American Express - Corporate Governance Case

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American Express
Chairman/CEO Influence and Outcomes


Table of Contents

American Express Overview3

James D. Robinson3

Success and Failures of Robinson3

Board Of Directors4

Decisions Required4

Candidates for CEO Position5

Robinson’s Strategy5

Decisions Of The Board5

Problems Faced By American Express6


Lessons Learnt7


American Express Overview

American Express Company (American Express), incorporated in 1965, is a global service company The Company’s principal products and services are charge and credit payment card products and travel-related services offered to consumers and businesses around the world. American Express Company and its principal operating subsidiary, American Express Travel Related Services Company, Inc. (TRS), are bank holding companies. It is principally engaged in businesses comprising four reportable operating segments: U.S. Card Services, International Card Services, Global Commercial Services, and Global Network & Merchant Services. Its range of products and services includes charge and credit card products, expense management products and services, consumer and business travel services, stored value products, such as Travelers Cheques and other prepaid products, network services, merchant acquisition and processing, point-of-sale, servicing and settlement, and marketing and information products and services for merchants, and fee services, including market and trend analyses and related consulting services, fraud prevention services, and the design of customized customer loyalty and rewards programs. In November 2010, it acquired Accertify Inc., a provider of solutions that help merchants combat fraudulent online and other card-not-present transactions.

James D. Robinson

In 1977, James D Robinson was appointed CEO and Chairman of American Express. He continued to hold this position till 1992. He outlined a vision of a financial empire that would offer all things to all people: charge cards, insurance brokerage services, money management, private banking. It would be unlike any other company ever formed, offering cradle-to-grave financial care for anyone in the world, anywhere in the world. The potential synergies were awe-inspiring: Shearson mutual funds and Fireman’s Fund insurance offered to American Express card holders; American Express travel planning offered to Shearson’s Wall St clients. The combinations seemed endless.

In his tenure he also strengthened the board with 17 new members making the board to become 19 members strong. The corporate governance of the organization was therefore assumed to be mature enough for clients, markets and shareholders to put in their trust.

Success and Failures of Robinson

American Express soon launched a strategy of acquisition in 1980s. It went through enlarging the empire through takeovers to many organizations and big brands in the financial world. Some of examples are:

• 1981 - Shearson, at a cost of nearly $1 billion

• 1981 - The Boston Company

• 1983 - Edmond Safra’s Trade Development Bank

• 1984 - Investors Diversified Services

• 1984 - Lehman Brothers Kuhn Loeb

• 1987 - E.F. Hutton & Co.

There were other instances where American Express could not turn the mark the deal successful; examples are:

• 1977 - Philadelphia Life.

• 1987–88 - Disney

• 1987–88 - The Book-of-the-Month Club.

• 1979 - McGraw-Hill.

While all the goals and acquisitions were targeted to increase the profitability of the organization, there were some major setbacks arising due to this:

• AmEx’s 36 years record of increasing profit broken in 1983, as Fireman’s fund declared $242m loss bringing down the company’s profit.

• Trade Development Bank was sold and an additional $8m penalty paid to Safra because of Robinson’s negative campaign against him.

• Boston Company confessed accounting...
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