UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 2006
AMERICAN EXPRESS COMPANY
(Exact name of registrant as specified in its charter)
New York 1-7657 13-4922250
----------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation Identification No.)
or organization)
200 Vesey Street, World Financial Center
New York, New York 10285
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 640-2000
---------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act
--- (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
--- (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the
--- Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the
--- Exchange Act (17 CFR 240.13e-4(c))
================================================================================
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On January 23, 2006, the Compensation and Benefits Committee (the
"Compensation Committee") of the Board of Directors of American Express
Company (the "Company") approved the performance-based criteria by which
potential payouts to the Company's executive officers under (i) the annual
incentive (i.e., bonus) awards will be determined in respect of the year
ending December 31, 2006 and (ii) Portfolio Grant XVII ("PG-XVII") will be
determined, which will be based on the Company's performance during the three
years ending December 31, 2008. The 2006 annual incentive awards and PG-XVII
awards for the Company's executive officers are made pursuant to the Company's
1998 Incentive Compensation Plan, as amended (which was filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the three months ended
March 31, 2002, and approved most recently by shareholders at the Company's
2002 annual meeting). The Compensation Committee's intent is to structure the
2006 annual incentive awards and PG-XVII awards using "performance-based"
goals that are designed to allow the Company to pay competitive compensation
based on performance and fully deduct the compensation ultimately paid to the
executive officers under these awards under U.S. tax law and regulations. In
general, compensation is performance-based only if payment is contingent upon
attainment of pre-established objective performance goals set by the
Compensation Committee. Compensation to be paid to an executive officer in
respect of the 2006 annual incentive awards and PG-XVII awards after
achievement of a performance-based goal may be paid in the form of cash,
restricted shares of the Company's common stock or letters of intent to
deliver the Company's common stock (or a combination of awards), as determined
by the Compensation Committee in its discretion.
2006 ANNUAL INCENTIVE AWARDS
For 2006, the Compensation Committee has established performance goals
for the payment of annual incentive awards that are based on the Company's
diluted earnings per share ("EPS") and return on equity ("ROE") for the year,
with the award being determined by reference to a matrix of possible performance
levels. In determining diluted EPS and ROE, the Company's reported net income
will be adjusted to exclude the cumulative effect of accounting changes, income
and losses from discontinued operations and extraordinary gains and losses as
determined under generally accepted accounting principles. In addition, in
determining ROE, the Company's reported shareholders' equity will be adjusted to
exclude the effect of Statement of Financial Accounting Standards Nos. 115 and
133 (relating to mark-to-market treatment of certain investments and accounting
for derivatives, respectively).
In determining the payout to be made to an executive officer under an
annual incentive award, under the terms and conditions of the award the
Compensation Committee is precluded from paying the executive more than the
maximum payout that is called for by reference to the particular performance
level achieved by the Company; however, the Compensation Committee will have the
flexibility to reduce this amount in its complete discretion. In establishing
the actual annual incentive award to be paid to an executive, the Compensation
Committee may consider the Company's and each executive's performance during
2006 as measured against the EPS and ROE measures referred to above, as well as
other financial measures (e.g., shareholder return, revenue growth,
reengineering, margin improvement, business unit performance, etc). The
Compensation Committee may also consider non-financial measures such as
expansion and retention of the Company's customer base, development of products
and services, execution of the network services strategy in the United States,
strengthening the Company's value proposition to merchants accepting its card
products, attracting and retaining talented employees and other factors. In
addition, the Compensation Committee may evaluate each executive's leadership by
considering a variety of factors, including, among others, developing winning
strategies, driving results and focusing on the customer and client.
At present, it is expected that the payments to the Company's executive
officers in respect of 2006 annual incentive awards will be made in February
2007, and an executive officer must be continuously employed by the Company
through the date of payment to be eligible to receive such payment.
Under the payout schedule approved by the Compensation Committee, the
annual incentive award that may be made to the Company's Chief Executive Officer
("CEO") in respect of performance for the year ending December 31, 2006 ranges
from a minimum payout of zero to a maximum payout of $9,000,000. The annual
incentive award that may be made to the Company's executive officers other than
the CEO for such period ranges from a minimum payout of zero to a maximum
payout, depending on the executive, of up to $4,500,000.
-2-
PG-XVII AWARDS
Similar to previous portfolio grant awards approved by the Compensation
Committee, PG-XVII awards have two parts. The first part is the Financial
Incentive Component ("FIC"), which accounts for 60% of the target value of the
award. The FIC will be valued based on the Company's average annual diluted EPS,
average annual net revenue (managed basis) and average annual ROE for the three
years ending December 31, 2008. To determine these performance results, diluted
EPS and ROE will be adjusted by excluding from reported net income the same
items as those described above under "Annual Incentive Awards", and in
determining ROE, shareholders' equity will also be adjusted as described above
under "Annual Incentive Awards." Net revenue (managed basis) is the Company's
reported revenue as adjusted principally to exclude the effect of cardmember
lending securitizations.
The second part of the PG-XVII award is the Stock Incentive Component
("SIC"), which accounts for 40% of the target value of the award. The SIC will
be valued based on the Company's total shareholder return (i.e., share price
appreciation plus dividends) compared to that of the S&P Financial Index over
the 2006-2008 performance period.
The FIC will have value only if the Company achieves at least a
threshold level of performance on any of the financial measures described above.
Similarly, the SIC will have value only if the Company's total shareholder
return achieves at least a certain threshold level as compared to the total
return of the S&P Financial Index over the 2006-2008 performance period.
As with the annual incentive award, the Compensation Committee will be
precluded from paying an executive officer more than the maximum payout called
for by reference to the particular FIC and SIC performance levels achieved by
the Company during the 2006-2008 performance period; however, the Compensation
Committee will have the flexibility to reduce this amount in its complete
discretion. In determining the actual payout, the Compensation Committee may
take into consideration the executive's business unit's/staff group's results,
the executive's individual performance or other criteria as it may determine.
At present, it is expected that the payouts to the Company's executive
officers in respect of the PG-XVII award will be made in February 2009.
Generally, an executive officer must be continuously employed by the Company
through the date of payment to be eligible to receive such payout.
Under the payout schedules approved by the Compensation Committee, the
potential payout that may be made to the CEO in respect of PG-XVII ranges from a
"threshold payout" of $1,092,100 to a "maximum payout" of $18,541,250. The
potential payout that may be made to the Company's executive officers other than
the CEO ranges from a "threshold payout" of $107,200 to a "maximum payout,"
depending on the executive, of up to $3,412,500. The "threshold payout"
represents the maximum amount (assuming no downward adjustment by the
Compensation Committee) that may be paid to the CEO or other executive officer
assuming the achievement of the minimum levels of performance at which a payout
may first be made. The "maximum payout" represents the maximum amount (assuming
no downward adjustment by the Compensation Committee) that may be paid to an
executive officer assuming the achievement of the maximum level of performance
under the award provisions.
INCREASE IN BASE SALARY
In addition to the actions by the Compensation Committee described
above, on January 23, 2006, after a review of performance and competitive market
data, the Compensation Committee increased the annual base salary of Louise M.
Parent, the Company's Executive Vice President and General Counsel, from
$440,000 to $500,000, effective to January 23, 2006.
-3-
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
On January 23, 2006, the Board of Directors of the Company elected
Peter Chernin as a director of the Company. The Board expects to appoint Mr.
Chernin to one or more committees of the Board at a later date. A copy of the
press release announcing the election of Mr. Chernin is attached as Exhibit 99.1
to this Current Report on Form 8-K.
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
Exhibit 99.1 Press Release dated January 23, 2006, regarding the
election of Peter Chernin to the Company's Board
of Directors.
-4-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EXPRESS COMPANY
(REGISTRANT)
By: /s/ Stephen P. Norman
Name: Stephen P. Norman
Title: Secretary
DATE: January 27, 2006
-5-
EXHIBIT INDEX
Exhibit
No. Description
---- -----------
99.1 Press Release dated January 23, 2006, regarding the election
of Peter Chernin to the Company's Board of Directors.
-6-