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||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))|
|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):|
|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):
|(4)||Proposed maximum aggregate value of transaction:|
|(5)||Total fee paid:|
|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.:|
|Our Blue Box Values reflect who we are and what we stand for as a company.|
|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.|
|Integrity||We uphold the highest standards of integrity in all our actions.|
|Teamwork||We work together, across boundaries, to meet the needs of our customers and to help the company win.|
|Respect for People||We value our people, encourage their development and reward their performance.|
|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.|
|We are personally accountable for delivering on our commitments.|
|In 2014 American Express produced solid earnings in a challenging economic and competitive environment. Results reflected higher spending by our Card Members, increased loan balances and tight controls on costs, as well as a strong balance sheet and continued investments in growth opportunities.|
200 Vesey Street
New York, New York 10285
Notice of Annual Meeting of Shareholders
Monday, May 11, 2015
9:00 a.m. Eastern Time
American Express Company, 200 Vesey Street, 26th Floor, New York, New York 10285
To vote on the following proposals:
|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 2015|
|3.||Advisory resolution to approve executive compensation|
|4.||Five shareholder proposals if properly presented at the annual meeting|
|5.||Such other business that may properly come before the annual meeting|
Close of business on March 13, 2015
March 30, 2015
Carol V. Schwartz
2015 Proxy Statement 1
|Table of Contents|
|Annual Meeting Information||4|
|2014 Performance Highlights||6|
|Executive Compensation Program||6|
|Summary of Voting Matters and Board Recommendations||7|
|Our Director Nominees||7|
|Board and Governance Highlights||8|
|Board Expertise and Skills||8|
|American Express Corporate Governance||9|
|CORPORATE GOVERNANCE AT AMERICAN EXPRESS||10|
|Our Corporate Governance Framework||10|
|Board Meetings and Board Committees||14|
|Risk Oversight and the Board’s Role in Risk Oversight||16|
|Report of the Audit and Compliance Committee||17|
|CORPORATE CITIZENSHIP AT AMERICAN EXPRESS||18|
|OWNERSHIP OF OUR COMMON SHARES||19|
|COMPENSATION OF DIRECTORS||21|
|Compensation Discussion and Analysis||23|
|Report of the Compensation and Benefits Committee||39|
|EXECUTIVE COMPENSATION TABLES||40|
|Summary Compensation Table||40|
|Grants of Plan-Based Awards||43|
|Outstanding Equity Awards at Fiscal Year-End 2014||44|
|Option Exercises and Stock Vested in 2014||46|
|Retirement Plan Benefits||47|
|Nonqualified Deferred Compensation||48|
|Potential Payments Upon Termination or Change in Control (CIC)||49|
|EQUITY COMPENSATION PLANS||52|
|ITEM 1—||ELECTION OF DIRECTORS FOR A TERM OF ONE YEAR||53|
|Board Membership Criteria and Diversity||53|
|Our Director Nominees||55|
|ITEM 2—||RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM||62|
|PricewaterhouseCoopers LLP Fees and Services||62|
|ITEM 3—||ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION (SAY ON PAY)||64|
|ITEM 4—||SHAREHOLDER PROPOSAL RELATING TO ANNUAL DISCLOSURE OF EEO-1 DATA||65|
|ITEM 5—||SHAREHOLDER PROPOSAL RELATING TO REPORT ON PRIVACY, DATA SECURITY AND GOVERNMENT REQUESTS||67|
|ITEM 6—||SHAREHOLDER PROPOSAL RELATING TO ACTION BY WRITTEN CONSENT||69|
|ITEM 7—||SHAREHOLDER PROPOSAL RELATING TO LOBBYING DISCLOSURE||70|
|ITEM 8—||SHAREHOLDER PROPOSAL RELATING TO INDEPENDENT BOARD CHAIRMAN||72|
2015 Proxy Statement 2
|Certain Relationships and Transactions||73|
|Section 16(a) Beneficial Ownership Reporting Compliance||74|
|Director and Officer Liability Insurance||74|
|2016 Annual Meeting of Shareholders Information||75|
|ADDITIONAL VOTING INFORMATION||76|
|Voting at the Annual Meeting||76|
|Multiple Shareholders Sharing the Same Address||78|
|Availability of Form 10-K||78|
|ANNEX A—||INFORMATION REGARDING NON-GAAP FINANCIAL MEASURES||A-1|
|LOCATION OF THE 2015 ANNUAL MEETING||Inside Back Cover|
2015 Proxy Statement 3
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 2015 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 30, 2015.
Date, Time and Place: May 11, 2015, at 9:00 a.m. Eastern Time at 200 Vesey Street, New York, New York 10285.
Admission: 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 your shares are held in a bank, brokerage or other institutional account you are a beneficial owner of these shares but not the record holder. This is known as holding shares in “street name.” If you wish to vote these shares in person at the meeting, you must obtain a proxy from your bank, broker or other intermediary and bring it with you to hand in with your ballot.
Webcast: You can access a live audio webcast and a replay of the meeting on our investor website at http://ir.americanexpress.com.*
How to View Proxy Materials Online
Important notice regarding the availability of proxy materials for the 2015 shareholder meeting:
Our proxy statement and 2014 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 2014 Annual Report to Shareholders and vote online.
You may vote common shares that you owned as of the close of business on March 13, 2015, which is the record date for the meeting.
We encourage you to vote as soon as possible, even if you plan to attend the meeting in person. Please follow the instructions on your proxy card, voting instruction form or on the notice of internet availability of proxy materials that you received. If you submit your vote prior to the meeting, you may still attend and vote at the meeting.
You may vote in the following ways:
|BY TELEPHONE||BY INTERNET||BY MAIL||IN PERSON|
|You can vote by calling the number on your proxy card or voting instruction form or provided on the website listed on your notice.||You
can vote online at
|If you received written materials, you can vote by mail by marking, dating and signing your proxy card or voting instruction form and returning it in the envelope provided.||You can vote in person at the annual meeting. If you hold your shares in street name, you must obtain a proxy from the record holder to vote in person.|
For telephone and Internet voting, you will need the 16-digit control number included on your notice, on your proxy card or in the voting instructions that accompanied your proxy materials.
Telephone and online voting are available through 3:00 p.m. Eastern Time on Wednesday, May 6, 2015, for shares held in employee plans, and through 11:59 p.m. Eastern Time on Sunday, May 10, 2015, for all other shares.
* Weblinks throughout this document are provided for convenience only. Information from the American Express website and any other website referred to in this proxy statement is not incorporated by reference into this proxy statement.
2015 Proxy Statement 4
You may confirm your vote was cast in accordance with your instructions. Beginning April 28, 2015, 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.
2015 Proxy Statement 5
We present below a summary of certain information in this proxy statement. Please review the complete proxy statement and 2014 Annual Report to Shareholders before you vote.
The company produced solid earnings in 2014 reflecting higher spending by our Card Members, growth in average Card Member loans, excellent credit quality and control over operating expenses.
|•||We earned a record $5.9 billion in net income for 2014, up 10 percent from last year.|
|•||Our earnings per share (EPS) were $5.56, an increase of 14 percent from 2013.|
|•||Our total revenues net of interest expense rose 4 percent (5 percent on an adjusted basis1) to $34.3 billion.|
|•||Our return on average equity (ROE) was 29.1 percent, compared with 27.8 percent in 2013.|
|•||We achieved $1.02 trillion in worldwide billed business (including cards issued by third parties), an increase of 7 percent (9 percent on an FX-adjusted basis2) over last year.|
|•||Our credit performance outpaced the industry, and write-off rates remained at or near historic lows.|
|•||Our total shareholder return (TSR) for the year trailed the S&P 500 and the S&P 500 Financials indices, but our three-and five-year returns were better than both of these indices.|
|•||While maintaining tight control of our operating expenses, we continued to invest in key areas to support our moderate-and long-term growth.|
On Average, Over Time Financial Targets
We have set long-term targets that we think would generate sustainable value for our shareholders. We manage the company for the moderate to long-term and do not make decisions simply to achieve results on a short-term basis.
Since 2010, our annual EPS growth has averaged 14 percent. Our revenue growth rate was 6 percent over the same period.
During this time, we delivered high returns on capital, with an average ROE of 27 percent.
|ON AVERAGE, OVER TIME FINANCIAL TARGETS|
|•||EPS growth: 12-15%|
|•||Revenue growth: at least 8%|
|•||ROE: 25% or more|
Our executive compensation program is designed to reward our leadership team for delivering results and building sustainable shareholder value. Several important features of our executive compensation program are:
|•||About 92 percent of the total direct compensation delivered to our CEO for 2014 was variable and tied to performance. About 74 percent is in the form of restricted stock units, stock options and a portfolio grant, the value of which will depend on the company’s future share price, financial, and other 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.|
|•||Our long-term incentive awards include (1) performance-vested restricted stock units whose value is based on achievement of return on average equity targets, (2) stock options, and (3) portfolio grant awards whose value is based on the achievement of financial, stock price, and strategic goals over a three-year performance period.|
|•||We require our executive officers to have significant outright ownership of company shares.|
|•||We made a number of changes to our compensation program in recent years to further strengthen the link between pay and performance. For example, we added performance vesting to our annual restricted stock unit grants and added a clawback feature to the cash bonus paid to the CEO.|
1 The growth rate of adjusted total revenues net of interest expense, a non-GAAP measure, excludes business travel revenues for Q3-Q4 ’13, due to the deconsolidation of our global business travel operations as a result of the joint venture transaction that closed June 30, 2014, the gain on the Q4 ’14 sale of the company’s investment in Concur Technologies, Inc. and the impact of changes in foreign exchange rates. Refer to Annex A for a reconciliation and footnote 2 for an explanation of foreign currency adjusted (FX-adjusted) information.
2 The FX-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.
2015 Proxy Statement 6
|Board Voting||Page Reference|
|Proposal||Recommendation||for More Detail|
|Item 1—Election of Directors for a Term of One Year||FOR||53-61|
|Item 2—Ratification of Appointment of PricewaterhouseCoopers LLP for 2015||FOR||62-63|
|Item 3—Advisory Resolution to Approve Executive Compensation (Say on Pay)||FOR||64|
|Items 4-8—Five Shareholder Proposals, if properly presented||AGAINST||65-72|
The voting standard for all these items is a majority of votes cast.
You are being asked to elect 12 directors. Each of our current directors other than Mr. Reinemund is standing for reelection. The board has also nominated Michael O. Leavitt to stand for election. Each of the nominees is standing for election to hold office until the next annual meeting of shareholders and until his or her successor is duly elected and qualified. Detailed information about each nominee’s background, skills and expertise can be found in Proposal 1—Election of Directors for a Term of One Year on page 53.
INFORMATION ABOUT OUR DIRECTOR NOMINEES
|Name||Age||Since||Current Occupation||Independent||Public Boards|
|Charlene Barshefsky||64||2001||Senior International Partner, WilmerHale||3|
|Ursula M. Burns||56||2004||Chairman and CEO, Xerox Corporation||2|
|Kenneth I. Chenault||63||1997||Chairman and CEO, American Express Company||2|
|Peter Chernin||63||2006||Founder and Chairman, Chernin Entertainment, Inc.||2|
|Anne L. Lauvergeon||55||2013||Chairman and Chief Executive Officer, A.L.P. SAS||3|
|Michael O. Leavitt||64||—||Founder and Chairman, Leavitt Partners, LLC||2|
|Theodore J. Leonsis||59||2010||Chairman and CEO, Monumental Sports & Entertainment, LLC||1|
|Richard C. Levin||67||2007||Chief Executive Officer, Coursera|
|Samuel J. Palmisano||63||2013||Former Chairman, President and CEO, IBM||1|
|Daniel L. Vasella||61||2012||Honorary Chairman and Former Chairman and CEO, Novartis AG||1|
|Robert D. Walter*||69||2002||Founder and Former Chairman and CEO, Cardinal Health, Inc.||2|
|Ronald A. Williams||65||2007||Former Chairman and CEO, Aetna, Inc.||3|
* Lead Independent Director
2015 Proxy Statement 7
INFORMATION ABOUT OUR CURRENT BOARD COMMITTEE MEMBERSHIP AND 2014 COMMITTEE MEETINGS
|Compliance||and Benefits||and Technology||and Governance||Responsibility||Risk|
|Ursula M. Burns|
|Kenneth I. Chenault|
|Anne L. Lauvergeon|
|Theodore J. Leonsis|
|Richard C. Levin|
|Samuel J. Palmisano|
|Steven S Reinemund|
|Daniel L. Vasella|
|Robert D. Walter|
|Ronald A. Williams|
|TOTAL MEETINGS HELD||11||7||3||6||3||10|
Director Attendance: All directors attended over 75 percent or more of the meetings of the board and board committees on which they served in 2014.
Upon election of the board’s nominees at the annual meeting, the board will have the following characteristics:
2015 Proxy Statement 8
|Board Independence||•||9 out of 12 of our director nominees are independent.|
|•||Our CEO is the only member of management who serves as a director.|
|Board Refreshment and Diversity||•||We seek a board that as a whole possesses a mix of diverse skills, backgrounds and experience, including with respect to gender and race.|
|•||We have a mix of relatively newer and longer tenured directors to make sure the board has fresh perspectives and the benefit of experience. Upon election of the board’s nominees, the average tenure of our non-management directors will be under 7 years.|
|•||We added three new directors since 2012, including one woman and two directors from outside the United States, and we are nominating a new director for election in 2015.|
|•||Directors may not stand for reelection after age 72.|
|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.|
|•||Committee chairs shape the agenda and information presented to their committees to respond to evolving business and regulatory developments.|
|Lead Independent Director||•||Our independent directors annually elect a lead independent director. Mr. Walter has been our lead independent director since 2011.|
|•||In addition to his other duties, Mr. Walter chairs regular executive sessions of the board, at which non-management directors discuss matters such as senior executive performance and compensation, succession planning, board information needs, future agenda items and board priorities.|
|Board Oversight of||Oversight of business strategy and risk taking are primary functions of the board.|
|Strategy and Risks||•||Our board oversees and advises management on development and execution of business strategy through an in-depth review at an annual two-day strategy off site, followed by frequent updates.|
|•||Enterprise-wide risk management is overseen by our Risk Committee. Importantly, this committee has overlapping membership with the Audit and Compliance and the Compensation and Benefits committees.|
|•||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.|
|Accountability to||•||All directors are elected annually.|
|Shareholders||•||In uncontested director elections, our directors are elected by a majority of votes cast.|
|•||Each common share is entitled to one vote.|
|•||25% of shareholders can call special meetings.|
|Shareholder Engagement||•||We have regular outreach and engagement with shareholders so we are aware of and can address the issues that matter most to our investors.|
|•||Shareholders may also raise concerns directly to our directors or to our corporate ombudsperson.|
|Director Stock Ownership||•||Non-management directors are required to acquire a personal holding of shares (directly or through share equivalent units) with a value of $1 million within five years of joining our board.|
|Board Effectiveness||Our board has a continuous improvement mindset. Following are some of the processes in place to promote board effectiveness:|
|•||Regularly scheduled board meetings generally start with a directors’ only session at which the condition of the company’s business is discussed. At the conclusion of the meeting, the board generally meets again in a second directors’ only session, followed by an executive session of non-management directors led by the lead independent director.|
|•||The Nominating and Governance Committee leads an annual self-evaluation of the board. The board critically evaluates its performance including assessing its agendas, informational needs, composition, processes, and dynamics. Each committee follows a similar process. At the end of the process, any improvements that are identified are implemented.|
|Director Access||•||Senior leaders present regularly to directors to enable the board to hear directly from the leaders responsible for particular areas. All 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.|
2015 Proxy Statement 9
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 directors understand that they serve you as shareholders in carrying out their responsibility to oversee the operations and strategic direction of our company. To do so effectively, our board along with management regularly reviews our corporate governance principles and our practices to assure that they are appropriate and reflect high standards.
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 corporate governance principles, our employee code of conduct and our code of business conduct for directors, our whistleblower policy, our comprehensive enterprise-wide risk management program, our commitment to transparent financial reporting, and our systems of internal checks and balances. Comprehensive management policies, many of which are approved at the board level, guide the company’s operations.
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.
Leaders are responsible to demonstrate the highest standards of integrity in all dealings with fellow employees, customers, suppliers, and the community at large.
You may view the following documents at our investor relations website, located at http://ir.americanexpress.com:
|•||Corporate Governance Principles|
|•||Charters for each of our Board Committees|
|•||Code of Conduct for Employees|
|•||Code of Business Conduct for Directors|
Our governance principles provide that a substantial majority of our directors will meet the criteria for independence required by the NYSE. Currently, 75 percent of our board meets our criteria for independence.
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 our corporate governance principles and 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, the board determined in February and March 2015 that 9 of the board’s 12 director nominees are independent: Mses. Burns and Lauvergeon, and Messrs. Chernin, Leavitt, Levin, Palmisano, Vasella, Walter and Williams. Amb. Barshefsky, Mr. Chenault and Mr. Leonsis are not independent under these guidelines. Messrs. McGinn and Reinemund, who are not standing for reelection, were also determined to be independent during their board service.
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. Amb. Barshefsky is a partner of the law firm of WilmerHale, which firm provided legal services to us in 2014 at customary rates. Mr. Leonsis provided consulting services to the company in 2012 and is not independent under our guidelines which require a three year look back for consulting arrangements.
2015 Proxy Statement 10
Board leadership is provided through the combination of a unified chairman and CEO, a clearly defined and significant lead independent director role, active committee chairs, and independent-minded, skilled and committed directors. The board believes this structure provides an appropriate framework for effective board challenge and best serves the interests of our shareholders at this time. Our current lead independent director, Mr. Robert Walter, was reelected lead director in February 2015 by the independent directors upon the recommendation of the Nominating and Governance Committee. Significant considerations are provided below.
|•||The Company’s CEO, Mr. Chenault, has been able to draw on his knowledge of the company’s operations, industry and competitive developments, key customers and business partners to provide leadership in setting the agenda and focusing board discussions.|
|•||Mr. Chenault’s combined role has ensured that the company presents its message and strategy to shareholders, employees and customers with a unified voice, and provides unambiguous accountability.|
|•||The board’s lead independent director, Mr. Robert Walter, has accumulated a deep knowledge of the company’s business, history and organization, which enables him to provide strong and effective leadership to the independent directors. The board believes that it has in place processes that enable Mr. Walter to provide this leadership, including chairing executive sessions after every regular board meeting and providing feedback to Mr. Chenault.|
|•||Board meetings include healthy debate and exchange of viewpoints from all directors, and the Nominating and Governance Committee believes that board meetings evidence open and transparent board dynamics.|
|•||In addition to a strong lead independent director with clearly delineated and comprehensive duties, the board’s leadership structure includes experienced, independent-minded and involved committee chairs.|
Duties and Powers of Our Lead Independent Director:
Preside at all meetings of the board at which the chairman is not present, including the executive sessions of the non-management and 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 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.
Non-Management Director Executive Sessions
Executive sessions of non-management directors are led by the lead independent director and are an important governance practice because they enable the board to discuss matters, such as strategy, CEO and senior management performance and compensation, 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 independent director. During 2014, our non-management directors met in executive session at 8 meetings, one of which sessions included independent directors only.
|The company’s governance practices provide board accountability to shareholders through:|
|•||Majority voting for directors|
|•||Annual election of the entire board|
|•||Special meeting by-law provisions|
|•||One vote per common share|
2015 Proxy Statement 11
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.
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.
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.
Management succession is regularly discussed by the directors with the CEO as well as without management present 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.
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.
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 investors on a timely basis. We engage regularly with our largest shareholders to hear their views on governance matters generally and specifically with respect to the company, including discussion of executive compensation, emerging governance developments and our practices.
2015 Proxy Statement 12
You may communicate with our board or an individual director by letter, email or telephone, directed in care of the company’s Secretary, who will forward your communication to the intended recipients. However, in the discretion of the Secretary, unsolicited advertisements or invitations to conferences or promotional material may not be forwarded to the directors. 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 or the lead independent director. 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 independent director.
Please direct such communications as follows:
Carol V. Schwartz
Secretary and Corporate Governance Officer
American Express Company
200 Vesey Street
New York, NY 10285
In addition, you may raise a shareholder concern to our board in a confidential or anonymous manner, by contacting 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.
Board Evaluation Process
The board and each committee annually evaluate their performance to identify areas for improvements. The areas covered in the evaluation include agendas, informational needs, composition, processes and structure, dynamics, performance and effectiveness, and access to resources and senior management. The table below summarizes the process followed.
|Corporate Governance Review||Our Nominating and Governance Committee reviews our corporate governance principles in light of general corporate governance developments and practices suggested by governance organizations and investors, recommends to the board changes that it believes are appropriate to maintain high standards of governance, and determines and oversees the process for the upcoming annual board and committee evaluations.|
|Annual Board and Committee Self-Evaluations||Currently, the evaluations have been conducted through a tailored questionnaire for the board and each committee, followed by discussion in executive session. The questionnaires evaluate progress against specific areas and elicit discussion through open-ended questions.|
|Summary of the Written Questionnaires||The corporate secretary summarizes the responses, showing trends since the prior year and written comments, which are shared with the board and committee members.|
|Executive Sessions||The chair of the Nominating and Governance Committee and each committee chair leads an executive session of the non-management directors and their committee to discuss the results of the evaluation, without management present. Committee chairs report on their evaluations to the full board.|
|Actions||Improvements that are identified in response to this process are implemented.|
2015 Proxy Statement 13
Attendance at Board Meetings
During 2014, our board met nine times. All directors attended 75 percent or more of the meetings of the board and board committees on which they served in 2014.
Attendance at Annual Meetings
In 2014, all of our directors other than Mr. Leonsis 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 2014
Please see Board and Governance Highlights on page 8 for information about our current committee memberships and committee meetings held in 2014.
Audit and Compliance Committee
|Members: Anne Lauvergeon, Steven S Reinemund, Daniel L. Vasella (Chair) and Ronald A. Williams|
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 control over financial reporting, and legal and regulatory compliance. The committee has established procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of the company of concerns regarding questionable accounting or auditing matters. The committee also receives and discusses reports from management regarding significant reported ethics violations under the company’s Code of Conduct and other corporate governance policies. The 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 & Ethics Officer. The duties of the committee with respect to oversight of the company’s financial reporting process are described in the report of the committee on page 17 under Report of the Audit and Compliance Committee.
Independence: Our board has determined that each member of the committee is independent and meets the additional independence requirements under the listing standards of the NYSE and our governance principles for service on the committee. Our board has also determined that Mr. Williams meets the requirements for being an “audit committee financial expert” as defined by SEC rules.
Compensation and Benefits Committee
|Members: Ursula M. Burns, Peter Chernin, Samuel J. Palmisano, Robert D. Walter (Chair) and Ronald A. Williams|
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 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 committee considers and determines Named Executive Officer compensation are described in the Compensation Discussion and Analysis included in this proxy statement.
Independence: Our board has determined that each member of the committee is independent and meets the additional independence requirements under the listing standards of the NYSE and our governance principles for service on the committee.
Compensation and Benefits Committee Interlocks and Insider Participation: None of the current members of the committee 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.
2015 Proxy Statement 14
Innovation and Technology Committee
|Members: Charlene Barshefsky, Theodore J. Leonsis (Chair), and Robert D. Walter|
The Innovation and Technology Committee was established by the board 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
|Members: Peter Chernin (Chair), Samuel J. Palmisano, Steven S Reinemund and Robert D. Walter|
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.
Independence: All members of the committee are independent directors as required by the listing standards of the NYSE and our governance principles.
Public Responsibility Committee
|Members: Charlene Barshefsky (Chair), Anne Lauvergeon, Theodore J. Leonsis, Richard C. Levin and Daniel L. Vasella|
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), funded solely by voluntary employee contributions. 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 U.S. political contributions, may be found at http://about.americanexpress.com/news/pap.aspx.
|Members: Ursula M. Burns, Richard C. Levin, Daniel L. Vasella and Ronald A. Williams (Chair)|
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 the risks facing the company; management’s execution of capital management; and liquidity planning. The committee meets regularly in executive session with the company’s Chief Risk Officer. The charter of the committee provides that the Chief Risk Officer has express authority to communicate directly at any time with the chair of the committee about any significant risk matter involving the company. Please see “Risk Oversight and the Board’s Role in Risk Oversight” below for a fuller description of the activities of the committee.
Independence: All members of the committee are independent directors under the listing standards of the NYSE and our governance principles.
2015 Proxy Statement 15
We use our comprehensive Enterprise-wide Risk Management (ERM) program to identify, aggregate, monitor and manage risks. The program also defines the company’s risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer.
Risk management is overseen by our board through three committees: the Risk, Audit and Compliance, and Compensation and Benefits committees. Each of these committees consists entirely of independent directors and provides regular reports to the board regarding matters reviewed at the committee level. In addition to the risks under the purview of a particular committee, the board monitors the “tone at the top” and risk culture of the company, oversees strategic risk, and reviews specific and aggregate risks the company faces from time to time. These board committees meet regularly in private sessions with our Chief Risk Officer, Chief Compliance & Ethics Officer, General Auditor and other senior management with regard to the company’s risk management processes, controls and capabilities.
The Risk Committee provides risk oversight on risk policies and risk management performance. The Risk Committee approves key risk management policies and monitors risk culture, talent, capabilities and outcomes. In particular, the Risk Committee approves our 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 policies governing the launch of new products and services, third-party management and resolution planning. The ERM policy defines the company’s risk appetite as well as governance over risk taking and risk oversight processes. Risk appetite defines the levels and types of risks the company is willing to assume to achieve its business plans while controlling risk exposures well within the company’s risk capacity. 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 control programs.
The Risk Committee reviews and concurs in the appointment, replacement, performance and compensation of the Company’s Chief Risk Officer. The Risk Committee receives regular updates from the global risk oversight teams that report to the Chief Risk Officer on key risks, transactions and exposures.
The Risk Committee reviews the company’s credit risk profile as well as credit risk performance, trends and risk management capabilities. The Risk Committee also reviews enterprise-wide operational risk trends, events and capabilities, with an emphasis on compliance, fraud, legal, process or control failures, information security, and privacy, as well as trends in market, funding, liquidity and reputational risks. The Risk Committee also provides 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, and resolution planning.
The Audit and Compliance Committee approves our compliance policies and risk tolerance and reinforces the importance of compliance risk management at the company. In addition, the Audit and Compliance Committee reviews the effectiveness of our 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 our independent registered public accounting firm and the performance of the Company’s internal audit services function; and the integrity of our systems of internal accounting and financial controls.
The Audit and Compliance Committee provides oversight of the Company’s internal audit group. The Audit and Compliance Committee reviews and concurs in the appointment, replacement, performance and compensation of the Company’s General Auditor and approves internal audit’s annual audit plan, charter, policies and budget. The Audit and Compliance Committee also receives regular updates on the audit plan’s status and results including significant reports issued by internal audit and the status of management’s corrective actions.
The Compensation and Benefits Committee works with the Chief Risk Officer to ensure the compensation programs covering the company overall, its business units and risk-taking employees, appropriately balance risk with incentives such that business performance is achieved without taking imprudent or uneconomic risks. Our Chief Risk Officer is actively involved in setting goals for the company and its business units. The Chief Risk Officer also 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 whether performance goals and 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 our Chief Risk Officer, which oversee risks. The ERMC is responsible for risk governance and oversight. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies across the company with approval by the appropriate board committee. The ERMC reviews key risk exposures, trends, and concentrations, significant compliance matters, economic capital and Basel capital trends, and provides guidance on the steps to monitor, control and report major risks.
As defined in the ERM policy, we follow the “three lines of defense” approach to risk management. The first line of defense comprises functions and management committees directly initiating risk
2015 Proxy Statement 16
taking. Business unit presidents, our Chief Credit Officer, Chief Operational Risk Officer, Chief Market Risk Officer and Functional Risk Officer are part of the first line of defense. The second line comprises independent functions overseeing risk taking activities of the first line. The Global Risk Oversight Officer and Market Risk Oversight Officer, the Chief Compliance & Ethics Officer, the Corporate Comptroller and certain control groups, both at the enterprise level and within regulated entities, are part of the second line of defense. The global risk oversight teams oversee the policies, strategies, frameworks, processes and capabilities deployed by the first line teams and act as a check to the first line of defense in managing risks. The Internal Audit Group constitutes the third line of defense, and provides independent assessments and effective challenge of the first and second lines of defense.
In addition, the Asset-Liability Committee (ALCO), chaired by the company’s Chief Financial Officer, is responsible for managing market, liquidity, asset/liability risk and capital.
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 control over financial reporting. The company’s independent registered public accounting firm is 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 registered public accounting firm the company’s audited financial statements. The Audit and Compliance Committee also has discussed with the independent registered public accounting firm 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 registered public accounting firm the written disclosures and letter required by applicable requirements of the PCAOB regarding the firm’s communications with the audit committee concerning independence, has discussed with the independent registered public accounting firm their independence from the company and its management, and has considered whether the independent registered public accounting firm’s provision of non-audit services to the company is compatible with maintaining the firm’s independence.
The Audit and Compliance Committee discussed with the company’s General Auditor and independent registered public accounting firm the overall scope and plan for their respective audits. Internal Audit is 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 General Auditor and independent registered public accounting firm, 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 2014 Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2014 for filing with the SEC.
AUDIT AND COMPLIANCE COMMITTEE
Daniel L. Vasella, Chairman
Steven S Reinemund
Ronald A. Williams
2015 Proxy Statement 17
At American Express, we believe that serving our communities is not only integral to running a business successfully; it is part of our responsibilities as citizens of the world. The mission of our corporate social responsibility program is to bring to life the American Express value of good corporate citizenship by supporting communities in ways that enhance the company’s reputation with employees, customers, business partners and other stakeholders. We do this by supporting visionary nonprofit organizations that are:
|•||Preserving and sustaining unique historic places for the future;|
|•||Developing new nonprofit leaders for tomorrow; and|
|•||Encouraging community service where our employees and customers live and work.|
We realize the importance of preserving cultural assets around the world and, over the years, American Express has contributed more than $50 million to historical preservation-related projects. This support has helped preserve iconic historic sites including the Rijks Museum in Amsterdam, the Frida Kahlo Museum in Mexico City, the National Theatre in London, the Schomburg Center in New York City and the Lockkeeper’s House on the National Mall in Washington, D.C.
Recognizing the difference that effective leadership can make, we also support programs that help nonprofit groups develop talent within their organizations so they are better prepared to tackle the important issues of today and tomorrow. Over 15,000 emerging nonprofit leaders worldwide have received professional development training through these programs in the past eight years.
By helping nonprofits increase their capacity to engage the public and our employees as volunteers, we have mobilized hundreds of thousands of volunteers across the globe. These projects address a wide range of causes including environmental stewardship, access to education, health and wellness, youth mentoring and efforts to supply basic needs in underserved communities. Included in these efforts are the company’s programs that engage our employees in charitable giving and community service.
In 2014, our volunteer program—Serve2Gether—engaged employees in more than 150,000 hours of company-sponsored volunteer service, and our employee giving campaign—Give2Gether—resulted in over $9 million in support of over 6,000 charitable organizations in the United States, Canada and India. Through our Serve2Gether consulting program, which engages our employees in short-term pro bono consulting projects, we delivered over 9,000 hours of consulting services to nonprofit organizations and social entrepreneurs around the world.
We also have a long history of helping people in times of trouble. American Express and its employees have provided humanitarian relief to victims of numerous disasters—including wildfires, floods, earthquakes, tsunamis and other disasters. In the last decade, American Express has provided assistance for over 50 disasters in more than 35 countries, including Japan, Haiti, the Philippines and Superstorm Sandy in the northeastern United States.
In keeping with our longstanding commitment to community service and corporate citizenship, we recognize our responsibility to help ensure the health of the environment and its well-being for generations to come. In the past few years, we have taken measurable actions to reduce our global carbon footprint, optimize the efficiency and sustainability of our workplace, support our customers in reducing their own environmental footprints, and encourage our suppliers and employees to act in more sustainable ways. Major goals and programs include:
|•||Reducing our carbon footprint by 10 percent by 2017 over 2011 levels.|
|•||Improving the environmental profile of our buildings. Seven of our largest facilities have been recognized by the U.S. Green Building Council and other international standards for environmental best practices.|
|•||Increasing the use of renewable energy. About 35 percent of the electricity used in the United States. is carbon-free, using a mix of wind, biogas, biomass and solar energy.|
|•||Reducing paper usage in our business processes and sourcing environmentally preferable paper, electronics and other commodities.|
|•||Engaging employees in our environmental responsibility programs.|
We have also been recognized for our progress in this journey.
|•||American Express ranked in the top 10 in the Financials category in the 2014 Newsweek Green Ranking.|
|•||The Environmental Protection Agency recognized American Express as a top user of sustainable energy, naming us number 50 on its annual National Top 100 list of the largest green power users in the United States.|
|Learn More About Corporate Responsibility at American Express. You may visit our corporate website at http://about.americanexpress.com/csr to learn how we, together with our Card Members and shareholders, are making a difference in our communities.|
2015 Proxy Statement 18
The table below shows how many American Express Company common shares certain individuals and entities beneficially owned on February 27, 2015. These individuals and entities include: (1) owners of more than 5 percent of our outstanding common shares; (2) our current directors and nominees; (3) the executive officers named in the Summary Compensation Table on page 40; and (4) all current directors, nominees 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. The stock equivalent units credited to the directors’ accounts as of December 31, 2014 are set forth in footnote 5 below.
|Number of Shares Owned||Right to Acquire||Percent of Class|
|Berkshire Hathaway Inc.|
|3555 Farnam Street|
|Omaha, NE 68131||151,610,700||(1)||—||14.9||%|
|Capital World Investors|
|333 South Hope Street|
|Los Angeles, CA 90071||56,629,860||(2)||—||5.6||%|
|55 East 52nd Street|
|New York, NY 10022||55,471,621||(3)||—||5.5||%|
|Douglas E. Buckminster||46,980||378,386||*|
|Ursula M. Burns||20,000||—||*|
|Jeffrey C. Campbell||25,000||—||*|
|Kenneth I. Chenault(7)||965,624||3,701,566||*|
|Edward P. Gilligan||174,644||931,006||*|
|Anne L. Lauvergeon||—||—||*|
|Michael O. Leavitt||—||—||*|
|Theodore J. Leonsis||20,000||—||*|
|Richard C. Levin||2,000||—||*|
|Samuel J. Palmisano||550||—||*|
|Steven S Reinemund||20,208||—||*|
|Stephen J. Squeri||140,681||795,070||*|
|Daniel L. Vasella||—||—||*|
|Robert D. Walter||230,300||—||*|
|Ronald A. Williams||27,500||—||*|
|All current directors, nominees and executive officers (28 individuals)(8)||2,155,593||7,576,576||.96||%|
|*||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, 2014, and information provided by Berkshire. Of the shares listed in the table, National Indemnity Co. and its subsidiaries beneficially owned 120,141,879 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 33.9 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.|
2015 Proxy Statement 19
|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.|
|(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, 2014.|
|(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, 2014. 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 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 Retirement Savings Plan (RSP) accounts on February 27, 2015, as follows:|
|Name||Number of Shares in Plan Accounts|
|All current executive officers||50,245|
|(5)||Does not include directors’ stock equivalent units (SEUs), which are counted toward satisfying the director stock ownership guidelines discussed on page 9. The balance in directors’ SEU accounts at December 31, 2014 is set forth below.|
|Name||Number of SEUs|
|(6)||These are shares that the named individuals have the right to acquire within 60 days upon the exercise of stock options or the vesting of restricted stock units 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.|
|(8)||On February 27, 2015, the current directors, nominees and executive officers beneficially owned 9,732,169 shares, or about 0.96 percent of our outstanding shares. No current director, nominee or executive officer beneficially owned more than 1 percent of our outstanding shares.|
2015 Proxy Statement 20
The Nominating and Governance Committee reviews director compensation. Our objectives are to compensate our directors in a manner that attracts and retains highly qualified directors and aligns the interests of our directors with those of our long-term shareholders. In 2014, the committee engaged an independent compensation advisory firm, Semler Brossy Consulting Group, to assist the committee in its review of the competitiveness and structure of the company’s non-management director compensation. The committee recommended an increase in director compensation, effective January 1, 2015, described below. The committee did not change the form of director compensation.
The following table provides information on the 2014 compensation of non-management directors who served for all or a part of 2014. We also reimburse directors for reasonable out-of-pocket expenses attendant to their board service.
|Fees Earned or||All Other|
|Paid in Cash||Stock Awards||Compensation||Total|
|Ursula M. Burns||$||120,000||$||155,000||$||53,919||$||328,919|
|Anne L. Lauvergeon||$||115,000||$||155,000||$||4,207||$||274,207|
|Theodore J. Leonsis||$||110,000||$||155,000||$||19,667||$||284,667|
|Richard C. Levin||$||115,000||$||155,000||$||23,262||$||293,262|
|Richard A. McGinn||$||98,750||$||155,000||$||34,061||$||287,811|
|Samuel J. Palmisano||$||105,000||$||155,000||$||5,011||$||265,011|
|Steven S Reinemund||$||115,000||$||155,000||$||23,262||$||293,262|
|Daniel L. Vasella||$||155,000||$||155,000||$||11,384||$||321,384|
|Robert D. Walter||$||150,000||$||155,000||$||66,841||$||371,841|
|Ronald A. Williams||$||160,000||$||155,000||$||49,439||$||364,439|
|(1)||Annual Retainers. For service in 2014, 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 lead independent 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 independent 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 2014 retainers into a cash account, a share equivalent unit account, or both, under the deferred compensation plan described below in footnote 2.|
|For service in 2015, the annual retainer for non-management directors will be $95,000; the annual retainer to the chair of the Nominating and Governance Committee will be $20,000; and the annual retainer to the lead director will be $25,000 (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).|
|Mr. McGinn retired from board service effective December 31, 2014.|
|(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) 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 May 12, 2014, the date of last year’s annual meeting, each non-management director elected to the board was credited with SEUs having a value of $155,000, which consisted of 1,778 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. For service in 2015, non-management directors will be granted SEUs having a value of $165,000.|
|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.|
2015 Proxy Statement 21
The balance in directors’ SEU accounts at December 31, 2014 is set forth in the table below. 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.
|Name||Number of SEUs|
|(3)||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 2014 in these amounts: Amb. Barshefsky $48,719; Ms. Burns $53,871; Mr. Chernin $26,989; Ms. Lauvergeon $4,158; Mr. Leonsis $11,618; Mr. Levin $23,213; Mr. McGinn $34,012; Mr. Palmisano $4,962; Mr. Reinemund $23,213; Dr. Vasella $6,336; Mr. Walter $42,343; and Mr. Williams $41,390.|
|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 2014, 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. This column includes the amounts matched for 2014.|
2015 Proxy Statement 22
Our executive compensation program is designed to reward our leadership team not just for delivering short-term results but also for driving 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.
We earned $5.9 billion in net income in 2014 in a challenging and competitive environment, up 10 percent from 2013. Our earnings per share rose 14 percent as our strong balance sheet allowed us to return a substantial amount of capital to shareholders though dividends and share repurchases. We delivered solid earnings while increasing spending on investments to help position our company for the long-term. Our revenues rose by 4 percent, lower than our long-term target of 8 percent, in part due to weaker than expected macroeconomic growth and a strengthening U.S. dollar. In addition, our return on average equity was 29.1 percent, compared with last year’s 27.8 percent. 2014 was another year of record spending on our network — an increase of 7 percent to a total of $1.02 trillion in 2014.
During 2014, we grew our worldwide loans by 5 percent and the credit quality of our portfolio remained industry-leading. We used gains from the business travel joint venture transaction and the sale of our investment in Concur to continue to invest in our business (e.g., marketing and promotion up by 9 percent), while controlling our operating expense levels.
Our 2014 stock performance trailed the S&P 500 and the S&P 500 Financials indices, but our three-and five-year returns were better than both of these indices. We maintained our commitment to customers and remained committed to our control, compliance, and risk management goals.
ON AVERAGE, OVER TIME FINANCIAL TARGETS
We seek to achieve three financial targets, on average and over time:
• EPS growth: 12-15%
• Revenue growth: at least 8%
• ROE: 25% or more
2014 Results Against Targets
3 The growth rate of adjusted revenues is a non-GAAP measure. See footnote 1 on page 6.
2015 Proxy Statement 23
American Express shares delivered a total return of 4%, 104%, and 145% over a period of one-, three-, and five-years, respectively. Over a five-year period, American Express shares substantially outperformed both the S&P 500 and the S&P 500 Financials indices.
TOTAL SHAREHOLDER RETURN
Total Shareholder Return 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 annually).
CEO 2014 Pay At-A-Glance
In January 2015, the Compensation and Benefits Committee (Compensation Committee) awarded Mr. Chenault Total Direct Compensation (TDC) of $25,100,000 for performance year 2014, 3 percent higher than his 2013 compensation. A significant portion (about 74 percent) of Mr. Chenault’s total compensation is deferred (some until one year after retirement) and is in the form of restricted stock units, stock options and a portfolio grant, the value of which will depend on the company’s future share price, as well as achievement of financial and other performance targets. 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:
|•||EPS of $5.56 against 2014 target range of $5.36 to $5.56; 14 percent higher than 2013 EPS|
|•||Total revenues net of interest expense rose 4 percent (5 percent on an adjusted basis4) to $34.3 billion, compared to 2014 target of 6-7 percent|
|•||ROE of 29.1 percent against 2014 target of 25 percent or more; 130 basis point improvement over 2013 ROE|
|•||Mr. Chenault’s overall leadership contributions to the success of American Express|
Mr. Chenault’s TDC comprises the following:
|Base Salary||$||2,000,000||Unchanged since 2010|
|Annual Incentive Award (AIA)|
|Restricted Stock Units (RSUs)||$||3,600,000||RSUs vest after one year and 50% of net shares are subject to retention until one year after retirement|
|Stock Options (SO)||$||2,563,000||Stock Options vest after three years|
|Performance-based RSUs||$||7,312,000||RSUs vest based on 2015-17 ROE performance (see page 27 for more information)|
|Portfolio Grant (PG)||$||5,125,000||Final payout based on 2015-17 performance (see page 27 for more information)|
|Total Direct Compensation||$||25,100,000|
About 74% of total pay is deferred and
subject to future company performance.
4 The growth rate of adjusted revenues is a non-GAAP measure. See footnote 1 on page 6.
2015 Proxy Statement 24
Our Pay and Performance Alignment
Our performance assessment framework and pay program are designed to link pay and performance. About 89 percent of the TDC delivered to our CEO and other Named Executive Officers (NEOs) for performance year 2014 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. Compensation is delivered in the form of base salary, AIA, PG awards, and Long-Term Incentive Awards (LTIAs, which include SOs and Performance RSUs). A full description of our forms of compensation is on page 27.
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
|Directly link pay outcomes to company and share performance|
|Defer a significant portion of our NEOs’ total pay, so that it is subject to future company performance|
|Use a structured approach for CEO compensation decisions|
|Maintain ongoing dialogue with shareholders and incorporate feedback in our compensation programs|
|Apply sizable stock ownership guidelines for NEOs, including a requirement that the CEO hold a portion of his shares through one year after retirement|
|Discourage imprudent risk taking, including Chief Risk Officer review of goals and results to certify that actual results were achieved without taking imprudent risks|
|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)|
|Prohibit executive officers from pledging shares subject to stock ownership guidelines, and limit the number of other shares they may pledge|
|In-depth review of CEO’s and NEOs’ goals and performance by an independent Compensation Committee with support from its independent compensation consultant|
|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|
|Subject cash incentives and equity awards to recoupment and forfeiture provisions|
|Evaluate management succession and leadership development efforts|
|Maintain a cap on CEO incentive compensation payments (125 percent of target)|
|Require termination of employment in addition to a change in control for accelerated equity vesting (known as “double trigger”)|
|Include criteria in incentive compensation plans to support tax deductibility for the company|
WHAT WE DO NOT DO
|No employment contracts with NEOs|
|No payment of dividends or dividend equivalents on RSUs until they vest|
|No excise tax gross-ups upon a change in control|
|No repricing of underwater stock options without shareholder approval|
|No individual change in control arrangements|
* The proportions of each pay element shown for performance year 2014 may change in the future based on performance or other considerations.
2015 Proxy Statement 25
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|
|• Deferring a majority of incentive compensation for three or more years|
|• Requiring executive officers to have significant outright ownership of company shares|
|Pay for Performance||Provide a strong link between pay and performance by:|
|• Reviewing performance from both a financial and a strategic perspective, through the use of performance measures that are 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 2014 Advisory Vote on Executive Compensation
We have benefited from shareholder feedback about executive compensation through our Say on Pay votes for the past six years. Our Say on Pay proposal received 97.7 percent support in 2014. At the direction of our Compensation Committee, every year we also reach out to our largest shareholders to discuss our executive compensation program, 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, requiring the CEO to retain a portion of shares granted until after retirement, changes to our peer group, enhancements to the process the Compensation Committee uses to determine CEO compensation, and 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.
2015 Proxy Statement 26
|Pay Element||What It Does||Performance Measures|
• Provides competitive fixed pay
• Balances risk-taking concerns with pay for performance
|• Job scope and experience, market pay|
• Provides a competitive annual incentive opportunity
• Aligns with individual, business unit and company performance
The goals established in the first quarter of 2014 include
• Annual Service Profit Chain goals (shareholder, customer, employee), including EPS, revenue, ROE and billed business growth
• 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, which allows exercise of Compensation Committee judgment
• Provides cash incentive, earned based on achievement of specific performance metrics
• 3-year performance period (2015–2017)
• 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
• Aligns payout with share price
• Ties payout to our publicly stated ROE target of 25%
• 3-year average ROE (2015–2017), with target based on publicly disclosed on average, over time target of 25%***
• Payout range is 0–125% as follows:
|• 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 performance outcomes 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 PG2012-14 award granted in 2012. The company does not disclose the goals at the time of the grant because of competitive sensitivity.
** We use the S&P 500 Index as a benchmark to review our relative stock price performance. The S&P 500 Index is a market-cap weighted index, which we believe provides a reasonable basis to review our performance because while we compete both with networks and issuers, our “closed-loop” network and “spend-centric” business model are unique among our direct competitors.
*** We use the 25 percent ROE as a performance measure to track progress against our publicly disclosed on average and over time financial target of 25 percent or more. Other measures (e.g., EPS) are also used under the company’s programs to provide a balanced view of performance.
2015 Proxy Statement 27
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 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.
How We Select the Company Peers
The Compensation Committee periodically reviews the composition of our peers in response to shareholder feedback as well as changes to our business model. In selecting the current peer group, 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:
|•||Iconic global consumer brands|
|•||Other credit card businesses|
|•||Technology companies with an emphasis on payments or network systems|
The actual number of companies in each category varies, taking into account factors such as revenue size and direct business and talent competitors. No changes were made to our peers in 2014 because the Compensation Committee believes that the companies below continue to be a reasonable group to benchmark competitive practices.
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 seven meetings over the course of 2014, six 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
The Compensation Committee retained Semler Brossy Consulting Group (Semler Brossy) as its independent compensation consultant. During 2014, the compensation consultant 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 2014, Semler Brossy also provided outside director compensation advice to the Nominating and Governance Committee. The Compensation Committee assessed the independence of Semler Brossy pursuant to SEC rules and concluded that their work for the Compensation Committee did not raise any conflicts of interest.
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 the Compensation Committee does not rely on a formula or specific matrix for making pay decisions, the Compensation Committee believes its process provides accountability for performance against goals and enables the Compensation Committee to effectively assess the quality of the performance and leadership demonstrated by the management team. Importantly, the process also differentiates among each individual’s performance and motivates short-term and long-term results as well as innovation and business transformation.
2015 Proxy Statement 28
The Compensation Committee’s Process
The Compensation Committee follows the process outlined below to determine NEO compensation:
|Q1 | ending 3/31/2014|
|•||Set the metrics and goals for the CEO performance assessment framework|
|•||Set the other NEOs’ performance objectives|
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 & Ethics Officer.
|2014||Q3 | ending 9/30/2014 & Q4 | ending 12/31/2014|
|•||Review the company’s performance|
|•||Assess progress toward NEO objectives|
|•||Discuss program changes in light of feedback from shareholders, regulatory guidance, and external trends|
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.
|Q1 | ending 3/31/2015|
|•||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. Finally, 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.
2015 Proxy Statement 29
CEO Pay – Process and Decisions
In 2013, the Compensation Committee enhanced the framework used to determine the CEO’s TDC. The same framework was used to evaluate 2014 performance and determine the CEO’s compensation. Under this framework, the Compensation Committee evaluated the CEO’s performance based on the 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, employees, and customers. Goals are determined to reflect our rigorous on average and over time financial targets, incorporate significant business metrics, address the importance of employee engagement, diversity and customer service in creating sustainable value, and drive our future growth.
|Shareholder Goals||Employee Goals||Customer/Strategic and|
• Profit/return (EPS, ROE);
• Growth (revenue growth, billed business growth); and
• Cost containment (operating expense growth and lending write-off rates)
See page 31.
• Succession planning for key roles
• Improved workplace culture
• Improved workplace diversity
• Validation of program efficacy through external recognition
• Revenue diversity (e.g., obtaining new sources of revenue)
• International expansion (e.g., billed business growth and net income contribution from outside the United States)
• Customer service as well as customer segment expansion, including creating value propositions for new groups of customers as well as customers who are underserved by other service providers
• Expansion of our commerce-related and digital businesses (e.g., expansion of digital and mobile offerings such as Pay with Points)
These goals are evaluated considering our relative performance as compared to the performance of our peers as well as our risk goals:
|Relative Performance||Risk/Control and Compliance Goals|
As compared to companies listed on page 28:
• Financial measures (e.g., EPS, revenue growth, ROE)
• Stock price performance
• Also review specific performance measures (such as write-off rates and fraud rates) against industry peers (e.g., large U.S. issuers)
• We believe it is crucial to embed compliance and risk management in all our business processes, including goal setting and performance evaluation
• The framework adopted by the Compensation Committee considers compliance and risk management goals (acceptable return on economic capital, credit and fraud write-off rates, the promotion of error-free products and processes, and our risk/ control and compliance environment) in evaluating performance
• The Compensation Committee meets with the Chief Risk Officer to consider risk results when reviewing performance
2015 Proxy Statement 30
The Compensation Committee did not make any changes to Mr. Chenault’s target compensation, which remained at the 2013 level. 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:
|Portfolio Grant Award||$||5,125,000|
|Equity (Performance RSUs and Stock Options)||$||8,250,000|
Phase 3 below provides information on steps taken by the Compensation Committee to determine AIA and LTIA for performance year 2014 for Mr. Chenault.
Mr. Chenault’s base salary was fixed at $2 million (unchanged since 2010).
The Compensation Committee could grant 0 percent to 125 percent of the target amounts, 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 framework allows the Committee to adjust the final performance score downwards or upwards (but not exceeding the 125 percent maximum) by 5-10 percent to specifically reflect any risk/control and compliance assessments.
Phase 3—Score CEO Performance and Set Final TDC
In January 2015, the Compensation Committee awarded Mr. Chenault TDC of $25,100,000 for performance year 2014, 3 percent higher than his prior year’s compensation. The Compensation Committee considered solid 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 steps:
Step 1 – Determine AIA
|=||FINAL AIA DECISION|
In January 2015, the Compensation Committee reviewed performance against the CEO goals (see below) and decided to provide an AIA award of $8.1 million (about 120 percent of target).
|EPS||$5.56||$5.36-$5.56||Actual EPS was at the upper end of 2014 target range;|
2013 EPS was $4.88
|5%||6% to 7%||Adjusted revenue growth outpaced many large issuing peers.|
|ROE||29.1%||25.0% or more||2013 ROE was 27.8%|
|Billed Business Growth||8.6%
|0%||Less than 3%||Above target|
|Write-Off Rate||1.5%||1.9%||Above target|
• Customer Service exceeded target (as measured by the “Recommend to a Friend” score)
• Renewed several key co-brand relationships with broad ties to American Express programs
• One-year TSR lagged the S&P 500 and S&P 500 Financials indices, but we outperformed both indices over the last three- and five-year periods
• Successfully executed the business travel joint venture transaction resulting in a net gain of $626 million (pretax). This gain along with a $719 million gain (pretax) from the sale of our investment in Concur allowed us to make additional investments to gain momentum for the moderate to long-term
|5||The growth rate of adjusted revenues is a non-GAAP measure. See footnote 1 on page 6.|
|6||See footnote 2 on page 6.|
|7||The growth rate of adjusted total operating expenses, a non-GAAP measure, excludes Q3-Q4 ’13 global business travel operating expenses, Q2 ’14 global business travel joint venture gain and transaction related costs, Q2 ’14 American Express Foundation contribution and Q2 ’14 and Q4 ’14 restructuring charges from total operating expenses. Reported operating expense was lower by 6 percent year-over-year. Refer to Annex A for reconciliation of the adjusted growth rate and its components.|
2015 Proxy Statement 31
• Succession planning for key roles aligned with board expectations; incorporated 360º feedback reviews for senior executives
• Diversity targets and talent measures were above target
• We continued to be recognized as a global Employer of Choice. Recognized on 11 U.S. surveys as an employer of choice, including Working Mother and Fortune; internationally recognized in four countries as a top employer
(25% overall weighting)
• Initiated or expanded initiatives, such as Amex EveryDay, Loyalty Partner, American Express Serve, and international card products
• Maintained our ongoing focus to increase revenues from new businesses, such as e-commerce and performance marketing including Loyalty Partner and our Enterprise Growth Group
• Grew or maintained market share in a number of international markets
• Successfully launched Amex EveryDay to continue our customer segment expansion through our proprietary products
• Made significant progress toward new merchant acquisition, including launching OptBlue and signing several perception changing merchants (e.g., Dollar General)
• Enterprise Growth Group introduced new tools to the customer bases of both American Express Serve and Bluebird; also, expanded the availability of American Express Serve and the Serve cash reload network over the past year
• Continued progress toward goal of becoming a facilitator of commerce by connecting buyers and sellers in creative ways, while providing exceptional value to both. For example, eligible U.S. Card Members can now use points at McDonald’s and Uber, we entered into a partnership with Intuit to deliver ReceiptMatch with QuickBooks, and launched the Walmart Savings Catcher program with the Bluebird product
The Compensation Committee also reviewed the following relative performance against our major competitors:
|•||Our revenue growth outperformed a number of our large U.S issuer peers, but lagged the networks and our share of U.S. credit network volumes declined slightly|
|•||Our write-off rate remained exceptional and we led our major competitors by a wide margin|
|•||We continued to have the best-in-industry fraud rates|
|•||Our U.S. card segment’s income growth rate in 2014 was better than many of our large U.S. issuer peers|
|•||Our U.S. loan growth rate outperformed the industry growth rate|
|•||Our U.S. billed business growth rate was 8.0 percent as compared to a weighted-average growth rate of 8.4 percent (estimated) for our large U.S. issuer peers|
|•||Our one-year stock price lagged the S&P 500 and S&P 500 Financials indices, but we outperformed both indices over the last three and five years|
|•||As compared to the peers identified by the Compensation Committee and available performance data, our financial performance (EPS, revenue growth, ROE) was above median over the last one- and three-year periods, while our stock performance was below median|
The Compensation Committee approved a total AIA of $8,100,000 (about 120 percent of target) payable in a combination of cash and restricted shares. The cash payment is subject to clawback considering 2015 performance and the CEO is required to retain a portion of restricted shares until one year after retirement. The Compensation Committee considered the above mentioned Shareholder, Employee, and Customer/Transformation results as well as the company’s relative performance against our major competitors. In doing so, the Compensation Committee reviewed the risk assessment and certification performed by the Chief Risk Officer that the company’s 2014 results were achieved by taking economic and controlled risk, without taking imprudent risks.
Step 2 – Determine LTIA
Based on the company’s 2014 performance (as assessed in Step 1 above), the Compensation Committee awarded Mr. Chenault Portfolio Grant awards of $5,125,000 (equal to 100 percent of target), and equity awards of $9,875,000 (equal to 120 percent of target). Actual payouts under these awards will be based on future performance (2015-2017) and shareholder outcomes. See page 27 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 the CEO’s TDC of $25.1 million—an increase of 3 percent from his 2013 performance year TDC. Further, to provide more emphasis on the company’s stock performance, the Compensation Committee determined that $3.6 million of Mr. Chenault’s AIA should be paid in RSUs instead of cash and a portion of these RSUs are subject to retention until one year after retirement. Overall, about 74 percent of the CEO’s TDC is subject to future performance of the company, including stock price performance.
2015 Proxy Statement 32
CEO Total Direct Compensation
|Note Regarding 2014 TDC Decisions and Summary Compensation Table|
|It is important to recognize that the way the Compensation Committee presents TDC in the charts that follow is different from the SEC-required disclosure in the Summary Compensation Table (SCT) and is not a substitute for the information in that table (shown on page 40). The Compensation Committee makes compensation decisions every January for the just completed performance year using the most recent performance information. For example, in January 2015, the Compensation Committee evaluated 2014 performance and made compensation decisions for 2014. These decisions are shown below.|
|There are two principal differences between the SCT and the charts below:|
|•||First, the SCT shows equity awards granted in January 2014 for 2013 performance as 2014 compensation, whereas the chart below shows January 2015 equity awards as 2014 compensation.|
|•||Second, the SCT shows RSUs granted in January 2014 as part of Mr. Chenault’s AIA for 2013 performance as 2014 compensation, whereas the chart below shows the AIA awards granted in January 2015 for 2014 performance as 2014 compensation, regardless of payout form and timing.|
|In summary, it is essential to understand that the main difference between the SCT and the chart below is the timing of disclosure related to equity and cash awards.|
CEO Total Direct Compensation ($ Millions)
Mr. Chenault’s TDC for 2014 performance was $25.1 million — a 3 percent increase from his 2013 TDC. About 74 percent of TDC is subject to future performance of the company, including stock price performance.
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 its 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|
2015 Proxy Statement 33
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 2014.
EDWARD P. GILLIGAN, PRESIDENT
Mr. Gilligan has served as 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 2014 achievements included:
|•||Drove year-over-year growth and continued best in class credit performance across his businesses in support of the company’s overall financial results|
|•||Served new customer and merchant segments through the launch of new card products and issuing partnerships, new approaches to merchant acquisition and the continued expansion of Loyalty Partner|
|•||Re-signed several major co-brand relationships|
|•||Facilitated digital commerce through the launch of multiple new capabilities and partnerships|
|•||Continued to strengthen our Global Banking capabilities in support of our compliance and regulatory objectives|
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 organization and our global business travel joint venture, as well as Global Services, our shared services organization consisting of World Service, Global Business Services, Technology, Global Credit Administration and Global Security. His 2014 achievements included:
|•||Led the successful execution of the global business travel joint venture to accelerate the growth and transformation of the corporate travel business which led to a $626 million (pretax) gain for the company|
|•||Delivered solid financial results including robust year-over-year earnings growth in our Global Corporate Payments business as well as continued strong expense management|
|•||Delivered superior customer service, as evidenced by improved customer satisfaction metrics|
|•||Enabled multiple capabilities across the company that yielded significant progress against our business objectives|
|•||Improved operational efficiency and effectiveness through continued globalization and consolidation of key processes and functions|
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 and Corporate Development organizations and representing American Express to the financial community. His 2014 achievements included:
|•||Effectively communicated the company’s business and financial information to regulatory bodies and the financial community|
|•||Assisted in achieving operational cost targets aligned with the company’s risk-balanced plan|
|•||Ensured a strong financial and regulatory reporting control environment|
|•||Continued to enhance planning processes consistent with regulatory requirements and managed the company’s CCAR and Basel processes to achieve the company’s capital, funding and liquidity plans|
|•||Exhibited leadership that impacted the company’s strategic and financial decisions|
DOUGLAS E. BUCKMINSTER, PRESIDENT, GLOBAL NETWORK AND INTERNATIONAL CARD SERVICES
Mr. Buckminster has served as the President, Global Network and International Card Services since February 2012. His 2014 achievements included:
|•||Delivered solid financial results with significant progress in the proprietary issuing, network and coalition loyalty businesses across international markets|
|•||Implemented effective business transformation initiatives and drove significant efficiencies|
|•||Allocated strategic investments in digital capabilities and emerging businesses that will be instrumental to future growth of the franchise|
|•||Continued Global Network Services growth through the launch of new partnerships and products, including US Bank and Wells Fargo in the U.S., and Barclaycard in the UK|
|•||Led growth in the coalition loyalty business (Loyalty Partner) with strong year-over-year increases in revenue and total collectors, launch of new co-brand products and expansion into Italy|
2015 Proxy Statement 34
NEOs TDC Decisions ($000s)
The Compensation Committee’s TDC decisions for performance year 2014 are reflected in the table below. Overall, January 2015 TDC was higher than January 2014 TDC as a result of the company’s financial results and the NEOs’ performance.
|E.P. Gilligan||S.J. Squeri||J.C. Campbell||D.E. Buckminster|
|PG (target value)||$||1,600||$||1,325||$||1,500||$||900|
|(up 6% from||(up 13% from||(N/A**)||(up 5% from|
|January 2014)||January 2014)||January 2014)|
* Similar to the CEO’s equity awards, other NEOs received RSUs that are earned based on three-year average (2015-2017) ROE performance. For the total equity awards, an equal number of shares were delivered in the form of performance-vested RSUs and stock options. Mr. Squeri’s RSU grant includes a special award ($1,250,000) for his extraordinary results on executing the global business travel joint venture that resulted in a pretax gain of $626 million, American Express delivering superior customer service, as evidenced by improved customer satisfaction metrics, the technology transformation, and expense management. This special award vests after two years based on positive cumulative company net income (2015-2016).
** Mr. Campbell joined the company in July 2013.
A significant portion (about 89%) of these
four NEOs total compensation is deferred and subject to
future performance of the company, including stock price performance.
Offer Letter – Mr. Campbell
In connection with his employment offer letter with the company entered into in June 2013, Mr. Campbell is entitled to a sign-on cash award of $4,000,000 payable over a period of two years (2014 and 2015) to replace a portion of long-term incentives he forfeited at his prior employer as a result of joining the company. Additional information on his sign-on cash award is provided on page 50 in the Potential Payments Upon Termination of Employment/CIC table.
2015 Proxy Statement 35
Portfolio Grants Awarded in January 2012 – Payout Based on 2012-2014 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 2012 for the three-year performance period ending December 2014 (PG2012-14). In January 2015, the Compensation Committee determined the final payout for these Portfolio Grant awards at 105.9 percent of target. The performance metrics for PG2012-14 are shown below along with the results achieved during the period:
|Metric And Weighting||Performance Goals*||Contribution|
|Cumulative EPS (20%)||18.4%|
|TSR vs. S&P 500 (30%)||37.5%|
|Strategic Milestones (50%)||50%|
|Consumer, Small Business, Merchant, and|
|Network Services Businesses|
|• International Net Income (cumulative)||$5.2 billion|
|• Global online spend growth||10% or above||Overall, at or above target based on financial performance and Compensation Committee evaluation|
|• Deliver superior service (measured by Global “Recommend to a Friend” score)||4.5 percentage point improvement|
|• Average annual growth of Global Payment Options revenue||At market growth rate|
|• Attract new and diverse customers||Compensation Committee judgment|
The NEOs’ PG2012-14 grants resulted in the following payouts:
|Executive||Grant Amount||(Q1 2015) Payout|
The grant amounts of PG2012-14 were included in the Grants of Plan-Based Awards table in the 2013 proxy statement. The cash payouts made in February 2015 are included in the Summary Compensation Table on page 40 (non-equity incentive plan compensation for 2014). For Mr. Chenault, the 2015 payout was made solely in the form of RSUs that vest one year after the grant. Accordingly, the grant amount of these RSUs will be included in the Summary Compensation Table next year in the stock awards column.
* 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 based on actual performance against goals as well as at the discretion of the Compensation Committee.
** Mr. Chenault’s payment was in the form of RSUs granted in January 2015 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.
2015 Proxy Statement 36
RSUs Awarded in January 2012 – Vesting Based on 2012-2014 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 chart). Performance RSUs were awarded in January 2012 for the three-year performance period ending December 2014.
Given that average ROE for years 2012 to 2014 was above target at 26.7 percent (23.1 percent for 2012, 27.8 percent for 2013, and 29.1 percent for 2014), the Compensation Committee awarded a payout of 102.8 percent of target. This resulted in the vesting of the following number of shares for the NEOs:
|Target Number of|
* In addition to these amounts, deferred dividends were paid on the target number of shares in the first quarter of 2015. Mr. Campbell joined the company in July 2013 and did not receive a January 2012 performance-based RSU.
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 measures 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. Our incentive plans are not overly leveraged (i.e., there is a cap on the maximum payout).|
|•||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 38), including the retention of a portion of net shares for one year after stock option exercises and RSU vestings.|
2015 Proxy Statement 37
Consistent with past practice, annual cycle LTIA awards were granted to NEOs in January 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.
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.
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.
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.|
In addition, 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. Once the legislation is proposed, 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. Pursuant to our policy, the company recovered over $14 million (including related taxes) from the former Group President of Enterprise Growth Group when he left the company to join a competitor in 2014.
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:
|NEO||Target Number of Shares||Before Target Met||After Target Met|
|E.P. Gilligan||75,000||75% of net shares until||50% of net shares for|
|S.J. Squeri||75,000||target number of shares||one year|
|J.C. Campbell||75,000||is met|
|*||In addition to these requirements, Mr. Chenault is required to hold, one year beyond his retirement from the company, a significant portion of his 2010-2014 year-end AIA and Portfolio Grant payouts delivered in RSUs.|
With the exception of Mr. Campbell, who was hired in 2013, all our NEOs own more than the target number of shares. Mr. Chenault beneficially owned 881,980 shares as of December 31, 2014 with estimated value of $82,059,419 using the company’s closing stock price on the same day.
2015 Proxy Statement 38
Hedging 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.
NEOs receive retirement benefits through the following plans:
|•||Retirement Savings Plan (RSP): A qualified 401(k) savings plan available to all eligible employees.|
|•||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 one times the base salary.
NEOs (except 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 47 and under Nonqualified Deferred Compensation on page 48.
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. 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.
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:
|•||All LTIAs granted after December 31, 2010 require employment termination (“double trigger”) following a CIC before these awards will vest.|
|•||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 49.
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
Samuel J. Palmisano
Ronald A. Williams
2015 Proxy Statement 39
The following Summary Compensation Table (SCT) summarizes the compensation of our NEOs for the year ended December 31, 2014, using the SEC-required disclosure rules. It is important to recognize that 2014 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 2014.
|Stock||Option||Incentive Plan||Compensation||All Other|
|Name||Year||($)||($) (1)||($) (2)||($) (2)||($) (3)||($) (4)||($) (5)||($)|
|Chief Executive Officer||2013||$||2,000,000||$||6,000,000||$||10,486,267||$||2,079,871||$||0||$||125,658||$||1,145,624||$||21,837,420|
|Group President Global|
|Executive Vice President and Chief Financial Officer||2013||$||461,538||$||1,600,000||$||5,508,922||$||1,990,889||$||0||$||0||$||907,771||$||10,469,120|
|President, Global Network and International Card Services|
|*||For Mr. Campbell, 2013 amounts in the table above reflect partial year compensation as he was hired in July 2013.|
|(1)||The amounts in this column reflect AIA cash payments made for annual performance. For Mr. Chenault, $3,600,000 out of $8,100,000 of his 2014 AIA is paid in the form of RSUs granted in January 2015 that vest one year from the grant date. 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). For Mr. Campbell, this amount also includes a $2,000,000 sign-on cash payment made in accordance with his employment offer letter to replace a portion of long-term incentives he forfeited at his prior employer as a result of joining the company.|
|(2)||Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718. Additional details on accounting for stock-based compensation can be found in Note 11 “Stock Plans” to our Consolidated Financial Statements contained in our 2014 Annual Report to Shareholders.|
|A significant portion of Mr. Chenault’s total direct compensation is delivered in the form of equity that is deferred. The table below provides detail on the RSUs included in the stock awards column:|
|Annual RSU award granted in January for performance in the prior year*||$||6,789,197||$||6,170,078||$||6,090,046|
|Portion of AIA awarded in RSUs in January for performance in the prior year*||$||1,949,920||$||2,624,955||$||6,624,980|
|Payment of PG award in the form of RSUs. Amount in column reflects the RSUs granted in||$||3,689,997||$||1,691,234||$||6,149,959|
|January with respect to PG awards whose performance periods ended the prior year|
|*||For example, 2014 amount shows RSUs awarded in January 2014 for 2013 performance.|
2015 Proxy Statement 40
|With respect to the RSU awards, for Mr. Chenault the amount in the Summary Compensation Table reflects the aggregate value of all the awards set forth in the immediately preceding table, including the target value of his annual RSU award assuming that target performance is achieved against the average ROE target during the three-year performance period ($6,789,197). For all other executives, the amount in the Summary Compensation Table reflects only the target value of their annual RSU awards assuming that target performance is achieved against the average ROE target during the three-year performance period.|
|For each executive’s annual RSU award, the maximum value as of the grant date assuming the highest level of performance will be achieved, is as follows: Messrs. Chenault ($8,486,475), Gilligan ($3,412,750), Squeri ($2,843,958), Campbell ($2,275,166) and Buckminster ($1,228,555).|
|(3)||For 2014, the amounts in this column reflect the cash payment made to the NEO in respect of payment toward the PG2012-14 awards granted in 2012, in accordance with award terms. For Mr. Chenault, the 2014 amount excludes payment of $5,427,375, which was made in the form of RSUs granted in January 2015 that vest one year from the grant date. One-half of these RSUs are payable in cash and the other half are payable in shares (which must be held until one year after retirement).|
|(4)||The amounts in this column reflect the actuarial increase or decrease in the present value of the NEOs’ benefits under all defined benefit pension plans established by the company. Over 90 percent of this amount includes the impact of change in interest rates and the NEO’s change in age during the year, which is used to measure the present value. When interest rates fall, as they did during 2014, the present value of this benefit will increase, but this increase does not represent any additional benefit to the executive.|
|(5)||See the All Other Compensation Table below for additional information|
ALL OTHER COMPENSATION TABLE
|Perquisites and||Contributions to||Dividends|
|Other Personal||Tax Payments/||Defined||Executive Life||and Dividend|
|Name||Year||($) (1)||($) (2)||($) (3)||($) (4)||($) (5)||($)|
|(1)||See the Perquisites and Other Personal Benefits table below for additional information regarding the components of this column.|
|(2)||For Mr. Buckminster, the amount shown in this column includes tax equalization payments and/or reimbursements that have been made to him in connection with his international assignment in London, which ended in June 2014. 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. 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. The amounts shown have been reduced to reflect the company’s retention of certain amounts related to home country taxes from Mr. Buckminster’s compensation. There are trailing payments and/or reimbursements made after the end of the period of assignment to address any foreign tax obligations relating to income received, awarded, or earned during the assignment. For Mr. Campbell, the 2013 amount is for tax payments made directly to 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 47-49 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)||For 2014, this column reports dividend equivalents received while RSUs were still unvested. Beginning with awards granted in 2011, dividend equivalents on unvested RSUs granted to executive officers will be paid only if and when the underlying shares vest. As per the disclosure requirements, the 2014 amount excludes dividend equivalents paid to Messrs. Chenault ($392,330), Gilligan ($115,196), Squeri ($79,446) and Buckminster ($47,667) on RSUs vested in 2014 since these dividends were factored in the grant date fair value of the award included in the Summary Compensation Table in the year of grant.|
2015 Proxy Statement 41
PERQUISITES AND OTHER PERSONAL BENEFITS
|and Other||Use of||Flexible||Home||During|
|Name||Year||($) (1)||($) (2)||($) (3)||($) (3)||($) (3)||($) (4)||($) (5)||($) (6)||($) (7)||($)|
|(1)||For 2014, 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. Mr. Campbell’s 2014 amounts are in connection with personal travel to attend a business meeting in accordance with appropriate approvals.|
|(3)||The amount in these columns reflect the perquisite allowance paid to the NEOs and home security and security during personal trips for Mr. Chenault.|
|(4)||The amount shown includes expatriate services and allowances in connection with Messrs. Gilligan and Buckminster’s repatriation to the United States, due to their international assignments. The services received by Messrs. Gilligan and Buckminster 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.|
|(5)||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.|
|(6)||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.|
|(7)||This column reports the total amount of other perquisites and personal benefits provided, none of which individually exceeded the greater of $25,000 or 10 percent of the total amount of all perquisites and other personal benefits reported for the NEO. These other benefits consist of office parking, reimbursement for certain information technology, cost of certain meals from the company’s dining facilities and premiums for Director’s Charitable Award Program life insurance (for Mr. Chenault only). In addition to the perquisites and other benefits described in the table and footnotes above, our NEOs also receive occasional secretarial support with respect to personal matters and may, on occasion, use the company’s tickets for sporting and entertainment events for personal rather than business purposes. We incur no incremental cost for the provision of such additional benefits.|
2015 Proxy Statement 42
The following table provides information on SO, RSU and PG awards granted to each of our NEOs in 2014 under the 2007 Plan.
|Estimated Future Payouts under||Estimated Future Payouts under||Grant Date|
|Non-Equity Incentive Plan Awards (2)||Equity Incentive Plan Awards (2)||Exercise Price or||Fair Value|
|Base Price of||of Stock and|
|Grant||Approval||Threshold||Target||Maximum||Threshold||Target||Maximum||Option Awards||Option Awards|
|Name||Award Type (1)||Date||Date||($)||($)||($)||(#)||(#)||(#)||($/sh) (3)||($) (4)|
|(1)||PG Awards. These awards link compensation to our financial and strategic performance over a three-year performance period. The goals for the performance period are based 50 percent on financial and stock performance metrics and 50 percent on strategic milestones. The company discloses the specific performance metric goals as well as the performance outcomes of each PG award at the end of the performance period so that shareholders can assess the appropriateness thereof. The company does not disclose the goals at the time of grant because of competitive sensitivity. The potential award payout is determined based on a table of possible performance and earned payout levels, including a cap on the overall earned payout level. The actual payout could be higher or lower than the notional target value based on actual performance.|
|Restricted Stock Units. Except as specified otherwise, RSU awards will vest on the third anniversary of the grant date in an amount determined by performance against the average ROE target during the three-year performance period.|
|65,096 RSUs granted to Mr. Chenault are in connection with his 2013 AIA and the final payout of PG2011-13 and will vest on the first anniversary of the grant date subject to the performance hurdle of positive Net Income over the vesting period. One half of these RSUs is payable in cash and the other half is payable in shares (which must be held until one year after retirement). Dividend equivalents on RSUs will accrue but will not be paid unless and until the underlying shares vest.|
|Stock Options. The SOs have a ten-year term and 100 percent of these shares become exercisable on the third anniversary of the grant date, subject to the company achieving positive Cumulative Net Income over the vesting period.|
|All awards are subject to continuous employment with the company (except where specified otherwise), except that all awards may vest upon death, disability termination, retirement or, in certain circumstances, in connection with a change in control of the company, as described on pages 49-52.|
|(2)||The amounts shown under these columns represent potential aggregate threshold, target and maximum payouts for achievement of threshold, target and maximum performance levels for awards granted. The threshold payout is zero, since it represents the level of performance for which no award would be earned. The “target” payout is equal to 100 percent of the NEO’s grant value and represents the amount that may be paid for achieving the target level of performance across all performance goals. The “maximum” payout represents the amount that may be paid for achieving the maximum level of performance across all performance goals, subject to an overall cap on the payout amount.|
|(3)||The exercise price of the SOs is the closing price of the company’s common shares on the NYSE on the grant date.|
|(4)||Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718. Additional details on accounting assumptions for stock-based compensation are described in the Summary Compensation Table.|
2015 Proxy Statement 43
The following table shows the number of shares covered by exercisable and unexercisable SOs and unvested RSUs granted under the 1998 Plan or the 2007 Plan held by our NEOs on December 31, 2014.
|Option Awards||Stock Awards|
|Name||Grant Date||Number of|
that have not
or other Rights
that have not
2015 Proxy Statement 44
|Option Awards||Stock Awards|
|Name||Grant Date||Number of|
that have not
or other Rights
that have not
Except as otherwise indicated, exercisability of option awards and vesting of stock awards is subject to continuous employment by the company, except that unvested awards may vest upon death, disability termination, retirement or change in control of the company (or for awards granted after December 2010, certain terminations in connection with a change in control), as described on pages 49-52.
Notes Relating to Option Awards
|(1)||These SOs vest 100 percent on the third anniversary of the grant date, subject to positive Cumulative Net Income performance during the three-year performance period starting with the year of grant.|
|(2)||These SOs vest 25 percent on the first, second, third and fourth anniversaries of the grant date.|
|(3)||These SOs vest 25 percent on the third and fourth anniversaries of the grant date, and 50 percent on the fifth anniversary of the grant date.|
|(4)||These SOs constitute 25 percent of a Special Grant that became exercisable in January 2014 given the company’s TSR performance against the S&P 500 Index during the six-year performance period from January 1, 2008 through December 31, 2013. The remaining SOs under the Special Grant were forfeited.|
|(5)||These SOs vest 100 percent on the fourth anniversary of the grant date.|
|(6)||These SOs vest on January 29, 2016, subject to positive Cumulative Net Income performance during the three-year performance period starting the year of grant.|
Notes Relating to Stock Awards
|(a)||The market value of the stock awards is based on the closing price per share of our stock as of December 31, 2014, which was $93.04.|
|(b)||These awards vest on the third anniversary of the grant date, subject to our achieving average annual ROE of 23-27 percent or more for the 2014 awards and average annual ROE of 25 percent or more for the 2013 awards over the vesting period. The number of awards above reflects the assumption that ROE is at 30 percent and a payout at 125 percent is made based upon the trend in performance as of December 31, 2014. Mr. Campbell’s July 31, 2013 award of 31,115 RSUs will vest on January 29, 2016.|
|(c)||These awards vest on the third anniversary of the grant date, subject to our achieving average annual ROE of 25 percent or more over the vesting period. The number of awards above reflects the assumption that ROE is at 28 percent and a payout at 105 percent is made based upon the trend in performance as of December 31, 2014.|
|(d)||For Mr. Gilligan and Mr. Squeri, these awards were granted in connection with their 2012 AIA payout and vest on the third anniversary of the grant date subject to positive Cumulative Net Income performance but not subject to continued employment.|
|(e)||These awards vest on the first anniversary of the grant date subject to positive Cumulative Net Income performance and a portion of these awards will be settled in cash.|
2015 Proxy Statement 45
The following table contains information about exercises of SOs by the NEOs and shares acquired by the NEOs upon the vesting of RSUs, in each case during 2014.
|Option Awards||Stock Awards|
|Number of Shares||Value Realized on||Number of Shares||Value Realized on|
|Acquired on Exercise||Exercise||Acquired on Vesting||Vesting|
|(1)||Amounts reflect the difference between the exercise price of the SO and the market price of our common stock at the time of exercise.|
|(2)||Amounts reflect the market value of our common stock on the day on which the RSUs vested.|
2015 Proxy Statement 46
The table below shows the present value of accumulated benefits payable to each of the NEOs under the American Express Retirement Plan and the American Express Retirement Restoration Plan (RRP), a nonqualified plan, except for Mr. Campbell who is not eligible to participate in these plans.
PENSION BENEFITS 2014
|Number of Years||Present Value of||Payments During|
|Credited Service||Accumulated Benefits||Last Fiscal Year|
|Name||Plan Name||(#)||($) (1)||($)|
|K.I. Chenault||Retirement Plan||33||$||663,347||$||0|
|E.P. Gilligan||Retirement Plan||34||$||446,167||$||0|
|S.J. Squeri||Retirement Plan||29||$||321,770||$||0|
|D.E. Buckminster||Retirement Plan||28||$||292,349||$||0|
|(1)||Present Value of Accumulated Benefits (PVAB) was determined using the same measurement date (December 31, 2014) and assumptions as used for financial reporting purposes:|
|•||Discount rate equal to 3.50 percent|
|•||RP-2014 Mortality Table projected with MP-2014 longevity improvements|
|•||Retirement age is assumed to be the normal retirement age as defined in the plan (age 65)|
|•||Form of payment is the value of the cash balance account payable as a lump-sum distribution upon retirement|
|•||PVAB includes the value of the MetLife benefit described below, if applicable|
Retirement Plan. The NEOs (except for Mr. Campbell) participate in the Retirement Plan, which is a defined benefit cash balance retirement plan. As a result of amendments made to the Retirement Plan in 2007, we discontinued benefit accruals, although the Retirement Plan continues to credit participants with interest on their outstanding account balances. The Retirement Plan sets the interest rate each year based on the average of the interest rates for certain five-year U.S. Treasury Notes, with a minimum interest rate of 5 percent. The maximum interest rate is the lower of 10 percent or the applicable interest rate specified in the Retirement Plan. For 2014 and 2015, the interest rate is 5 percent. In addition, benefits from the prior retirement plan, which was terminated in 1985, are payable through an insurance contract with Metropolitan Life Insurance Company and are included in the table above.
RRP-Retirement Plan. Each RRP participant who participated in the Retirement Plan has a Retirement Plan related account for benefits that could not be provided under the Retirement Plan as a result of IRS limitations on tax-qualified plans. Compensation for RRP-Retirement Plan account purposes included the same components of compensation as for the Retirement Plan. RRP-Retirement Plan benefits accrue and vest in a similar manner to benefits under the Retirement Plan. Participants may elect to receive payment of their RRP-Retirement Plan benefits in either a lump sum or annual installments over a period of five, ten, or 15 consecutive years. Lump-sum payments are made on or about the January 1 or July 1 that is at least six months following the participant’s separation from service and installment payments commence on or about the July 1 of the calendar year following the year in which the participant separates from service.
As a result of amendments made to the Retirement Plan and RRP in 2007, we discontinued benefit accruals, although the RRP-Retirement Plan continues to credit participants with interest on their outstanding account balances in accordance with the Retirement Plan as described above.
2015 Proxy Statement 47
The following table shows the executive or company contributions, earnings, withdrawals and account balances for the NEOs in our RRP-RSP accounts and our deferred compensation programs. These programs are unfunded, unsecured deferred compensation programs.
NONQUALIFIED DEFERRED COMPENSATION 2014
|Contributions in Last||Contributions in Last||Earnings in Last||Withdrawals/||Balance at|
|Name||Plan Name||($)||($) (1)||($) (2)||($)||($) (3)|
|(1)||The amounts in this column are also included in the Summary Compensation Table on page 40 under “All Other Compensation.”|
|(2)||Earnings on RRP-RSP and Deferral Plan balances are determined based on hypothetical investment of those account balances at the direction of the participant in the funds available under the RSP (other than the Self-Directed Brokerage Account). In addition to the investment funds in the RSP, a Market Interest Rate option is available for pre-2011 Deferral Plan balances only. The Market Interest Rate option earns a rate of return based on the SEC defined market rate for deferred compensation for the year, which is 120 percent of the long-term Applicable Federal Rate for December of the preceding year.|
|(3)||Of the total amounts shown in this column, the following amounts have been reported as “Salary,” “Bonus” or “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table in this proxy statement and prior years’ proxy statements: for Mr. Chenault, $9,797,098; for Mr. Campbell, $127,327; for Mr. Gilligan, $3,397,500; for Mr. Squeri, $2,225,692; and for Mr. Buckminster, $600,000. The amounts in the preceding sentence do not include: 1) amounts deferred by each executive before becoming an NEO; and 2) amounts reported in prior years’ proxy statements as above-market earnings on deferred compensation.|
Retirement Savings Plan. Effective January 2010, all active participants, including the NEOs, were immediately 100 percent vested in the company matching contribution, which is generally up to 5 percent of total pay (base pay and eligible incentive pay capped at one times base pay). We may also contribute an annual discretionary profit sharing amount (ranging from 0-5 percent) for eligible employees based on our annual performance. As a result of our 2014 performance, the Board approved a profit sharing contribution of 3 percent of total pay for eligible employees (including NEOs). Company profit sharing contributions generally vest on the third anniversary of an employee’s service with the company.
For our employees who commenced their employment prior to April 1, 2007, we generally also contribute an additional conversion contribution of up to 8 percent of total pay. The percentage varies by individual based on their projected age and service as of December 31, 2008. The conversion contributions for the NEOs are as follows: Messrs. Chenault and Gilligan: 6.0 percent and Messrs. Squeri and Buckminster: 3.75 percent. Mr. Campbell commenced employment after April 1, 2007 and is not eligible for conversion contributions.
RRP-RSP. Each RRP participant has a RRP-RSP account for benefits that cannot be provided under the Retirement Savings Plan as a result of IRS limitations on tax-qualified plans. The RRP was amended effective January 1, 2011, such that the company matches employee contributions in the RRP-RSP account up to a maximum of 5 percent of total pay in excess of IRS compensation limits, only to the extent the employee voluntarily defers compensation under the company’s nonqualified Deferral Plan. All other company contributions to the RRP-RSP were not impacted by this amendment. Compensation for RRP-RSP account purposes includes the same components of compensation as for the Retirement Savings Plan, as well as the value of base pay and annual cash incentive amounts deferred by a participant under the nonqualified Deferral Plan. Participants may elect to receive payment of their RRP-RSP benefits in either a lump sum or annual installments over a period of five, ten, or 15 consecutive years. New participants will have a default lump-sum election for contributions attributable to the first year.
2015 Proxy Statement 48
Deferral Plan. As part of planning for retirement or other long-term financial needs, we provide the NEOs and certain other senior-level employees with an annual opportunity to defer receipt of a portion of their base salary or annual cash incentive award up to one times their base salary.
Under the Deferral Plan, participants may elect for payment to commence upon separation from service or a specified date at least five years after deferral, but not later than separation from service, and to receive payment in either a lump sum or annual installments over a period of five, ten or 15 consecutive years. For 2007 and prior years, participants were able to defer receipt until termination of employment or a specified date at least five years after deferral, but not later than ten years after termination of employment.
Deferral Plan Earnings. Starting January 1, 2011, earnings for NEOs on deferral balances are based on investment options similar to those offered under the Retirement Savings Plan (other than the Company Stock Fund and the Self Directed Brokerage Account). Furthermore, for participants, including NEOs, with pre-2011 balances, the Deferral Plan was amended to allow for an additional investment option that provides a market interest rate based on 120 percent of the long-term Applicable Federal Rate for December of the preceding year. Interest crediting on deferrals was previously based on ROE-linked interest crediting schedules.
The tables below show certain potential payments that would have been made to an NEO if the NEO’s employment had terminated on December 31, 2014, under various scenarios, including a Change in Control. The tables do not include the pension benefits or nonqualified deferred compensation that would be paid to an NEO, which are set forth in the Pension Benefits 2014 and Nonqualified Deferred Compensation 2014 tables above, except to the extent that the NEO is entitled to an additional benefit as a result of the termination. In addition, the tables do not include the value of vested but unexercised SOs as of December 31, 2014 and cash AIA and PG awards for performance cycles ending on December 31, 2014. The footnotes to the tables describe the assumptions used in estimating the amounts shown in the tables.
Because the payments to be made to an NEO depend on several factors, the actual amounts to be paid out upon an NEO’s termination of employment can only be determined at the time of an executive’s separation from the company.
POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT/CIC AS OF 12/31/14