American Express 2019 annual meeting is May 7th. Vote by May 6 online. For optimum accountability and shareholder return vote AGAINST John Brennan, Peter Chernin, Stephen Squeri, Ralph de la Vega, Ronald Williams, the Auditor, Say-on-Pay. Vote FOR Written Consent, Deduct Impact of BuyBacks on Pay, Report on Gender Pay Gap.
American Express Company, together with its subsidiaries, provides charge and credit payment card products, and travel-related services to consumers and businesses worldwide. Most shareholders do not vote. Reading through 98+ pages of the proxy takes too much time. Your vote will make only a small difference but could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 8 minute read. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 38% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
American Express 2019: ISS Rating
From the Yahoo Finance profile: American Express Company’s ISS Governance QualityScore as of April 1, 2019 is 9. The pillar scores are Audit: 2; Board: 5; Shareholder Rights: 4; Compensation: 10.
American Express 2019 Proxy Voting Guide: Board Proposals
1. American Express 2019: Directors
Egan-Jones Proxy Services recommends Against Peter Chernin and Stephen J. Squeri, since both have served for 10 years or more and can no longer be considered independent for purposes of serving as a member of the Audit, Compensation or Nominating committees. I agree.
Since I voted against Executive Compensation I also voted against all members of the compensation committee.
Vote AGAINST John J. Brennan, Peter Chernin, Stephen J. Squeri, Ralph de la Vega, and Ronald A. Williams.
2. American Express 2019: Executive Compensation
American Express’ Summary Compensation Table (p. 66) shows the highest paid named executive officer (NEO) was retired Chairman and CEO K.I. Chenault at $24.2M, with current Chirman and CEO Stephen Squeri paid $17.3M. I’m using Yahoo! Finance to determine market cap ($95.3B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. American Express is a large-cap company.
According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014. Chenault’s pay puts American Express in the top 10% of S&P 500 companies in 2018. Squeri’s pay is well above the 75% level for the S&P 500 in 2018, according to MyLogIQ.
American Express shares outperformed the S&P 500 over the most recent one and two year time periods, but underperformed during the most recent five year time period. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 306:1. According to a recent report from MyLogIQ, CEO Pay Ratios inthe S&P 500, that puts AT&T at having the 26th highest ratio in the S&P 500.
Egan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. They believe the company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, qualified executives critical to the Company’s long-term success and the enhancement of shareholder value.
Given far above median pay, mixed performance, and my concern for growing wealth inequality, I voted against and also voted against the members of the compensation committee.
3. American Express 2019: Ratification of Independent Auditor
I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. PricewaterhouseCoopers served more than seven years. No other issues appear significant.
American Express 2019: Shareholder Proposals
4. Shareholder Proposal: Written Consent
This good governance proposal comes from Kenneth Steiner. Egan-Jones recommends a vote FOR. I file many similar proposals myself.
5. Shareholder Proposal: Deducting Stock Buyback Impact from Executive Pay
This good governance proposal is from me (James McRitchie for my wife Myra Young), so of course I support it. Egan-Jones recommends voting FOR and notes the following:
Alignment of senior executive pay with long-term sustainable growth may not exist if a company is using earnings per share or certain financial return ratios to calculate incentive pay awards when the company is aggressively repurchasing its shares or if senior executives use the jump in stock price resulting from a buyback announcement as a chance to sell stock intended to incentivize long-term performance.
4. Shareholder Proposal: Gender Pay Equity
This good governance comes from Arjuna Capital. Egan-Jones notes the following:
Pay disparities by gender in companies, in our view, could bring operational risks and reputational damage that is detrimental to shareholder value. After evaluating the details pursuant to the shareholder proposal and in accordance with the Egan-Jones’ Proxy Guidelines, we recommend a vote FOR this Proposal.
American Express 2019 CorpGov Recommendations
Proxy Insight reported the votes of three funds as I wrote up my recommendations. I was disappointed to learn that Calvert voted FOR all items except our proposal #5 to deduct the impact of stock buybacks from CEO pay. Trillium voted against all items, except auditor. Perhaps they default to management if they have not sufficiently studied an issue, such as buybacks. Domini voted against Brennan, Chernin, Squeri, de la Vega, Williams, Leavitt, Leonsis, Vasella, and Young, as well as say-on-pay. Notably, they voted FOR all the shareholder proposals, including Deduct Impact of Buybacks on Exec Pay.
In looking up a few funds on our Shareowner Action Handbook, I see Praxis voted the same as Calvert.
- Directors: Vote AGAINST John J. Brennan, Peter Chernin, Stephen J. Squeri, Ralph de la Vega, and Ronald A. Williams
- Auditor: AGAINST
- Say-on-Pay: AGAINST
- Written Consent: FOR
- Deduct Impact of Buybacks on Exec Pay: FOR
- Report on Gender Pay Gap: FOR
American Express 2019: Issues for Future Proposals
Looking at SharkRepellent.net for anti-shareholder provisions:
- Unanimous written consent. That is the same as not having it.
- Special meetings can only be called by shareholders holding not less than 25% of the voting power determined to be Net Long Shares.
- Proxy Access lite.
American Express 2019: Mark Your Calendar
To be considered for inclusion in next year’s proxy statement, any shareholder proposals submitted in accordance with SEC Rule 14a-8 must be received by our Corporate Secretary at our principal executive offices no later than November 16, 2019. Any such proposals must comply with all of the requirements of SEC Rule 14a-8.
Tangela S. Richter
Corporate Secretary and Chief Governance Officer
American Express Company
200 Vesey Street
New York, NY 10285
Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” chosen by aspiration. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
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