American Express Co.
Summary:
These guys are making a lot of money, regardless of how well the company is doing. They say: "American Express, don't leave home without it." We say: "Shareholders, can you afford your home with it?"
Analysis:
The economy is in a slump and credit terms are tightening. Discretionary spending is down and consumers are defaulting left and right on their loans. Not good news if you're in the Financial Services Industry!
Count American Express as one of those companies facing an uphill battle. The customers' spending habits have tailed off lately, while late payments and non-payments continue to rise. They have attempted to administer cost-cutting efforts to counter-balance their revenue losses, but have still only been able to maintain a small level of growth. The stock price for 2007 was also on a bit of a roller coaster, fluctuating between $55 and $65. 2008 has seen a large drop-off, going as low as $35 in July.
Let's take a look at the executive compensation program.
So… What Are They Paid?
The base salaries appear normal for the CEO, Ken Chenault, and the NEOs. The bonuses, however, are pretty high. The reported cash bonus for the CEO was $6 million in 2007, and the NEOs averaged about $2.8 million in bonus money. If you fish around the footnotes, you will see another $6 million going to the CEO in non-cash bonuses and about $1 million apiece for three-fourths of the NEOs. That's $12 million in bonuses for the CEO!
Stock and option awards were high as well. The CEO received nearly $15 million in stock and option awards. That's $21 million in stock, option, and cash awards for one year! Tack on another $500,000 for non-equity incentives to the CEO with an average of $1.1 million to the NEOs and you have a large amount of money being spent on the top fellas.
The perks given out aren't much better. The CEO gets a little over $100,000 for a car and $323,000 in incremental costs for personal use of company aircraft! Both numbers are very high compared to the perks given out by other companies. Another high perk was the amount spent on security for the CEO. Expenses for both home and business-related security totaled over $175,000 for 2007.
So if the board decides that they'd like to see a fresh face in the top position, forget about it. Mr. Chenault isn't going anywhere. If he were to be fired without good cause, he could walk away with $68 million, including a ridiculously high $26.5 million cash severance! These high severance payments are also common throughout the company. The NEOs' severance pay ranges from $2.2 million to $10 million. Does it still seem like there isn't enough incentive to keep you favorite execs around? How about a change in control clause that could net the CEO as much as $96 million!
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $1,238,461 | $616,638 |
| Bonus | $6,000,000 | $2,795,500 |
| Stock | $6,476,202 | $973,430 |
| Options | $8,288,342 | $2,007,592 |
| non-Equity Incentives | $500,000 | $1,134,750 |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report