 for service in 2013 as a director and as Chairman of the Audit and Risk Committee of Centurion (until October 23, 2013) and as Chairman of the Board of Directors of Centurion (from October 23, 2013), which is included in this column. |
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EXECUTIVE SUMMARY
Our executive compensation program is designed to reward our leadership team not just for delivering short-term results but also for driving consistent sustainable growth, which is how we create value for our shareholders. We believe our program’s structure aligns the interests of our shareholders and senior executives by tying pay outcomes to performance over the short-, medium-, and long-term. Awards are made using a mix of some fixed and mostly variable pay components with different time horizons and payout forms (cash and stock) to reward annual and sustained performance over the longer term. Our program is also structured to discourage imprudent risk taking.
2013 Performance
| During 2013 we produced record earnings in a slow-growth economy. Our net income of $5.4 billion was up 20% from the previous year. We returned a substantial portion of these profits to shareholders through dividend payments and share buy-backs (in accordance with our Comprehensive Capital Analysis and Review (CCAR) submission to the Federal Reserve), taking advantage of our strong capital position. We saw Card Member spending reach a record high of $952 billion, and we continued to roll out innovations that provide flexibility and convenience for our Card Members. We won our seventh straight J.D. Power and Associates award for the highest customer satisfaction among U.S. credit card companies and a record number of Card Members said they would recommend American Express to a friend, which we take as the highest expression of satisfaction. In 2013 we grew revenues by 5% on an FX-adjusted basis.2 Earnings per share (EPS) growth was 11% using 2012 adjusted EPS3, and return on equity (ROE) was 27.8%. |
On-Average, Over-Time Financial Targets
Fundamental to the way we measure medium- to long-term success is our progress compared to our publicly stated “on-average, over-time” financial targets: Ÿ Revenue growth: at least 8% Ÿ EPS growth: 12–15% Ÿ ROE: 25% or more
|
2013 RESULTS AGAINST TARGETS
| 2 | See footnote 1 on page 3. |
| 3 | EPS is Earnings per Common Share from Continuing Operations Diluted, determined as net income from continuing operations attributable to common shareholders divided by diluted weighted-average shares; Return on Average Equity (ROE) is calculated by dividing one-year period net income by one-year average total shareholders’ equity. 2012 adjusted EPS, 2012 adjusted ROE and the adjusted EPS growth rate are non-GAAP measures and exclude certain 2012 fourth-quarter items. Please refer to Annex B for further discussion on the determination of these amounts. |
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Our strong performance and cost controls in 2013 gave us the ability to invest in a mix of opportunities in both traditional and new areas, with different return horizons. In our core businesses, we focused on acquiring new Card Members and merchants globally; expanding our network of card-issuing partners; and developing new services and capabilities to better support our customers and business partners. As a result, we:
| • | Added nearly 5 million Card Members worldwide |
| • | Increased average spending per card by making it easier and more rewarding to do business with American Express |
| • | Expanded our network of card-issuing partners with major new signings like Wells Fargo and U.S. Bank in the United States, and Barclaycard in the United Kingdom |
| • | Continued to increase corporate account signings and small-business volumes |
In addition, we continued to build the customer base for our new alternative payment products, Bluebird and Serve. Loyalty Partner, our international rewards coalition program, passed the 60 million customer mark, nearly double the number of customers as when we acquired this business in 2011.
Our Total Shareholder Return
American Express shares delivered a total return of 60 percent for 2013, outperforming the S&P 500 by 28 percentage points. Over three-year and five-year periods, American Express shares substantially outperformed both the S&P 500 and the S&P Financials index.
Total Shareholder Return (TSR) is the total return on common shares over a specified period, expressed as a percentage (calculated based on the change in stock price over the relevant measurement period and assuming reinvestment of dividends). Source: Bloomberg (returns compounded monthly).
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2013 Enhancements
The Compensation and Benefits Committee (Compensation Committee) made a number of recent changes to the executive compensation program to promote good governance and enhance the link between pay and performance, including:
| Ÿ | Enhanced structure of CEO compensation decision process: In 2013 the Compensation Committee enhanced the process used to determine the CEO’s compensation. Under the enhanced structure, the Compensation Committee set a target annual incentive award (AIA) of $6.625 million, a target Portfolio Grant award (PG award) of $5.125 million and a target equity award of $8.250 million. Actual incentive compensation is paid out in the range of 0-125 percent of target depending on the Compensation Committee’s assessment of the CEO’s actual performance against the goals set at the beginning of the year. The Compensation Committee imposed a 125 percent cap on the CEO’s incentive payments in response to shareholder feedback to specify a maximum incentive amount and regulatory feedback. See page 30 for more details. |
| Ÿ | New peer group: The Compensation Committee revised our Company Sample and replaced certain companies with companies whose revenue was closer in size to ours. See page 27 for more details. |
CEO 2013 Pay At-A-Glance
In January 2014, the Compensation Committee awarded Mr. Chenault Total Direct Compensation (TDC) of $24,400,000 for performance year 2013, 11 percent higher than his 2012 compensation and 11 percent above target. In determining Mr. Chenault’s TDC, the Compensation Committee followed the process set out on page 30. In accordance with the process, the Compensation Committee considered multiple performance factors (see pages 31-32), including:
| • | Actual EPS of $4.88 against 2013 target range of $4.74 to $4.94; 11 percent higher than 2012 adjusted EPS4 |
| • | Actual ROE of 27.8 percent against 2013 target of 26 percent; 1.7 percentage points higher than 2012 adjusted ROE4 |
| • | TSR of 60 percent in 2013 |
| • | Mr. Chenault’s overall leadership contributions to the success of American Express |
Mr. Chenault’s TDC comprises the following:
| • | Base salary of $2,000,000 (unchanged since 2010) |
| • | Annual Incentive Award of $7,950,000, of which $6,000,000 is payable in cash and $1,950,000 is payable in restricted stock units (120 percent of target) |
| • | Performance Grant award of $5,125,000, where final payout is based on 2014-16 performance (100 percent of target) |
| • | Equity award of about $6,789,000 performance-based restricted stock units (Performance RSUs) and about $2,536,000 in Stock Options (SO) that vest after three years (113 percent of target) |
A significant portion (67 percent) of Mr. Chenault’s total pay is deferred (some until one year after retirement) and subject to future company performance. Further details are provided on page 33.
4 See footnote 3 on page 20.
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Our Pay and Performance Alignment
Our performance assessment framework and pay program are designed to link pay and performance. Over 84 percent of the TDC delivered to our CEO and other Named Executive Officers (NEOs) for performance year 2013 is variable (i.e., all compensation other than base salary).* This directly ties their pay to our company’s performance, including financial results, strategic initiatives, and stock performance. Our compensation is delivered in the form of base salary, AIA, PG awards, and Long-Term Incentive Awards (LTIA, which includes SOs and Performance RSUs). A full description of our forms of compensation is on page 26.
| * | The proportions of each pay element shown for performance year 2013 may change in the future based on performance or other considerations. |
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Key Compensation Practices
Key executive compensation practices are summarized below. We believe these practices promote good governance and serve the interests of our shareholders:
WHAT WE DO
| ü | Directly link pay outcomes to performance |
| ü | Defer a significant portion of our NEO’s total pay, so that it is subject to future company performance |
| ü | Use a structured approach to CEO compensation decisions |
| ü | Require termination of employment in addition to a change in control for accelerated equity vesting (known as “double trigger”) |
| ü | Apply sizable stock ownership guidelines for NEOs, including a requirement that the CEO hold a portion of his shares through one year after retirement |
| ü | Discourage imprudent risk taking |
| ü | Prohibit executive officers from hedging their company stock, which includes entering into any derivative transaction on AXP shares (e.g., short sale, forward, option, collar) |
| ü | Prohibit executive officers from pledging shares subject to stock ownership guidelines, and limit the number of other shares they may pledge |
| ü | Utilize an independent compensation consultant |
| ü | Grant Compensation Committee discretion to clawback the cash portion of the CEO’s AIA if the company does not achieve acceptable performance in the following year |
| ü | Subject cash incentives and equity awards to recoupment and forfeiture provisions |
| ü | Evaluate management succession and leadership development efforts |
| ü | Maintain a cap on CEO incentive compensation payments (125 percent of target) |
| ü | Include criteria in incentive compensation plans to maximize tax deductibility for the company |
| ü | Maintain ongoing dialogue with shareholders and incorporate feedback in our compensation programs |
WHAT WE DO NOT DO
| û | No employment contracts with NEOs |
| û | No payment of dividends or dividend equivalents on RSUs unless and until they vest |
| û | No excise tax gross-ups upon a change in control |
| û | No repricing of underwater stock options without shareholder approval |
| û | No individual change in control arrangements |
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COMPENSATION DISCUSSION AND ANALYSIS
EXECUTIVE COMPENSATION PROGRAM STRUCTURE
Overview of Philosophy, Design and Provisions
Our pay program is designed to recognize and reward outstanding achievement and to attract, retain and motivate our leaders in a competitive environment. We seek input from our investors as we want our program to be aligned with shareholder interests.
Following is an overview of key aspects of our pay philosophy.
| Overall Objectives |
Motivate our executives to:
• Achieve day-to-day operational excellence
• Meet short-term goals and strategic milestones while delivering on our longer-term business strategies, so we can continue to build shareholder value
• Support “Service Profit Chain” goals: engaged employees delivering superior customer service leads to satisfied customers, which in turn produces superior financial results for shareholders | |
| Pay Mix Principles |
Provide competitive opportunities for pay commensurate with job scope, required competencies and performance by:
• Using a mix of some fixed and mostly variable pay components with different time horizons and payout forms (cash and stock) to reward annual and sustained performance over the longer term
• Requiring executive officers to have significant outright ownership of company shares
• Deferring a majority of incentive compensation for three or more years | |
| Pay for Performance |
Provide a strong link between pay and performance by:
• Reviewing performance from both a financial and a strategic perspective, with performance measures tied to financial performance and our strategic initiatives, including risk/control and compliance measures
• Encouraging balanced performance and discouraging imprudent risk taking by avoiding too much emphasis on any one metric or short-term performance
• Using judgment when making pay decisions, taking into account both what was accomplished and how it was accomplished |
Shareholder Feedback/Consideration of 2013 Advisory Vote on Executive Compensation
We have benefited from shareholder feedback about executive compensation through our Say on Pay votes for the past five years. At the direction of our Compensation Committee, we also reach out to our largest shareholders on an ongoing basis to discuss our executive compensation program, our proxy disclosure and corporate governance, and we bring their feedback to the Compensation Committee and the Nominating and Governance Committee. This feedback has influenced a number of changes to our program in prior years, including the addition of performance vesting to our annual restricted stock unit grant, and has also resulted in a more comprehensive Compensation Discussion and Analysis. Based on the result of last year’s Say on Pay vote, and after conversations with some of our large shareholders, the Compensation Committee made changes to the Company Sample (described below) and enhanced the process it uses to determine CEO compensation, including specifying the CEO’s target and maximum incentive opportunities. The Compensation Committee will continue to consider the outcome of Say on Pay votes and other shareholder input in making future decisions regarding executive compensation.
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OVERVIEW OF YEAR-END 2013 TOTAL DIRECT COMPENSATION DESIGN
| PAY ELEMENT | WHAT IT DOES | PERFORMANCE MEASURES |
| Base Salary Short Term (Annual) |
• Provides competitive fixed pay
• Balances risk-taking concerns with pay for performance |
• Job scope and experience, market pay | ||
|
Annual Incentive Award Short Term (Annual) |
• Provides a competitive annual incentive opportunity
• Aligns with individual, business unit and company performance |
The goals established in the first quarter of 2013 include (see pages 31-32):
• Annual Service Profit Chain goals (shareholder, customer, employee), including EPS, revenue and billed business growth and ROE
• Strategic and transformational goals
• Customer satisfaction and employee goals
• Relative performance review
• Risk/control and compliance goals
• Individual leadership assessment
Payouts consider outcomes against these goals but without a specific matrix; allows exercise of Compensation Committee judgment | ||
|
Cash Portfolio Grant Award Medium Term (3 years) |
• Provides cash incentive, earned based on achievement of specific performance metrics
• 3-year performance period (2014–2016) |
• Financial metrics (e.g., EPS growth)–20% weighting*
• Stock performance (e.g., TSR relative to S&P 500 index)–30% weighting
• Strategic milestones–50% weighting
Payout range is 0–125% of target | ||
|
Performance Restricted Stock Unit Award Medium Term (3 years) |
• Aligns payout with share price
• Ties payout to our publicly stated ROE target of 25% |
• 3-year average ROE (2014–16), with target based on publicly disclosed on-average, over-time target
• Payout range is 0–125% as follows:**
30% = Maximum (125%) 23–27% = Target (100%) 22% = Below Target (95%) 20% = Below Target (75%) 10% = Below Target (25%) 5% = Threshold (0%) | ||
|
Stock Option Award Long Term (10 years) |
• Aligns payout with share price growth |
• Vests 3 years after grant; subject to forfeiture in the event of significant financial losses impacting the financial stability of the company |
| * | The company discloses the specific performance metric goals as well as the actual performance of each PG award at the end of the performance period so that shareholders can assess the appropriateness thereof. Page 36 discusses the goals and final results for the PG2011-13 award granted in 2011. The company does not disclose the goals at the time of the grant because of competitive sensitivity. |
| ** | Payout range was changed for the 2014-16 award to provide target payout if actual performance is within a reasonable range of 25 percent (our on-average, over-time target). |
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Assessing Competitive Practice
Our pay program is designed to reward achievement of financial and strategic goals and to attract, retain and motivate our leaders in an increasingly competitive talent market. The Compensation Committee periodically examines pay practices and pay data for a group of 20 companies (our Company Sample) as a source of benchmarking data to better understand the competitiveness of our total compensation and its various elements. The benchmarking data is used to assess the competitiveness of compensation but is not used to make specific pay decisions. We do not target a specific percentile or make pay decisions based on market data alone. As a result, performance is the primary driver of pay levels as opposed to market data.
The Compensation Committee periodically reviews the composition of the Company Sample in response to shareholder feedback as well as changes to our business model, and in September 2013 approved changes to the group. In revising the Company Sample, the Compensation Committee identified prominent S&P 500 companies, generally with revenue similar in size to ours, which fell into one or more of the following categories:
| • | Financial institutions |
| • | Iconic global consumer brands |
| • | Other credit card businesses |
| • | Technology companies with an emphasis on payments or network systems |
The revised Company Sample is below. The actual number of companies in each category varies, taking into account factors such as revenue size and direct business and talent competitors. We removed General Electric, Hewlett-Packard, Procter & Gamble, Johnson & Johnson, IBM, FedEx, Marriott, 3M and State Street; and added BlackRock, Citigroup, Goldman Sachs, Morgan Stanley, Discover, Nike, Walt Disney, Cisco and eBay:
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COMPENSATION GOVERNANCE, PROCESS AND DECISIONS
The Decision Makers
The Compensation Committee, composed solely of independent directors, is responsible for our executive officer compensation decisions. The Compensation Committee works very closely with its independent consultant and management to examine pay and performance matters throughout the year. The Compensation Committee held nine meetings over the course of 2013, eight of which either ended or started with executive sessions without management present. The Compensation Committee’s charter may be accessed through the “Corporate Governance” link found on our website at http://ir.americanexpress.com.
Compensation Committee’s Independent Compensation Consultant
In May 2013, after a robust search process that included the review of leading firms, the Compensation Committee retained Semler Brossy Consulting Group (Semler Brossy) as its independent compensation consultant. Prior to that time, and since 2007, F.W. Cook & Co. (Cook) had served as the Compensation Committee’s independent compensation consultant. The Compensation Committee determined to engage in this search in accordance with its periodic review process which coincided with the retirement of Mr. Fred Cook, the lead consultant to the Compensation Committee.
During 2013, the compensation consultants attended Compensation Committee meetings, met with the Compensation Committee in executive sessions, reviewed and provided recommendations on the components of the company’s executive compensation program and provided compensation advice independent of the company’s management.
In 2013, Cook provided outside director compensation advice to American Express Bank, FSB and American Express Centurion Bank, U.S. banking subsidiaries of the company. In 2013, Semler Brossy provided no other services to the company other than services to the Compensation Committee. The Compensation Committee assessed the independence of the compensation consultants pursuant to SEC rules and concluded that their work for the Compensation Committee did not raise any conflicts of interest.
Making Decisions
The Compensation Committee uses the performance assessment framework described on page 30 as the basis for TDC decisions for the CEO.
For both the CEO and the other NEOs, the Compensation Committee conducts an in-depth review of performance against goals and then applies its judgment to make compensation decisions. While we do not rely on a formula or specific matrix for making pay decisions, the Compensation Committee believes this process provides accountability for performance against goals, enables the Compensation Committee to effectively assess the quality of the performance and leadership demonstrated by the management team and differentiate among each individual’s performance, and motivates short-term and long-term results as well as innovation and business transformation.
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The Compensation Committee’s Process
The Compensation Committee follows the process outlined below to determine NEO compensation:
| 2013 |
Q1 | ending 3/31/2013
• Set the metrics and goals for the CEO performance assessment framework
• Set the other NEOs’ performance objectives | |||
|
GOAL SETTING
In Q1, the Compensation Committee reviews and approves the metrics and goals in the CEO performance assessment framework and the other NEOs’ performance objectives. Performance objectives are set for each business unit and staff group for which an NEO is responsible, and input is obtained from each of our General Auditor, Chief Risk Officer, and Chief Compliance Officer. | ||||
| Q3 | ending 9/30/2013 & Q4 | ending 12/31/2013
• Review the company’s performance
• Assess progress toward NEO objectives | ||||
|
REVIEW OF PROGRESS AGAINST GOALS
The Compensation Committee reviews corporate performance in the third and fourth quarters, and assesses progress against each of the NEOs’ objectives and incentive plan goals. | ||||
| 2014 | Q1 | ending 3/31/2014
• Evaluate NEO performance
• Determine TDC for the NEOs
• Approve any changes to the executive compensation program for the coming year | |||
| DETERMINE TDC FOR THE NEOs
In January, the Compensation Committee determines TDC amounts for the CEO and each of the other NEOs based on:
• Goal and Leadership Ratings: The Compensation Committee uses the performance assessment framework on page 30 to make CEO compensation decisions. For the other NEOs, the Compensation Committee, based on input from the CEO, reviews (1) business unit/staff group performance against the objectives set in Q1 of the previous year, and (2) each NEO’s Leadership Assessment based on individual performance including feedback from peers and direct reports, as appropriate, with regard to key leadership attributes. Performance assessments are graded on a three-point scale to differentiate performance and pay.
• Risk-Balancing and Performance: The Compensation Committee determines the amount of each TDC pay component based on company pay mix guidelines and individual performance. In evaluating the performance of the NEOs, the Compensation Committee seeks to understand what was accomplished relative to established objectives, how it was accomplished, the quality of financial results and the company’s strategic positioning for future competitive advantage. As part of this process, the Compensation Committee meets with the Chief Financial Officer and the Chief Risk Officer to discuss financial results and risk/control and compliance assessment results.
• Market Practices: The Compensation Committee evaluates each NEO’s relative compensation and changes in responsibilities, and considers current pay practices for comparable positions at companies that are talent competitors.
• Independent Consultant Recommendation: The Compensation Committee receives input from its independent compensation consultant.
• Other Factors: For the other NEOs, the Compensation Committee also considers the CEO’s recommendations, succession planning and retention. Furthermore, before making pay decisions, the Compensation Committee reviews the pay mix to ensure that at least 50 percent of TDC is deferred and performance based.
In addition, the Compensation Committee:
• Reviews and approves the payouts for each LTIA grant with a performance period completed at the end of the prior year.
• Approves any design changes to the executive compensation program for the coming year. | ||||
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2013 CEO PERFORMANCE REVIEW PROCESS AND TDC DECISION
CEO Pay - Process and Decisions
In 2013, the Compensation Committee enhanced the framework used to determine the CEO’s TDC. Under this framework, the Compensation Committee evaluated the CEO’s performance based on achievement of pre-determined goals, strategic and transformational initiatives, performance relative to our competitors and financial markets, and a risk/control and compliance assessment. The framework uses both qualitative and quantitative factors and is designed to provide a broad and balanced view of performance.
CEO PERFORMANCE ASSESSMENT FRAMEWORK
The following discussion provides a summary of the Compensation Committee’s determination of Mr. Chenault’s TDC using the above framework.
PHASE 1—SET CEO GOALS
The Compensation Committee approves financial, strategic and operational goals related to three key Service Profit Chain constituencies: shareholders, customers and employees. These goals were chosen because they reflect our rigorous on-average and over-time financial targets; cover significant business metrics; reflect the importance of employee engagement, diversity and customer service in creating sustainable value; and drive our future growth.
Shareholder goals include specific measurements of profit/return (EPS, ROE); growth (revenue growth, billed business growth); expense containment (operating expense growth and lending write-off rates); and customer service. See page 31.
Employee goals include succession planning for key roles, improved workplace culture and diversity, and validation of program efficacy through external recognition.
Customer/strategic and transformational goals include revenue diversity (e.g., obtaining new fee-based revenue); international expansion (e.g., billed business growth and net income contribution from international), customer segment expansion, including number of Coalition Loyalty Collectors, customers across Enterprise Growth businesses and transaction volume for new reloadable card products, and expansion of our commerce-related businesses (e.g., Small Business Saturday).
We believe it is crucial to embed compliance and risk management in all our business processes, including goal setting. The framework adopted by the Compensation Committee provides that it will consider compliance and risk management goals (acceptable return on economic capital, the promotion of error-free products and processes, and our risk/control and compliance environment) in evaluating performance.
PHASE 2—DETERMINE TARGET AIA AND LONG-TERM INCENTIVE AWARD, AS WELL AS PAYOUT RANGE
The Compensation Committee considered Mr. Chenault’s prior years’ compensation as well as market data as reference points to determine the following target AIA and LTIA for 2013 performance:
| COMPENSATION ELEMENT | TARGET | |||
| AIA | $ | 6.625 million | ||
| Performance Grant award | $ | 5.125 million | ||
| Equity (Performance RSU and Stock Options) | $ | 8.250 million | ||
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Mr. Chenault’s base salary was fixed at $2 million (unchanged since 2010).
Based on its review of 2013 performance, the Compensation Committee could award a payout range from 0 percent to 125 percent of the target amounts set out above, depending on the company’s financial results as well as the Compensation Committee’s assessment of the CEO’s performance against goals. Further, the Compensation Committee determined that it may adjust the final performance score downwards or upwards (but not exceeding the 125 percent maximum) by 5-10 percent to specifically reflect the impact of the risk/control and compliance assessment.
PHASE 3—SCORE CEO PERFORMANCE AND SET FINAL TDC
In January 2014, the Compensation Committee awarded Mr. Chenault TDC of $24,400,000 for performance year 2013, 11 percent higher than his 2012 compensation. The Compensation Committee considered strong performance against specific goals as well as Mr. Chenault’s overall leadership contributions to the success of American Express in determining his TDC. Mr. Chenault’s final TDC was determined using the following three steps:
Step 1 – Determine AIA
In January 2014, the Compensation Committee determined a performance score for each of the CEO goals, resulting in an AIA award of $7.95 million (120 percent of target). The Compensation Committee determined the final performance score as follows:
|
GOAL |
2013 PERFORMANCE |
ASSESSMENT | ||
| Shareholder
(50% overall weighting) |
• Actual EPS of $4.88 was toward the upper end of 2013 target range of $4.74-$4.94; 2012 adjusted EPS5 was $4.40 • Actual ROE of 27.8% exceeded 2013 target (26.0%); 2012 adjusted ROE5 was 26.1% • FX-adjusted billed business growth of 8.3% exceeded target (8.0%) • Adjusted operating expense growth of 0% was better than target (3.0%)6 • FX-adjusted revenue growth7 of 5.4% was below target (7.0%), but outpaced many card issuing peers • Customer Service exceeded target (as measured by the “Recommend to a Friend” score) • One-year TSR of 60%, which was 28 percentage points above S&P 500 and 24 percentage points above S&P Financials index • Net write-off rate of 1.8% was better than the 2013 target of 2.1-2.4% |
Significantly Above Target |
| 5 | See footnote 3 on page 20 |
| 6 | Operating expenses include salaries and employee benefits, professional services, occupancy and equipment, and other, net. The growth rate of adjusted total operating expenses, a non-GAAP measure, excludes Q4 ’12 restructuring charges from total operating expenses; please refer to Annex B for further discussion on the determination of this amount. |
| 7 | See footnote 1 on page 3 |
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|
GOAL |
2013 PERFORMANCE |
ASSESSMENT | ||
| Employee
(25% overall weighting) |
• Succession planning for key roles aligned with board expectations • Diversity targets were met and talent measures were on target • The company continued to be recognized as an Employer of Choice, globally; recognized on seven U.S. surveys as an employer of choice, including Working Mother and Fortune; internationally recognized in nine countries as a top employer |
At Target | ||
| Customer/ Transformation
(25% overall weighting) |
• Channeled investment into potential opportunities in Loyalty Partner, Bluebird and Serve • Expanded Loyalty Partner and ended 2013 ahead of plan on customer growth • LoyaltyEdge revenue grew by three times over 2012, driven by the launch of Wells Fargo in September 2013 and by a rapid expansion of loyalty programs managed for First National Bank of Omaha and FedEx • Availability of Serve was increased to 22,000 retail locations (including CVS, Family Dollar, Fred’s Stores, Office Depot and Walgreens), with a cash reload network of 14,000 locations • Significant progress was made towards international goals, including better than targeted billings growth internationally • Enterprise Growth Group brought in a cumulative total of 7 million customers (includes accounts in pending status) and $4.8 billion in load and transaction volume (both including Lianlian); 87% of Bluebird customers were new to the company’s franchise and 46% were under the age of 35, supporting our goal of broadening our customer base • Made progress toward goal of becoming a facilitator of commerce to connect buyers and sellers in creative ways, while providing exceptional value to both (e.g., Small Business Saturday) |
Above Target |
The Compensation Committee approved a total AIA payout of 120 percent of target ($7,950,000) considering the above Shareholder, Employee, and Customer/Transformation results as well as the company’s strong relative performance against our major competitors, including industry-best credit performance. The Compensation Committee also considered the company’s risk management governance including return on economic capital performance as well as relative TSR performance, compared to S&P 500 and S&P Financials indices.
Step 2 – Determine LTIA
Based on the company’s 2013 performance (as assessed in Step 1 above), the Compensation Committee awarded Mr. Chenault Portfolio Grant awards equal to 100 percent of target, or $5,125,000, and equity awards equal to 113 percent of target, or $9,325,000. These awards tie actual compensation to future performance and shareholder outcomes. See page 26 for how these awards work.
Step 3 – Review TDC and Pay Mix
After taking into account the company’s financial performance and evaluating Mr. Chenault’s performance against goals as well as his leadership contributions, the Compensation Committee determined that the CEO’s TDC of $24.4 million—an increase of 11 percent from his 2012 TDC—was appropriate. To further emphasize long-term and sustained performance, the Compensation Committee determined that $1.95 million of Mr. Chenault’s AIA should be paid in RSUs instead of cash.
The following chart provides more information on Mr. Chenault’s TDC for 2013 performance and compares it with his 2012 TDC.
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CEO Total Direct Compensation
Note Regarding 2013 TDC Decisions and Summary Compensation Table
It is important to recognize that the way the Compensation Committee presents TDC in the charts that follow is different from the SEC-required disclosure in the Summary Compensation Table (SCT) and is not a substitute for the information in that table (shown on page 43). Rather, it is intended to show how the Compensation Committee linked NEOs’ TDC and its components to the company’s 2013 performance results.
There are two principal differences between the SCT and the charts below. First, the SCT shows equity awards granted in January 2013 for 2012 performance as 2013 compensation, whereas the chart below shows January 2014 equity awards as 2013 compensation. Second, the SCT shows RSUs granted in January 2013 as part of Mr. Chenault’s AIA for 2012 performance as 2013 compensation, whereas the chart below shows the AIA awards granted in January 2014 for 2013 performance as 2013 compensation, regardless of the payout timing.
CEO TOTAL DIRECT COMPENSATION ($ MILLIONS)
Mr. Chenault’s TDC for 2013 performance was $24.4 million — a $2.4 million (11 percent) increase from his 2012 TDC
In addition to performance against specific goals, the Compensation Committee also considered Mr. Chenault’s overall leadership contributions in determining his TDC. These contributions included Mr. Chenault’s leadership in defining and executing strategies to:
| • | Deliver consistent, sustainable growth and value for shareholders |
| • | Drive business growth in an uneven economy |
| • | Contain operating expenses |
| • | Allocate investment to grow the core business and expand into new sectors |
| • | Drive product and digital innovation |
| • | Strengthen the company’s risk management governance and enhance the risk management culture |
| • | Create a workplace culture that attracts and retains the best talent |
| • | Build confidence in the American Express brand and help shape public policies that affect the overall payments industry |
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OTHER NAMED EXECUTIVE OFFICERS’ TDC
The CEO’s recommendations for the other NEOs were based on his review of performance and our pay mix guidelines.
The following information provides highlights of specific individual and business performance considered in the pay recommendations for the other NEOs. When approving pay decisions for the other NEOs, the Compensation Committee also considered the overall performance of the company. Included below are the Compensation Committee’s TDC decisions for each NEO for performance year 2013.
EDWARD P. GILLIGAN, PRESIDENT
Mr. Gilligan has been the Head of the Global Consumer and Small Business Card Issuing, Global Merchant Services, Network, and Global Banking businesses at American Express Company since October 2009. His 2013 achievements included:
| • | Delivered strong financial results in support of the company’s growth through strong billings, revenue, and net income growth, and best-in-class credit performance |
| • | Restructured the organization to drive synergies and implemented key business transformation initiatives across the organization that yielded significant benefits |
| • | Continued to expand the American Express franchise internationally, through new bank issuing and acquiring partnerships and new products, in addition to the effective management of Loyalty Partner |
| • | Launched a number of new, high-impact initiatives to enhance our customers’ digital experiences |
| • | Led company efforts to comply with safety and soundness targets for the global banks, while implementing continuous process improvements |
STEPHEN J. SQUERI, GROUP PRESIDENT, GLOBAL CORPORATE SERVICES
Mr. Squeri has served as the Group President for Global Corporate Services since November 2011. He is responsible for Global Commercial Services, which consists of the Global Corporate Payments and Global Business Travel organizations, as well as Global Services, our shared services organization consisting of World Service, Global Business Services, Technologies, and Global Credit Administration. His 2013 achievements included:
| • | Delivered strong financial results including robust earnings growth in Global Commercial Services |
| • | Delivered superior customer service, as evidenced by improved customer satisfaction metrics and the receipt of our seventh consecutive J.D. Power and Associates award in the United States |
| • | Led companywide restructuring initiatives and exceeded operating expense targets across Global Commercial Services and Global Services |
| • | Initiated the Global Business Travel joint venture to accelerate the growth and transformation of the corporate travel business |
| • | Successfully completed the migration of all our applications to our new, state-of-the-art enterprise data center |
| • | Enabled multiple digital capabilities that yielded significant progress against our business objectives |
DANIEL H. SCHULMAN, GROUP PRESIDENT, ENTERPRISE GROWTH
Mr. Schulman has served as the Group President for Enterprise Growth since August 2010. He is responsible for our global strategy to reach customers beyond our traditional card and travel businesses, including efforts to expand alternative mobile and online payment services, build new revenue streams, and foster greater financial inclusion among those excluded or poorly served by the traditional financial system. Mr. Schulman is also responsible for American Express Ventures and our $100 million Digital Commerce Initiative focused on investing in early stage startups. His 2013 achievements included:
| • | Attracted millions of incremental new customers to American Express with new product launches |
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| • | Relaunched American Express Serve, with availability in more than 22,000 retail locations and free cash reload at more than 14,000 retail locations; new product features include direct deposit, bill payment and financial management tools |
| • | Continued the growth of Bluebird, with more than 1 million accounts, nearly $2 billion in funds added, and approximately 87 percent of account cardholders new to American Express; new product features include pre-authorized check writing and FDIC insurance, which allows consumers to directly receive government payments |
| • | Continued expansion into international markets, including expansion of the partnership with the Lianlian Group to use the Serve platform to help power their digital infrastructure for consumer and business customers in China into nine Chinese provinces |
| • | Accelerated the growth of LoyaltyEdge, vente-privee USA, and Foreign Exchange Services |
JEFFREY C. CAMPBELL, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Mr. Campbell has served as Executive Vice President and Chief Financial Officer since August 2013. He is responsible for leading the company’s Finance organization and representing American Express to investors, lenders and rating agencies. His achievements included:
| • | Effectively communicated the company’s business and financial information to regulatory bodies and the financial community |
| • | Assisted in achieving operational costs target commitments aligned with the company’s risk-balanced plan |
| • | Ensured a strong financial and regulatory reporting control environment |
| • | Continued to strengthen capital planning processes consistent with regulatory requirements and managed the company’s CCAR and Basel programs to support the company’s capital, funding and liquidity plans |
| • | Exhibited leadership that impacted strategic and financial decisions |
NEO TDC Decisions
The Compensation Committee’s TDC decisions for performance year 2013 are reflected in the table below. Overall, January 2014 TDC was higher than January 2013 TDC as a result of the company’s financial results and the NEOs’ performance.
NEOs TDC DECISIONS ($000s)
| E.P. GILLIGAN | S.J. SQUERI | D.H. SCHULMAN | J.C. CAMPBELL** | |||||||||||||
| Base Salary | $ 1,450 | $ 1,250 | $ 1,100 | $ 1,000 | ||||||||||||
| AIA | $ 4,525 | $ 4,150 | $ 4,025 | $ 1,600 | ||||||||||||
| Equity—RSUs* | $ 2,730 | $ 2,275 | $ 2,348 | $ 1,820 | ||||||||||||
| Equity—SOs* | $ 1,020 | $ 850 | $ 877 | $ 680 | ||||||||||||
| PG (target value) | $ 1,600 | $ 1,325 | $ 1,500 | $ 1,500 | ||||||||||||
| TDC |
|
$ 11,325 (up 8% from January 2013) |
|
|
$ 9,850 (up 3% from January 2013) |
|
|
$ 9,850 (up 13% from January 2013) |
|
$ 6,600 | ||||||
| * | Similar to the CEO’s equity awards, other NEOs received RSUs that are earned based on three-year average ROE performance. For the total equity awards, an equal number of shares was delivered in the form of performance-vested RSUs and stock options. |
| ** | Mr. Campbell joined the company in July 2013. |
Offer Letter – Mr. Campbell
In connection with his employment offer letter with the company entered into on June 19, 2013, Mr. Campbell is entitled to an annual base salary of $1,000,000, a sign-on cash award of $4,000,000 payable over a period of two years, and sign-on grants to replace a portion of long-term incentives he forfeited at his prior employer as a result of joining the company. These grants are described in more detail on page 46 in the Grants of Plan-Based Awards table and on page 54 in the Potential Payments Upon Termination of Employment/CIC table.
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COMPENSATION DISCUSSION AND ANALYSIS
DETERMINATION OF LTIA PAYOUTS FOR AWARDS MADE IN PRIOR YEARS
Portfolio Grants Awarded in January 2011 – Payout Based on 2011-2013 Performance
Portfolio Grant awards provide a cash incentive based on achievement of certain performance metrics over a three-year performance period. Portfolio Grants were awarded in January 2011 for the three-year performance period ending December 2013 (PG2011-13). In January 2014, the Compensation Committee determined the final payout for these Portfolio Grant awards at 105 percent of target. The performance metrics for PG2011-13 are shown below along with the results achieved during the period:
| 2011-13 PERFORMANCE METRIC AND WEIGHTING |
THRESHOLD, TARGET AND MAXIMUM PERFORMANCE GOALS* |
ACTUAL PERFORMANCE | PAYOUT CONTRIBUTION | |||
| Cumulative EPS (20%) | Threshold = $11.09 Target = $12.66 Maximum = $13.38 |
$12.86 | 21% | |||
| TSR vs. S&P 500 (30%) | Threshold < 9 percentage points below Index Target = At index Maximum ³ 5 percentage points above Index |
11% above Index | 38% | |||
| Strategic Milestones (50%) | At or above target based on financial performance and Compensation Committee evaluation |
50% | ||||
| Consumer, Small Business, Merchant, and Network Services Businesses | ||||||
| • International Net Income (cumulative) |
$4.9 billion | |||||
| • Increase online spend across all products |
12-15% | |||||
| Global Services
• Deliver superior service (measured by U.S. “Recommend to a Friend” score) |
2.5 percentage point improvement over 2010 |
|||||
| Enterprise Growth
• Average annual growth of Global Payment Options revenue • Reach critical mass of Serve customers |
At market growth rate
Compensation Committee judgment |
|||||
| Preliminary Total 109% of target | ||||||
| Compensation Committee applied negative discretion to adjust the final payout to
consider ongoing progress toward strategic milestones. | ||||||
| Final Payout 105% of target | ||||||
| * | Participants receive 0 percent of the award at threshold level, 100 percent of the award at target level, and 125 percent of the award at maximum level. Payout range for strategic milestones is 0-125 percent and actual payout is at the discretion of the Compensation Committee. Award payments were subject to negative adjustments based on risk results (e.g., Tier I Capital Ratio), but no such adjustments were made based on actual performance. |
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COMPENSATION DISCUSSION AND ANALYSIS
In the first quarter of 2013, the Compensation Committee approved payment of 33 percent of the PG2011-13 grants based on the achievement of a target level of performance at that date. The remaining value of the award was paid in the first quarter of 2014. The NEOs’ PG2011-13 grants resulted in the following payouts:
| EXECUTIVE | PG2011-13 GRANT AMOUNT |
PG2011-13 INTERIM (Q1 2013) PAYOUT |
PG2011-13 FINAL (Q1 2014) PAYOUT** |
TOTAL PAYOUT |
||||||||||||
| K.I. Chenault | $5,125,000 | $1,691,250 | $3,690,000* | $5,381,250 | ||||||||||||
| E.P. Gilligan | $1,500,000 | $ 495,000 | $1,080,000 | $1,575,000 | ||||||||||||
| S.J. Squeri | $1,000,000 | $ 330,000 | $ 720,000 | $1,050,000 | ||||||||||||
| D.H. Schulman | $1,300,000 | $ 429,000 | $ 936,000 | $1,365,000 | ||||||||||||
| D.T. Henry | $1,100,000 | $ 363,000 | $ 792,000 | $1,155,000 | ||||||||||||
| * | Mr. Chenault’s payment was in the form of RSUs granted in January 2014 that vest one year from the grant date; one half of RSUs are payable in shares (which must be held until one year after retirement) and the other half are payable in cash. |
| ** | An interim payment equal to 33 percent of the Grant Amount was made in the first quarter of 2013. The final payout recorded in this column is equal to 105 percent of the Grant Amount less the interim amount paid in Q1 2013. |
The grant amounts of PG2011-13 were included in the Grants of Plan-Based Awards table in the 2012 proxy statement. The cash payouts made in January 2014 are included in the Summary Compensation Table on page 43 (non-equity incentive plan compensation for 2013). For Mr. Chenault, where the 2014 payout was made solely in the form of RSUs that vest one year after the grant, the grant amount of these RSUs will be included in the Summary Compensation Table next year, under stock awards.
RSUs Awarded in January 2011—Vesting Based on 2011-2013 Performance
Performance RSUs provide an opportunity for employees to receive Common Shares based on the company’s three year average ROE (as shown in the following table). Performance RSUs were awarded in January 2011 for the three-year performance period ending December 2013.
| PERFORMANCE METRIC | PERFORMANCE LEVEL: 3-YEAR AVERAGE ROE |
PAYOUT (% OF AWARD) | ||
| Average ROE for years 2011 to 2013 | ³ 30% | 125% | ||
| 28% | 105% | |||
| 25% (Target) | 100% | |||
| 22% | 95% | |||
| 20% | 75% | |||
| 10% | 25% | |||
| ££5% | 0% | |||
Given that average ROE for years 2011 to 2013 was above target at 26.2 percent (27.7 percent for 2011, 23.1 percent for 2012, and 27.8 percent for 2013), the Compensation Committee awarded a payout of 102 percent of target. This resulted in the vesting of the following number of shares for the NEOs:
| EXECUTIVE | TARGET NUMBER OF SHARES | SHARES VESTED* | ||
| K.I. Chenault | 135,981 | 138,700 | ||
| E.P. Gilligan | 47,799 | 48,754 | ||
| S.J. Squeri | 32,965 | 33,624 | ||
| D.H. Schulman | 41,206 | 42,030 | ||
| D.T. Henry | 30,492 | 31,101 | ||
* In addition to these amounts, deferred dividends were paid on the target number of shares in the first quarter of 2014.
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COMPENSATION DISCUSSION AND ANALYSIS
Special Grant Stock Options Awarded in 2007 and 2008—Vesting Based on 2008-2013 Performance
The Compensation Committee awarded Mr. Chenault two Special Grants of 1,375,000 stock options each in November 2007 and January 2008. These Special Grants were contingent on the company’s financial performance over a six-year period from January 1, 2008 to December 31, 2013 and were based on financial targets established at pre-financial crisis levels. Vesting of the grants was subject to the company’s achievement of a minimum (1) EPS growth rate (compound annual growth rate of 12 percent or more per year), (2) revenue growth (compound annual growth rate of 8 percent or more per year), (3) ROE (average of 33 percent or more per year), and (4) relative TSR (1 percent above the S&P 500 compound annual growth rate) over this six-year period. Pages 27-29 of the proxy statement filed on March 11, 2008 provide additional information on these grants.
In January 2014 following completion of the performance period, the Compensation Committee reviewed the company’s performance and confirmed that the company’s TSR outperformed the S&P 500 TSR by 4.4 percentage points on an annualized basis over the performance period compared to the target of 2.5 percentage points, resulting in a payout of 25 percent of these grants (687,500 out of 2,750,000 options became exercisable). The remaining 75 percent of these stock options were forfeited.
HOW WE DISCOURAGE IMPRUDENT RISK TAKING
Our executive compensation program is structured to provide a balance of cash and stock; annual, medium-term, and long-term incentives; and financial, strategic, and stock performance measured over various time periods. It is designed to encourage the proper level of risk taking consistent with our business model and strategies. Our business and risk profile is different from other financial services firms; for example, we do not trade securities, derivatives, mortgages or other financial instruments. Our executive compensation program is designed to be consistent with the Federal Reserve Board’s principles for safety and soundness.
The following policies and procedures help discourage imprudent risk taking:
| • | Annual risk goals: Our Chief Risk Officer sets annual risk goals for all business units and staff groups at the beginning of each year. |
| • | Monitoring of risk: We monitor return on economic capital and credit risk performance, and we assign control and compliance ratings to each business unit and staff group as part of our annual assessment of performance. |
| • | Adjustment of compensation: At year end, our Chief Risk Officer certifies to the Compensation Committee that actual results were achieved without taking imprudent risks. Larger losses are analyzed as part of the year-end process, and the Chief Risk Officer issues a year-end memorandum describing changes in the risk profile of the company. If deemed necessary, risk adjustments are made to company and business unit annual incentive funding levels as well as to individual incentive awards. |
| • | Cross-section of metrics: We assess performance against a cross-section of key metrics over multiple time frames to discourage undue focus on short-term results or on any one metric, and to reinforce risk balancing in performance measurement. |
| • | Deferred incentive compensation: At least 50 percent of incentive compensation for executive officers is deferred for at least three years with performance-based vesting. |
| • | Clawback policies: We maintain clawback policies that include a requirement that our CEO’s cash AIA is subject to clawback at the discretion of the Compensation Committee if the company does not achieve acceptable performance the next year. |
| • | Performance-based vesting: Performance RSUs are used in place of time-based RSUs for the company’s most senior employees. |
| • | Stock ownership and holding requirements: We have robust stock ownership requirements for our CEO and other NEOs (as described on page 40), including the retention of a portion of net shares for one year after stock option exercises and RSU vestings. |
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COMPENSATION DISCUSSION AND ANALYSIS
OTHER POLICIES AND GUIDELINES
Award Timing
Consistent with past practice, annual cycle LTIA awards were granted to NEOs on the Tuesday after the regularly scheduled January Compensation Committee meeting following the company’s public announcement of its financial results for the prior fiscal year. Our off-cycle LTIA awards (for new hires, mid-year promotions, etc.) are granted on pre-established grant dates. Mr. Campbell was hired in July 2013 and received his grant on a pre-determined grant date in July 2013.
Tax Treatment
Tax rules generally limit the deductibility of compensation paid to our NEOs to $1 million during any fiscal year unless such compensation is “performance-based.” In general, the company intends to structure its incentive compensation arrangements in a manner that would comply with these tax rules. However, the Compensation Committee maintains the flexibility to pay non-deductible incentive compensation if it determines it is in the best interest of the company.
Perquisites
We provide limited perquisites to support our objective to attract and retain talent for key positions, as well as to address security concerns. We provide a flexible cash perquisite allowance of $35,000, which executives can use for items such as financial and tax planning, and life and disability insurance.
Clawback Policies
We seek to recover, to the extent practicable, performance-based compensation from any executive officer and certain other members of senior management in those circumstances when:
| • | The payment of such compensation was based on the achievement of financial results that were subsequently the subject of a restatement; and |
| • | In the board’s view, the employee engaged in fraud or misconduct that caused or partially caused the need for the restatement, and a smaller amount would have been paid to the employee based upon the restated financial results. |
Also, the cash portion of the CEO’s AIA is subject to clawback at the discretion of the Compensation Committee if the company does not achieve acceptable performance in the following year.
Further, the Dodd-Frank legislation mandates regulation to add additional clawback requirements, and the company will take appropriate steps to implement the final requirements under this legislation.
American Express also maintains a “detrimental conduct” policy covering approximately 600 employees globally, including the NEOs. Each executive is required to sign an agreement that requires the executive to forfeit unvested awards, and to repay the proceeds from some or all of his or her compensation issued under our incentive compensation program in the event the executive engages in conduct that is detrimental to the company. This compensation includes Equity and Portfolio Grant awards and, in the case of our executive officers, AIA that was received up to two years prior to employment termination. Detrimental conduct includes, but is not limited to, termination of employment for misconduct, working for certain competitors, soliciting company customers or employees for a period of time after termination, or disclosing confidential information.
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COMPENSATION DISCUSSION AND ANALYSIS
Stock Ownership Guidelines
Our stock ownership guidelines require NEOs to own and maintain a substantial stake in the company. Our NEOs are required to accumulate a target number of shares (i.e., shares owned outright, not including unvested/unearned shares and unexercised stock options), and to retain a portion of the net after-tax shares received upon vesting or exercise of their equity awards as follows:
| STOCK OWNERSHIP GUIDELINES | ||||||||
| HOLDING REQUIREMENT | ||||||||
| NEO | TARGET NUMBER OF SHARES | BEFORE TARGET MET | AFTER TARGET MET | |||||
| K.I. Chenault* | 500,000 |
75% of net shares until target number of shares is met |
50% of net shares for one year | |||||
| E.P. Gilligan | 75,000 | |||||||
| S.J. Squeri | 75,000 | |||||||
| D.H. Schulman | 75,000 | |||||||
| J.C. Campbell | 75,000 | |||||||
| * | In addition to these requirements, Mr. Chenault is required to hold, one year beyond his retirement from the company, a significant portion of his 2010-2013 year-end AIA and Portfolio Grant payouts delivered in RSUs. |
With the exception of Mr. Schulman, who was hired in 2010, and Mr. Campbell, who was hired in 2013, all our NEOs own more than the target number of shares.
Hedging Policy and Pledging Restrictions
Our NEOs are not permitted to hedge their ownership of company securities, which includes entering into any derivative transaction on AXP shares (e.g., short sale, forward, option, collar). In addition, the company does not permit executive officers to pledge shares subject to stock ownership guidelines, including holding requirements, and has placed limitations on their ability to pledge other shares they may own.
Post-Employment Compensation
RETIREMENT BENEFITS
NEOs receive retirement benefits through the following plans:
| Ÿ | Retirement Savings Plan (RSP): A qualified 401(k) savings plan available to all eligible employees. |
| Ÿ | Retirement Restoration Plan (RRP): A nonqualified savings plan that makes up 401(k) benefits that would otherwise be lost as a result of U.S. tax limits. |
As part of NEOs’ planning for retirement and other long-term financial needs, we have provided them an annual opportunity under a nonqualified deferred compensation plan to defer a portion of their base salary and AIA payout. The total annual deferral is limited to 100 percent of base salary.
NEOs (except Mr. Schulman and Mr. Campbell) also continue to earn interest on outstanding account balances under the American Express Retirement Plan, which was closed to new entrants and frozen for additional accruals in 2007. All retirement benefits are more fully described under Retirement Plan Benefits on page 50 and under Nonqualified Deferred Compensation on page 51.
SEVERANCE
SENIOR EXECUTIVE SEVERANCE POLICY
The company has an executive severance policy instead of individual severance or employment agreements. Under the Senior Executive Severance Policy, NEOs who are terminated involuntarily (except in cases of misconduct) receive cash severance benefits equal to two years of base salary and AIA and also receive a pro rata AIA payment for the year of termination. Severance payments are made in installments, except in certain terminations following a change in control, when payment is made in a lump sum, and the pro rata AIA is paid at the same time as all other employees.
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COMPENSATION DISCUSSION AND ANALYSIS
LTIAs continue to vest during the severance period, unless the executive begins full-time, outside employment. NEOs may continue to be covered under certain of our compensation and benefit plans during the severance period. U.S.-based NEOs who are age 65 or older are not eligible for severance unless the Compensation Committee specifically approves severance for such an executive.
To protect shareholders and our business model, executives are required to comply with non-compete, non-solicitation, confidentiality, and non-denigration provisions during the period of time they are receiving severance. Our uniform severance policy helps to avoid individual treatment and provides an important enforcement mechanism for these protections. The Compensation Committee must pre-approve severance for an executive officer.
SEVERANCE TERMS
MR. CAMPBELL
Under the terms of Mr. Campbell’s offer letter, to the extent that his employment is terminated prior to August 8, 2014, he will receive a notice period through that date and his severance period will commence on the day following expiration of the notice period.
MR. HENRY
As previously disclosed in May 2013, the company and Mr. Henry mutually agreed on a time table for, and flexibility during, the transition to a new CFO. The company and Mr. Henry mutually agreed to end his employment effective October 5, 2013. Mr. Henry received the benefits he was entitled to receive in accordance with the terms of the Senior Executive Severance Policy which are described above and under Post-Employment Payments – Mr. Henry on page 57. Under an agreement with the company entered into on September 18, 2013, Mr. Henry agreed to certain non-competition, non-solicitation, and confidentiality covenants for the benefit of the company, and a general release of claims against the company.
CHANGE IN CONTROL BENEFITS
The company provides change in control (CIC) benefits to encourage executives to consider the best interests of shareholders by stabilizing any concerns about their own personal financial well-being in the face of a potential CIC of the company. Some key CIC provisions were implemented in 2011 based on shareholder input and changing market trends:
| Ÿ | All LTIAs granted after December 31, 2010 require employment termination (“double trigger”) following a CIC before these awards will vest. |
| Ÿ | We no longer provide excise tax reimbursements and gross-up payments in the case of a CIC (in the case of LTIAs, applies to grants after December 31, 2010). |
In the event of certain employment terminations in connection with a CIC, executives also receive cash severance described above under Severance and other benefits. Detailed information is provided under Potential Payments Upon Termination or Change in Control (CIC) on page 53.
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COMPENSATION DISCUSSION AND ANALYSIS
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Compensation and Benefits Committee recommended to the board of directors, and the board of directors approved, that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION AND BENEFITS COMMITTEE
Robert D. Walter, Chairman
Ursula M. Burns
Peter Chernin
Samuel J. Palmisano
Ronald A. Williams
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Summary Compensation Table
In January 2014, the Compensation Committee awarded Mr. Chenault 2013 Total Direct Compensation (TDC) of $24,400,000, 11 percent higher than 2012 TDC. The following Summary Compensation Table (SCT) summarizes the compensation of our NEOs for the year ended December 31, 2013 using the SEC-required disclosure rules. It is important to recognize that 2013 TDC determined by the Compensation Committee is different than amounts disclosed below using the SEC-required disclosure rules. See page 33 for key differences between the SCT and TDC awarded by the Compensation Committee for 2013.
SUMMARY COMPENSATION TABLE (1)
| NAME | YEAR | SALARY ($) |
BONUS ($)(2) |
STOCK AWARDS |
OPTION AWARDS |
NON-EQUITY INCENTIVE PLAN |
CHANGE IN VALUE AND EARNINGS ($)(5) |
ALL OTHER COMPENSATION ($)(6) |
TOTAL ($) |
|||||||||||||||||||||||||
| K.I. Chenault Chairman and Chief Executive Officer |
2013 | $ | 2,000,000 | $ | 6,000,000 | $ | 10,486,267 | $ | 2,079,871 | $ | 0 | $ | 125,658 | $ | 1,145,624 | $ | 21,837,420 | |||||||||||||||||
| 2012 | $ | 2,000,000 | $ | 4,000,000 | $ | 18,864,985 | $ | 2,159,907 | $ | 0 | $ | 478,945 | $ | 987,897 | $ | 28,491,734 | ||||||||||||||||||
| 2011 | $ | 2,000,000 | $ | 2,000,000 | $ | 15,274,191 | $ | 2,193,374 | $ | 0 | $ | 548,290 | $ | 1,022,836 | $ | 23,038,691 | ||||||||||||||||||
| E.P. Gilligan President |
2013 | $ | 1,450,000 | $ | 4,525,000 | $ | 2,418,842 | $ | 731,099 | $ | 1,080,000 | $ | 0 | $ | 539,971 | $ | 10,744,912 | |||||||||||||||||
| 2012 | $ | 1,450,000 | $ | 4,350,000 | $ | 2,620,562 | $ | 929,413 | $ | 495,000 | $ | 266,338 | $ | 564,823 | $ | 10,676,136 | ||||||||||||||||||
| 2011 | $ | 1,450,000 | $ | 4,750,000 | $ | 2,128,967 | $ | 770,998 | $ | 3,800,000 | $ | 210,948 | $ | 2,779,172 | $ | 15,890,085 | ||||||||||||||||||
| J.C. Campbell* Executive Vice President and Chief Financial Officer |
2013 | $ | 461,538 | $ | 1,600,000 | $ | 5,508,922 | $ | 1,990,889 | $ | 0 | $ | 0 | $ | 907,771 | $ | 10,469,120 | |||||||||||||||||
| 2012 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| 2011 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| S.J. Squeri Group President Global Corporate Services |
2013 | $ | 1,250,000 | $ | 4,150,000 | $ | 2,500,586 | $ | 674,386 | $ | 720,000 | $ | 0 | $ | 379,355 | $ | 9,674,327 | |||||||||||||||||
| 2012 | $ | 1,201,923 | $ | 3,775,000 | $ | 1,845,436 | $ | 654,506 | $ | 330,000 | $ | 103,185 | $ | 351,948 | $ | 8,261,998 | ||||||||||||||||||
| 2011 | $ | 1,000,000 | $ | 4,000,000 | $ | 1,468,261 | $ | 531,725 | $ | 1,200,000 | $ | 81,999 | $ | 341,383 | $ | 8,623,368 | ||||||||||||||||||
| D.H. Schulman Group President Enterprise Growth |
2013 | $ | 1,100,000 | $ | 4,025,000 | $ | 2,119,690 | $ | 630,258 | $ | 936,000 | $ | 0 | $ | 278,325 | $ | 9,089,273 | |||||||||||||||||
| 2012 | $ | 1,100,000 | $ | 3,550,000 | $ | 1,845,436 | $ | 654,506 | $ | 429,000 | $ | 0 | $ | 309,240 | $ | 7,888,182 | ||||||||||||||||||
| 2011 | $ | 1,100,000 | $ | 4,000,000 | $ | 1,835,315 | $ | 664,653 | $ | 1,560,000 | $ | 0 | $ | 202,573 | $ | 9,362,541 | ||||||||||||||||||
| D.T. Henry ** Former Executive Vice President and Chief Financial Officer |
2013 | $ | 653,846 | $ | 2,086,986 | $ | 1,420,974 | $ | 478,996 | $ | 792,000 | $ | 26,411 | $ | 549,743 | $ | 6,008,956 | |||||||||||||||||
| 2012 | $ | 850,000 | $ | 2,750,000 | $ | 1,402,563 | $ | 497,435 | $ | 363,000 | $ | 35,244 | $ | 333,686 | $ | 6,231,928 | ||||||||||||||||||
| 2011 | $ | 850,000 | $ | 3,050,000 | $ | 1,358,114 | $ | 491,836 | $ | 1,320,000 | $ | 49,462 | $ | 384,372 | $ | 7,503,784 | ||||||||||||||||||
| * | For Mr. Campbell, amounts in the table above reflect partial year cash compensation as he was hired on July 15, 2013. |
| ** | For Mr. Henry, amounts in the table above reflect partial year cash compensation in connection with the end of his employment effective October 5, 2013. |
| (1) | Amounts shown are not reduced to reflect the NEOs’ elections, if any, to defer receipt of base salary, bonus, or non-equity incentive plan compensation under our deferred compensation programs. |
| (2) | The amounts in this column reflect AIA cash payments made for annual performance. For Mr. Chenault, $1.95 million out of $7.95 million of his 2013 AIA is paid in the form of RSUs granted in January 2014 that vest one year from the grant date, subject to performance conditions. One half of these RSUs are payable in cash and the other half are payable in shares (which must be held until one year after retirement). |
| (3) | Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718. Additional details on accounting for stock-based compensation can be found in Note 20 “Stock Plans” to our Consolidated Financial Statements contained in our 2013 Annual Report to Shareholders. |
| With respect to the RSU awards, the grant date fair value included in the Summary Compensation Table above is based upon performance against the average ROE target during the three-year performance period and assumes that target performance is achieved. The target value of the RSU awards for Messrs. Chenault, Gilligan, Campbell, Squeri, Schulman and Henry is $6,170,078, $2,168,855, $5,508,922, $2,000,611, $1,869,703 and $1,420,974, respectively (included above), and the maximum value as of the grant date assuming the highest level of performance will be achieved for Messrs. Chenault , Gilligan, Campbell, Squeri, Schulman and Henry is $7,712,567, $2,711,039, $6,886,134, $2,500,764, $2,337,098 and $1,776,188, respectively. |
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| A significant portion of Mr. Chenault’s total direct compensation is delivered in the form of equity that is deferred. The table below provides detail on the RSUs included in the stock awards column: |
| 2013 | 2012 | 2011 | ||||||||||
| Annual RSU award granted in January for performance in the prior year* | $ | 6,170,078 | $ | 6,090,046 | $ | 6,056,594 | ||||||
| Portion of AIA awarded in RSUs in January for performance in the prior year* | $ | 2,624,955 | $ | 6,624,980 | $ | 3,125,000 | ||||||
| Payment of PG award in the form of RSUs. Amount in column reflects the RSUs granted in January with respect to PG awards whose performance periods ended the prior year | $ | 1,691,234 | $ | 6,149,959 | $ | 6,092,597 | ||||||
| Total | $ | 10,486,267 | $ | 18,864,985 | $ | 15,274,191 | ||||||
| * | For example, 2013 amount shows RSU awarded in January 2013 for 2012 performance. |
| (4) | For 2013, the amounts in this column reflect the cash payment made to the NEO in respect of final payment toward the PG2011-13 awards granted in 2011, in accordance with award terms. For Mr. Chenault, the 2013 amount excludes payment of $3.69 million, which was made in the form of RSUs granted in January 2014 that vest one year from the grant date, subject to performance conditions. One-half of these RSUs are payable in cash and the other half are payable in shares (which must be held until one year after retirement). |
| (5) | The amounts in this column reflect the actuarial increase or decrease in the present value of the NEOs’ benefits under all defined benefit pension plans established by the company. The amounts also include the impact of changes in the interest rate environment during the year, which is used to measure the present value. When interest rates rise, as they did during 2013, this can decrease the present value. As a result, for Mr. Gilligan and Mr. Squeri, this value was negative $101,795 and negative $39,192, respectively, and therefore it is not reflected in the table above. |
| (6) | See the All Other Compensation Table below for additional information. |
The table below shows the components of the amounts included for each NEO under the All Other Compensation column in the Summary Compensation Table.
ALL OTHER COMPENSATION TABLE
| NAME | YEAR | PERQUISITES AND OTHER PERSONAL BENEFITS ($)(1) |
TAX PAYMENTS/ REIMBURSEMENTS ($)(2) |
COMPANY CONTRIBUTIONS TO DEFINED CONTRIBUTION PLANS ($)(3) |
EXECUTIVE LIFE ($)(4) |
DIVIDENDS AND DIVIDEND EQUIVALENTS ($)(5) |
OTHER PAYMENTS ($) (6) |
TOTAL ($) |
||||||||||||||||||||||
| K.I. Chenault |
2013 |
$ | 358,956 | $ | 0 | $ | 560,000 | $ | 4,813 | $ | 221,855 | N/A | $ | 1,145,624 | ||||||||||||||||
| 2012 |
$ | 368,647 | $ | 0 | $ | 442,500 | $ | 4,340 | $ | 172,410 | N/A | $ | 987,897 | |||||||||||||||||
| 2011 |
$ | 395,439 | $ | 0 | $ | 570,000 | $ | 3,939 | $ | 53,458 | N/A | $ | 1,022,836 | |||||||||||||||||
| E.P. Gilligan | 2013 |
$ | 105,251 | $ | 0 | $ | 406,000 | $ | 2,258 | $ | 26,462 | N/A | $ | 539,971 | ||||||||||||||||
| 2012 |
$ | 89,040 | $ | 0 | $ | 384,250 | $ | 2,100 | $ | 89,433 | N/A | $ | 564,823 | |||||||||||||||||
| 2011 |
$ | 108,942 | $ | 2,152,743 | $ | 413,250 | $ | 1,958 | $ | 102,279 | N/A | $ | 2,779,172 | |||||||||||||||||
| J.C. Campbell |
2013 |
$ | 433,441 | $ | 472,606 | $ | 0 | $ | 1,724 | $ | 0 | N/A | $ | 907,771 | ||||||||||||||||
| 2012 |
— | — | — | — | — | — | — | |||||||||||||||||||||||
| 2011 |
— | — | — | — | — | — | — | |||||||||||||||||||||||
| S.J. Squeri |
2013 |
$ | 79,814 | $ | 0 | $ | 293,750 | $ | 2,313 | $ | 3,478 | N/A | $ | 379,355 | ||||||||||||||||
| 2012 |
$ | 79,489 | $ | 0 | $ | 242,212 | $ | 2,150 | $ | 28,097 | N/A | $ | 351,948 | |||||||||||||||||
| 2011 |
$ | 69,205 | $ | 0 | $ | 240,000 | $ | 2,003 | $ | 30,175 | N/A | $ | 341,383 | |||||||||||||||||
| D.H. Schulman |
2013 |
$ | 82,906 | $ | 0 | $ | 176,000 | $ | 7,740 | $ | 11,679 | N/A | $ | 278,325 | ||||||||||||||||
| 2012 |
$ | 94,277 | $ | 0 | $ | 159,500 | $ | 4,140 | $ | 51,323 | N/A | $ | 309,240 | |||||||||||||||||
| 2011 |
$ | 70,741 | $ | 0 | $ | 31,413 | $ | 4,201 | $ | 96,218 | N/A | $ | 202,573 | |||||||||||||||||
| D.T. Henry |
2013 |
$ | 68,201 | $ | 0 | $ | 129,135 | $ | 6,075 | $ | 18,791 | $ | 327,541 | $ | 549,743 | |||||||||||||||
| 2012 |
$ | 75,132 | $ | 0 | $ | 186,750 | $ | 5,392 | $ | 66,412 | N/A | $ | 333,686 | |||||||||||||||||
| 2011 |
$ | 70,955 | $ | 0 | $ | 242,250 | $ | 4,813 | $ | 66,354 | N/A | $ | 384,372 | |||||||||||||||||
| (1) | See the Perquisites and Other Personal Benefits table below for additional information regarding the components of this column. |
| (2) | For Mr. Gilligan, who was on international assignment in London until July 2009, trailing tax equalization payments and/or reimbursements have been made and recorded following termination of his assignment in 2009 to address any foreign tax obligations relating to income received, awarded or earned during his assignment. These payments and reimbursements are made under a policy that applies to all employees on international assignment and is designed to facilitate these assignments by covering taxes over and above taxes that these employees would have incurred had they remained in their home countries. In 2013, Mr. Gilligan received a net foreign tax credit of approximately $0.65 million relating to payments made by the company on his behalf in previous years, which was returned to the company and is not reflected in the table above. The payments or reimbursements included in the amount shown that were paid or received in British Pound Sterling were converted to U.S. dollars based on the conversion rate as of the date paid, received or allocated. For Mr. Campbell, this amount is for tax payments made directly to the |
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| applicable U.S. federal, state and local authorities for taxable relocation reimbursement and payments made to or on Mr. Campbell’s behalf which the Internal Revenue Service deems taxable based on the relocation program. The relocation program was provided in connection with Mr. Campbell’s employment with American Express which required him to relocate his residence from California to New York. The tax payments received by Mr. Campbell are available to all employees under the company’s relocation program. |
| (3) | This column reports company contributions to the NEOs’ accounts under the company’s Retirement Savings Plan (RSP) and the RRP-RSP Related Account. See pages 50-52 for a further description of the RSP and the RRP-RSP Related Account. |
| (4) | This column reports imputed income to the NEO under the company’s executive life insurance program. |
| (5) | This column reports dividends and dividend equivalents paid in connection with RSUs awarded to the NEO under the 1998 Incentive Compensation Plan (1998 Plan) or the 2007 Incentive Compensation Plan (2007 Plan). Beginning with awards granted in 2011, dividends and dividend equivalents on unvested RSUs granted to executive officers will be paid only if and when the underlying shares vest. |
| (6) | This column reports the payments paid to Mr. Henry in 2013 in connection with the end of his employment. For additional details, refer to Post Employment Payments – Mr. Henry on page 57. |
PERQUISITES AND OTHER PERSONAL BENEFITS
| NAME | YEAR | LOCAL AND OTHER TRAVEL BENEFITS ($)(1) |
PERSONAL USE OF COMPANY AIRCRAFT ($)(1)(2) |
FLEXIBLE PERQUISITE ALLOWANCE ($) |
HOME SECURITY SYSTEM ($) |
SECURITY DURING PERSONAL TRIPS ($) |
INTERNA- TIONAL ASSIGNMENT ($)(3) |
FILING FEE REIMBURSEMENT ($)(4) |
RELOCATION ($)(5) |
OTHER ($)(6) |
TOTAL ($) |
|||||||||||||||||||||||||||||||
| K.I. Chenault |
2013 |
$ | 19,852 | $ | 193,676 | $ | 35,000 | $ | 32,601 | $ | 18,841 | N/A | $ | 45,000 | N/A | $ | 13,986 | $ | 358,956 | |||||||||||||||||||||||
| 2012 |
$ | 16,623 | $ | 195,536 | $ | 35,000 | $ | 34,283 | $ | 76,241 | N/A | N/A | N/A | $ | 10,964 | $ | 368,647 | |||||||||||||||||||||||||
| 2011 |
$ | 31,464 | $ | 200,000 | $ | 35,000 | $ | 30,906 | $ | 61,332 | N/A | N/A | N/A | $ | 36,737 | $ | 395,439 | |||||||||||||||||||||||||
| E.P. Gilligan |
2013 |
$ | 30,000 | $ | 11,277 | $ | 35,000 | N/A | N/A | $ | 28,234 | N/A | N/A | $ | 740 | $ | 105,251 | |||||||||||||||||||||||||
| 2012 |
$ | 30,000 | $ | 7,115 | $ | 35,000 | N/A | N/A | $ | 14,715 | N/A | N/A | $ | 2,210 | $ | 89,040 | ||||||||||||||||||||||||||
| 2011 |
$ | 30,000 | $ | 0 | $ | 35,000 | $ | 0 | N/A | $ | 43,180 | N/A | N/A | $ | 762 | $ | 108,942 | |||||||||||||||||||||||||
| J.C. Campbell |
2013 |
$ | 15,000 | $ | 0 | $ | 17,500 | N/A | N/A | N/A | N/A | $ | 377,055 | $ | 23,886 | $ | 433,441 | |||||||||||||||||||||||||
| 2012 |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| 2011 |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| S.J. Squeri |
2013 |
$ | 30,000 | $ | 0 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 14,814 | $ | 79,814 | ||||||||||||||||||||||||||
| 2012 |
$ | 30,000 | $ | 0 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 14,489 | $ | 79,489 | |||||||||||||||||||||||||||
| 2011 |
$ | 30,000 | $ | 0 | $ | 35,000 | $ | 0 | N/A | N/A | N/A | N/A | $ | 4,205 | $ | 69,205 | ||||||||||||||||||||||||||
| D.H. Schulman |
2013 |
$ | 30,000 | $ | 8,406 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 9,500 | $ | 82,906 | ||||||||||||||||||||||||||
| 2012 |
$ | 30,000 | $ | 22,254 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 7,023 | $ | 94,277 | |||||||||||||||||||||||||||
| 2011 |
$ | 30,000 | $ | 0 | $ | 35,000 | $ | 0 | N/A | N/A | N/A | N/A | $ | 5,741 | $ | 70,741 | ||||||||||||||||||||||||||
| D.T. Henry |
2013 |
$ | 30,000 | $ | 0 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 3,201 | $ | 68,201 | ||||||||||||||||||||||||||
| 2012 |
$ | 30,000 | $ | 0 | $ | 35,000 | N/A | N/A | N/A | N/A | N/A | $ | 10,132 | $ | 75,132 | |||||||||||||||||||||||||||
| 2011 |
$ | 30,000 | $ | 0 | $ | 35,000 | $ | 0 | N/A | N/A | N/A | N/A | $ | 5,955 | $ | 70,955 | ||||||||||||||||||||||||||
| (1) | For 2013, local and other travel benefits include local travel allowance for NEOs other than Mr. Chenault. For Mr. Chenault, the company’s security policy adopted by the Audit and Compliance Committee of the board requires him to use for all travel purposes, to the maximum extent practicable, the automobiles and aircraft provided by the company to executives for business travel. The calculation of incremental cost for personal use of company-owned automobiles and aircraft is based on the variable cost to the company of operating the automobiles and aircraft and includes, among other things, fuel costs, maintenance costs, and, in the case of aircraft, the cost of trip-related crew hotels and meals, and landing and ground handling fees. The calculation does not include fixed costs that would have been incurred regardless of whether there was any personal use of the automobiles or aircraft (e.g., purchase costs and depreciation, driver and flight crew fixed salaries and benefits, insurance costs, etc.). |
| (2) | Effective January 1, 2010, the company requires reimbursement by Mr. Chenault for incremental cost in excess of $200,000 per year for travel on company aircraft that is deemed by the SEC to be personal use, including use to travel to outside board meetings. Messrs. Gilligan’s and Schulman’s 2013 amounts are in connection with personal travel in accordance with appropriate approvals. |
| (3) | The amount shown includes expatriate services and allowances in connection with Mr. Gilligan’s repatriation to the United States, due to his international assignment. The services received by Mr. Gilligan apply to all employees on international assignment. Services and allowances included in the amounts shown that were paid or received in British Pound Sterling were converted to U.S. dollars based on the conversion rate as of the date paid, received or allocated. |
| (4) | This column reflects reimbursement by the company of the fee paid by Mr. Chenault in connection with a governmental filing required to be made as a result of his being an executive officer and the level of his equity holdings in the company. |
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| (5) | The amount shown includes taxable relocation reimbursements and payments, excluding tax payments. These payments were made in connection with Mr. Campbell’s employment with American Express which required that he relocate his residence from California to New York. The reimbursements and payments received by Mr. Campbell are available to all employees under the company’s relocation program. |
| (6) | This column reports the total amount of other perquisites and personal benefits provided, none of which individually exceeded the greater of $25,000 or 10 percent of the total amount of all perquisites and other personal benefits reported for the NEO. These other benefits consist of office parking, reimbursement for certain information technology, cost associated with employee recognition programs, and cost of certain meals from the company’s dining facilities. For Mr. Campbell, this also includes professional fees incurred with respect to his employment offer letter. In addition to the perquisites and other benefits described in the table and footnotes above, our NEOs also receive occasional secretarial support with respect to personal matters and may, on occasion, use the company’s tickets for sporting and entertainment events for personal rather than business purposes. We incur no incremental cost for the provision of such additional benefits. |
Grants of Plan-Based Awards
The following table provides information on SO, RSU and PG awards granted to each of our NEOs in 2013 under the 2007 Plan. There can be no assurance that the grant date fair value of awards will ever be realized by the NEOs.
GRANTS OF PLAN-BASED AWARDS
| ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS (2) |
ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS (2) |
|||||||||||||||||||||||||||||||||||||||||
| NAME | AWARD TYPE (1) |
GRANT DATE |
APPROVAL DATE |
THRESHOLD ($) |
TARGET ($) |
MAXIMUM ($) |
THRESHOLD (#) |
TARGET (#) |
MAXIMUM (#) |
EXERCISE PRICE OR BASE PRICE OF OPTION AWARDS ($/SH)(3) |
GRANT DATE FAIR VALUE OF STOCK AND OPTION AWARDS ($)(4) |
|||||||||||||||||||||||||||||||
| K.I. Chenault | PG2013-15 | 1/29/2013 | 1/29/2013 | $ | 0 | $ | 5,125,000 | $ | 6,406,250 | |||||||||||||||||||||||||||||||||
| SO | 1/29/2013 | 1/29/2013 | 103,786 | $ | 59.45 | $ | 2,079,871 | |||||||||||||||||||||||||||||||||||
| RSU | 1/29/2013 | 1/29/2013 | 0 | 103,786 | 129,732 | $ | 6,170,078 | |||||||||||||||||||||||||||||||||||
| RSU | 1/29/2013 | 1/29/2013 | 72,602 | $ | 4,316,189 | |||||||||||||||||||||||||||||||||||||
| E.P. Gilligan | PG2013-15 | 1/29/2013 | 1/29/2013 | $ | 0 | $ | 1,500,000 | $ | 1,875,000 | |||||||||||||||||||||||||||||||||
| SO | 1/29/2013 | 1/29/2013 | 36,482 | $ | 59.45 | $ | 731,099 | |||||||||||||||||||||||||||||||||||
| RSU | 1/29/2013 | 1/29/2013 | 0 | 36,482 | 45,602 | $ | 2,168,855 | |||||||||||||||||||||||||||||||||||
| RSU | 1/29/2013 | 1/29/2013 | 4,205 | $ | 249,987 | |||||||||||||||||||||||||||||||||||||
| J.C. Campbell | PG2012-14 | 7/31/2013 | 6/11/2013 | $ | 0 | $ | 3,000,000 | $ | 3,750,000 | |||||||||||||||||||||||||||||||||
| PG2013-15 | 7/31/2013 | 6/11/2013 | $ | 0 | $ | 1,500,000 | $ | 1,875,000 | ||||||||||||||||||||||||||||||||||
| SO | 7/31/2013 | 6/11/2013 | 24,892 | $ | 73.77 | $ | 663,621 | |||||||||||||||||||||||||||||||||||
| SO | 7/31/2013 | 6/11/2013 | 49,785 | $ | 73.77 | $ | 1,327,268 | |||||||||||||||||||||||||||||||||||
| RSU | 7/31/2013 | 6/11/2013 | 0 | 24,892 | 31,115 | $ | 1,836,283 | |||||||||||||||||||||||||||||||||||
| RSU | 7/31/2013 | 6/11/2013 | 0 | 49,785 | 62,231 | $ | 3,672,639 | |||||||||||||||||||||||||||||||||||
| S.J. Squeri | PG2013-15 | 1/29/2013 | 1/29/2013 | |||||||||||||||||||||||||||||||||||||||