DEFC14A 1 ddefc14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x                            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))
x    Definitive Proxy Statement
¨    Definitive Additional Materials
¨    Soliciting Material Pursuant to Section 240.14a-12

American Express Company

 

(Name of Registrant as Specified In Its Charter)

  

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x 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.:

 

 

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  (4) Date Filed:

 

 


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LOGO   

AMERICAN EXPRESS COMPANY

200 VESEY STREET

NEW YORK, NEW YORK 10285

NOTICE OF

ANNUAL MEETING OF SHAREHOLDERS

 

DATE AND TIME   Monday, May 2, 2011, at 9:00 a.m. Eastern Time
PLACE  

American Express Company

200 Vesey Street, 26th Floor

New York, New York 10285

ITEMS OF BUSINESS  

(1)    Election of Directors

 

(2)    Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2011

 

(3)    Advisory vote on executive compensation

 

(4)    Advisory vote on frequency of advisory executive compensation vote

 

(5)    Shareholder proposal relating to cumulative voting for Directors

 

(6)    Shareholder proposal relating to the calling of special shareholder meetings

 

(7)    Such other business that may properly come before the Meeting

RECORD DATE   You can vote if you are a shareholder of record on March 4, 2011

Your vote is very important to us. Whether or not you plan to attend the Meeting, we encourage you to vote promptly.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 2, 2011. The Company’s Proxy Statement and 2010 Annual Report to Shareholders are available on the Company’s Web site at http://ir.americanexpress.com.

 

LOGO
CAROL V. SCHWARTZ
Secretary & Corporate Governance Officer

March 22, 2011


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TABLE OF CONTENTS

 

General Information

     1   

Voting Information

     2   

Corporate Governance

     5   

Report of the Audit and Risk Committee

     9   

Compensation of Directors

     13   

Ownership of Common Shares

     15   

Item 1—Election of Directors

     16   

Item 2—Ratification of Appointment of Independent Registered Public Accounting Firm

     25   

Executive Compensation

     27   

Compensation Discussion and Analysis

     27   

Report of the Compensation and Benefits Committee

     47   

Summary Compensation Table

     48   

Advisory Votes on Executive Compensation and Frequency of “Say On Pay”

     65   

Item 3—Advisory Vote on Executive Compensation

     65   

Item 4—Advisory Vote on Frequency of Executive Compensation Vote

     65   

Shareholder Proposals

     66   

Item 5—Shareholder Proposal Relating to Cumulative Voting for Directors

     66   

Item 6—Shareholder Proposal Relating to the Calling of Special Shareholder Meetings

     66   

Certain Relationships and Transactions

     68   

Section 16(a) Beneficial Ownership Reporting Compliance

     70   

Director and Officer Liability Insurance

     70   

Requirements, Including Deadlines, for Submission of Proxy Proposals, Nomination of Directors, and Other Business of Shareholders

     71   

Other Matters

     71   

Location of the 2011 Annual Meeting of Shareholders of American Express Company

     73   

Additional Information Regarding Participants in the Solicitation

     A-1   


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LOGO   

 

AMERICAN EXPRESS COMPANY

200 VESEY STREET

NEW YORK, NEW YORK 10285

March 22, 2011

PROXY STATEMENT

GENERAL INFORMATION

 

 

We are providing these proxy materials to you in connection with the solicitation of proxies by the Board of Directors of American Express Company for the 2011 Annual Meeting of Shareholders and for any adjournment or postponement of the Meeting. In this proxy statement, we refer to American Express Company as “the Company,” “we,” “our”, or “us.”

We are holding the Annual Meeting at 9:00 a.m. Eastern Time on Monday, May 2, 2011, at the Company’s New York City headquarters and invite you to attend in person. The Company has arranged for a live audio webcast and a replay of the 2011 Annual Meeting to be accessible to the general public on the Company’s Web site at http://ir.americanexpress.com. (Information from such site is not incorporated by reference into this proxy statement.)

We are pleased to be using the Securities and Exchange Commission (SEC) rule that allows companies to furnish proxy materials to shareholders over the Internet. By March 23, 2011, we will have mailed to certain of our shareholders a Notice of Internet Availability of Proxy Materials (Notice). This Notice contains instructions on how to access our proxy statement and 2010 Annual Report to Shareholders and vote online. By furnishing this Notice, we are lowering the costs and reducing the environmental impact of our Annual Meeting. Shareholders who do not receive the Notice will continue to receive a paper or electronic copy of our proxy statement and 2010 Annual Report, which we intend to start mailing on or about March 25, 2011.

We offer our shareholders the option to receive our proxy statements, annual reports and related materials electronically. If you currently receive a paper copy of our proxy materials mailed to your home and wish to receive the materials electronically in the future, you may register to receive electronic delivery in lieu of paper mailings, by visiting the Company’s Web site at http://ir.americanexpress.com.

 

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VOTING INFORMATION

 

Record Date

You may vote all common shares that you owned as of March 4, 2011, which is the record date for the Annual Meeting. On March 4, 2011, we had 1,202,342,363 common shares outstanding and eligible to vote. Each common share is entitled to one vote on each matter properly brought before the Meeting.

Ownership of Shares

You may own common shares in one or more of the following ways:

 

   

directly in your name as the shareholder of record, including shares purchased through our transfer agent’s BuyDIRECT stock purchase plan or restricted stock awards issued to employees under our long-term incentive plans;

 

   

indirectly through a broker, bank, or other holder of record in “street name”; or

 

   

indirectly through the American Express Company Stock Fund of our Retirement Savings Plan (RSP) or the Employee Stock Ownership Plan of Amex Canada, Inc.

If your shares are registered directly in your name, you are the holder of record of these shares and we are sending proxy materials directly to you. As the holder of record, you have the right to give your proxy directly to our tabulating agent. If you hold your shares in street name, your broker, bank, or other holder of record is sending proxy materials to you and you may direct them how to vote on your behalf by completing the voting instruction form that accompanies your proxy materials. Regardless of how you hold your shares, we invite you to attend the Meeting.

How to Vote

Your vote is important. We encourage you to vote promptly. Telephone and Internet voting are available through 11:59 p.m. Eastern Time on Wednesday, April 27, 2011, for shares held in employee plans, and through 11:59 p.m. Eastern Time on Sunday, May 1, 2011, for all other shares.

You may vote in the following ways:

 

By Telephone

  

By Internet

  

By Mail

If you are located in the United States or Canada, you can vote your shares by calling 1-800-690-6903.    You can vote your shares by Internet at www.proxyvote.com.    You can vote by mail by marking, dating, and signing your proxy card and returning it in the enclosed postage paid envelope, or by completing and mailing your voting instruction form, as applicable.

For telephone and Internet voting, you will need the 12-digit Control Number included on your Notice, on your proxy card, or in the instructions that accompany your proxy materials. The telephone and Internet voting systems have easy-to-follow instructions and allow you to confirm that the system has properly recorded your votes. If you vote by telephone or the Internet, you do not need to return your proxy card or your voting instruction form.

At the Annual Meeting. The way you vote your shares prior to the Meeting will not limit your right to change your vote at the Meeting if you attend in person and vote by ballot. If you hold your shares in street name and you want to vote in person by ballot at the Meeting, you must obtain a valid “legal proxy” from the record holder of your

 

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shares at the close of business on the record date indicating that you were a beneficial owner of shares, as well as the number of shares of which you were the beneficial owner on the record date, and appointing you as the record holder’s proxy to vote the shares covered by that proxy at the Meeting. You should contact your bank, broker, or other nominee to obtain a legal proxy.

All shares that have been properly voted and not revoked will be voted at the Meeting. If you sign and return your proxy card or voting instruction form without any voting instructions with respect to a matter, your shares will be voted as the Board of Directors recommends.

Revocation of Proxies. You can revoke your proxy at any time before your shares are voted if you (1) submit a written revocation to our Secretary, (2) submit a later-dated proxy or voting instruction form, as applicable, (3) provide subsequent telephone or Internet voting instructions, or (4) vote in person at the Meeting.

Shares Held Under Plans

If you participate in the BuyDIRECT stock purchase plan, administered by BNY Mellon, the Company’s transfer agent, your proxy includes the number of shares enrolled in that plan as well as any shares you have acquired through dividend reinvestment. If you participate in the RSP or the Employee Stock Ownership Plan of Amex Canada, Inc., your proxy includes shares that the relevant plan has credited to your account.

To allow sufficient time for the RSP and the Employee Stock Ownership Plan of Amex Canada, Inc. trustees to vote, the trustees must receive your voting instructions by 11:59 p.m. Eastern Time on Wednesday, April 27, 2011. If the trustees for the RSP and the Employee Stock Ownership Plan of Amex Canada, Inc. do not receive your instructions by that date, the trustees will not vote your shares.

Confidential Voting

We maintain the confidentiality of the votes of individual shareholders. Your vote will not be disclosed, unless the law requires disclosure, you authorize disclosure, or your vote is cast in a contested election. If you write comments on your proxy card or ballot, management may learn how you voted in reviewing your comments. In addition, the Inspectors of Election and selected employees of our independent tabulating agent may have access to individual votes in the normal course of counting and verifying the vote.

Effect of Not Casting Your Vote

If you hold your shares in street name, you are receiving a voting instruction form which enables you to instruct your bank, broker, or other nominee as to how to vote your shares. Under New York Stock Exchange (NYSE) rules, brokers are permitted to exercise discretionary voting authority on “routine” matters when voting instructions are not received from a beneficial owner ten days prior to the shareholder meeting. The only “routine” item on this year’s Meeting agenda is Item 2 of this proxy statement (ratification of the Company’s independent registered public accounting firm).

Accordingly, if you hold your shares in street name, and you wish to have your shares voted on all items in this proxy statement, please complete and return your voting instruction form. If you do not submit your voting instructions, your shares will not be voted on any items with the exception that your broker may vote in its discretion on Item 2. If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Meeting.

 

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Quorum and Required Vote

Quorum. We will have a quorum and will be able to conduct the business of the Annual Meeting if the holders of a majority of the votes that shareholders are entitled to cast are present at the Meeting, either in person or by proxy.

Votes Required for the Election of Directors and Approval of the Proposals. To elect directors and adopt the other proposals, the following votes are required under our governing documents and New York State law:

 

Item

 

Vote Required

 

Effect of Abstentions and

Broker Non-Votes on

Vote Required*

Election of directors   Plurality of the votes cast in a contested election; approval of the majority of the votes cast in an uncontested election. Based on a shareholder notice we received, plurality voting will apply. See Other Matters on page 71.   Not considered as votes cast and have no effect on the outcome
Ratification of appointment of independent accounting firm   Approval of the majority of the votes cast   Not considered as votes cast and have no effect on the outcome
Advisory vote on executive compensation**   Approval of the majority of the votes cast   Not considered as votes cast and have no effect on the outcome
Advisory vote on frequency of advisory executive compensation vote**   Approval of the majority of the votes cast   Not considered as votes cast and have no effect on the outcome
Shareholder Proposals**   Approval of the majority of the votes cast   Not considered as votes cast and have no effect on the outcome

 

* A broker non-vote occurs when a broker submits a proxy but does not vote for an item because it is not a “routine” item and the broker has not received voting instructions from the beneficial owner. As described under “Effect of Not Casting Your Vote”, your broker may vote in its discretion on the ratification of appointment of the Company’s independent accounting firm.

 

** Advisory/Non-binding

There are no cumulative voting rights.

Multiple Shareholders Sharing the Same Address

We are sending only one Notice or one proxy statement and annual report to the address of multiple shareholders unless we have received contrary instructions from any shareholder at that address. This practice, known as “householding,” reduces duplicate mailings. If any shareholder residing at such an address wishes to receive an individual copy of the materials, or if you are receiving multiple copies of our proxy statement and annual report and would like to enroll in this service, please contact the Company’s Secretary. The contact information for the Company’s Secretary is on page 73.

Cost of Proxy Solicitation

We will pay the expenses of soliciting proxies on behalf of the Board of Directors. Our directors, officers, or employees may solicit proxies for us in person, or by mail, telephone, facsimile, or electronic transmission. We have hired Morrow & Co., LLC, 470 West Ave., Stamford, CT 06902, to help us distribute and solicit proxies. We will pay them $17,500 plus expenses for these services.

 

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CORPORATE GOVERNANCE

 

Our business is managed by the Company’s employees under the direction and oversight of the Board of Directors. Except for Kenneth I. Chenault, our Chairman and Chief Executive Officer (CEO), none of our Board members is an employee of the Company. The Board limits membership of the Audit and Risk Committee, Compensation and Benefits Committee (Compensation Committee), and Nominating and Governance Committee (Nominating Committee) to independent directors. We keep directors informed of our business through discussions with management, materials we provide to them, visits to our offices, and their participation in Board and Board Committee meetings, as well as through our director orientation and ongoing education efforts.

The Board of Directors has adopted Corporate Governance Principles (Governance Principles) which, along with the charters of the Board Committees, the Company’s Code of Conduct for employees, and the Code of Business Conduct for Directors, provide the framework for the governance of the Company. The Board of Directors has also appointed a Corporate Governance Officer to promote best practices and help the Company remain in the forefront of good corporate governance. The Corporate Governance Officer periodically reviews the Company’s governance principles and practices with the Nominating Committee to assure that they continue to reflect high standards.

A complete copy of the Company’s Governance Principles, the charters of each of the Board Committees and the Codes of Conduct for our employees and directors may be found on the Company’s Web site at http://ir.americanexpress.com. We describe below some of our key governance principles and practices.

Corporate Governance

Independence of Directors. The Company’s Governance Principles provide that a substantial majority of the Board of Directors will consist of independent, non-management directors who meet the criteria for independence required by the NYSE. A director is considered independent if the Board determines that he or she does not have a material relationship with the Company or one of its subsidiaries. The Board has established guidelines to assist it in determining director independence, and these guidelines can be found within the Corporate Governance Principles which may be accessed through the “Corporate Governance” link found on our Web site at http://ir.americanexpress.com.

Our director independence guidelines provide standards to assist our Board in determining which relationships and transactions may create a material relationship that would cause a director not to be independent. The guidelines cover, among other things, employment and compensatory relationships, relationships with our auditors, customer and business relationships, and contributions to not-for-profit organizations.

The Board annually reviews director independence. Based on our guidelines, on January 24, 2011, the Board determined that ten of the Company’s 13 director nominees are independent: Ms. Burns and Messrs. Akerson, Chernin, Leschly, Levin, McGinn, Miller, Reinemund, Walter, and Williams. The other director nominees, Ms. Barshefsky, Mr. Chenault, and Mr. Leonsis, are not independent under these guidelines.

In making independence determinations, the Board considers transactions between each director nominee and the Company. The Board has determined that the following categories of transactions will be deemed immaterial under our director independence guidelines:

 

   

possession and use of an American Express® Card or use of any of the Company’s other products or services by a director or his or her immediate family members or their family businesses on terms and conditions similar to those available to other customers;

 

   

incurring indebtedness to the Company, on the American Express® Card or otherwise as permitted by law, by a director or his or her immediate family members or their family businesses on terms and conditions similar to those available to other persons of like creditworthiness;

 

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transactions in the ordinary course of business between the Company and another company where the director or an immediate family member serves as an executive officer and/or in which the director or an immediate family member has an equity interest, provided the amounts paid or received by the other company did not exceed, in any of the last three fiscal years, the greater of $1 million or 1% of its consolidated gross revenues;

 

   

transactions between the Company and another company where the director serves on the other company’s board and/or owns less than a 5% equity interest in the other company, regardless of the amount involved;

 

   

service on the board of another public company on which an executive officer of the Company also serves as a board member (except for compensation committee interlocks);

 

   

service as a director, trustee, or executive officer of a not-for-profit organization, including where an executive officer of the Company also serves as a director or trustee, unless the annual contributions of the Company and the American Express Foundation to the organization (exclusive of gift-match payments) exceed the greater of $1 million or 1% of the organization’s total annual revenues;

 

   

service as an executive officer of a public company that also uses the Company’s independent registered public accounting firm;

 

   

membership in the same professional association, social, fraternal or religious organization, or club as an executive officer of the Company; or

 

   

prior attendance at the same educational institution as an executive officer of the Company.

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 to the Company on a regular basis. Ms. Barshefsky is a partner of the law firm of WilmerHale, which firm provided legal services to us in 2010 at customary rates, and we may continue to use the services of this firm in 2011. As discussed under Certain Relationships and Transactions on pages 68 to 70, the Board also has determined that Mr. Leonsis is not an independent director.

Board Leadership

Chairman and CEO. The Company’s Governance Principles provide that ordinarily and in normal circumstances, the CEO will also serve as Chairman of the Board. The Board believes that the combination of an independent Lead Director (described below) and a combined Chairman and CEO serves the best interests of the Company at this time. By serving as both Chairman and CEO, Mr. Chenault has been able to draw on his intimate knowledge of the daily operations of the Company, industry and competitive developments, and the Company’s relationships with customers, employees, and business partners to provide the Board with leadership in setting its agenda and focusing its discussions. Mr. Chenault’s combined role as Chairman and CEO has also ensured that the Company presents its message and strategy to shareholders, employees, and customers with a unified voice.

Appointment of Independent Lead Director. The Nominating Committee reviews the Board’s leadership structure annually. In February 2011, the Company’s independent directors appointed Mr. Walter, who is Chairman of the Nominating Committee, to serve as the Board’s independent lead director (Lead Director), replacing the Company’s past practice of rotating presiding directors. Having an independent Lead Director will supplement the strong leadership that has historically been provided by each of the Board Committee Chairs. The Board believes that providing a clearly defined and significant independent Lead Director role, combined with having active, independent-minded, skilled, and committed directors, ensures effective Board oversight.

The Company’s Governance Principles provide that the Lead Director will be an independent director designated annually by the independent directors upon the recommendation of the Nominating Committee. The Lead Director will preside at all meetings of the Board at which the Chairman is not present, including the executive

 

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sessions of directors, and communicate Board member feedback to the Chairman and Chief Executive Officer, including as to Board informational needs and Board agenda items; will have the authority to call additional executive sessions of directors as appropriate; and will perform such other duties as the Board may from time to time designate.

Executive Sessions. The Company’s Governance Principles provide that non-management directors will meet in executive session at least three times per year, including one executive session of independent directors only. In addition, any director may request additional executive sessions of non-management or independent directors to discuss any matters of concern, and additional meetings of the independent directors may also be called at any time by the Lead Director. During 2010, the Board held four executive sessions of non-management directors, one of which included independent directors only.

Majority Voting for Directors. The Company’s Governance Principles provide that in a non-contested election (i.e., where the number of nominees is the same as the number of directors to be elected), the vote required to elect a director by the shareholders is the affirmative vote of a majority of the votes cast in favor of or against a nominee. In any such election of directors, any incumbent director who receives a greater number of votes “against” his or her election than votes “for” such election will immediately submit his or her resignation to the Board. The 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 SEC within 90 days after the results of the election are certified. In deciding whether or not to accept the resignation, the Board will consider all factors deemed relevant, including the stated reason why shareholders who cast “against” votes did so, the qualifications of the director, and whether the director’s resignation from the Board would be in the best interests of the Company and its shareholders. The Board will also consider a range of possible responses to the shareholder vote, including, for example, acceptance of the resignation or rejection of the resignation and having the director continue to serve but curing the grievance causing the “against” votes.

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 the Company’s 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 the Company files its definitive proxy statement with the SEC. For the election of directors at the Meeting, based on a shareholder notice that we have received, there will be more nominees than the number of directors to be elected, and therefore, plurality voting will govern.

Communicating with Directors. Communications to the Board or to individual directors may be made by letter, e-mail, or telephone and should be directed in care of the Company’s Secretary, who will forward them to the intended recipients. If an interested party wishes to communicate a concern about the Company’s financial statements, accounting practices, or internal controls, the concern should be submitted in writing to the Chair of the Audit and Risk Committee in care of the Company’s Secretary. If the concern relates to the Company’s governance practices, business ethics, or corporate conduct, the concern should be submitted in writing to the Chair of the Nominating Committee in care of the Company’s Secretary. Matters relating to executive compensation may be directed to the Chair of the Compensation Committee in care of the Company’s Secretary. If the interested party is unsure as to which category his or her concern relates, he or she may communicate it to any one of the independent directors or to the Lead Director in care of the Company’s Secretary. The contact information for the Company’s Secretary is on page 73.

The Company’s “whistleblower” policy prohibits the Company or any of its employees from retaliating or taking any adverse action against anyone for raising a concern in good faith. If an interested party nonetheless prefers to raise his or her concern to the Board in a confidential or anonymous manner, the concern may be directed to the Office of the Ombudspersons at the Company’s headquarters or by telephone at 1-800-297-1010. An Ombudsperson will refer the concern to the Chair of the Audit and Risk Committee who will assure that the matter is properly investigated.

 

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Special Shareholder Meetings. In February 2011, the Company amended its by-laws to allow holders of 25% of our common shares to call a special meeting of shareholders. The Board adopted this by-law amendment in response to input from the Company’s shareholders. The Board believes that a 25% ownership threshold provides an appropriate balance between ensuring the Board’s accountability to a large percentage of shareholders and enabling the Board and management to operate the Company effectively.

Management Succession Planning. The Board believes that one of its primary responsibilities is to oversee that the Company has the appropriate management talent to successfully pursue its strategies. Management succession is regularly discussed by the directors in Board meetings, in executive sessions of the Board, and in Board Committee meetings, as applicable. The 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.

We believe that the Board and the CEO should collaborate on succession planning and that the entire Board of Directors should be involved in the critical aspects of the CEO succession planning process, including establishing selection criteria, identifying and evaluating candidates, and making management succession decisions. Oversight of the management succession process is the responsibility of the Nominating Committee. Accordingly, the Company’s Governance Principles provide that:

 

   

The Nominating Committee will assure that the Company has in place appropriate planning to address emergency CEO succession, CEO succession in the ordinary course of business, and succession for key members of senior management;

 

   

The Company’s CEO succession planning will include criteria that reflect the Company’s business strategies, identification and development of potential internal candidates, and formal assessment processes; and

 

   

Directors are expected to become sufficiently familiar with the Company’s executive officers so as to be able to offer personal feedback on the performance of such officers, including by participating in an annual executive talent review of the experience, capabilities, and performance of the Company’s senior management.

Director Stock Ownership. We believe that each director should have a substantial personal investment in the Company. A personal holding of 20,000 shares of the Company is recommended for each director. Directors are expected to acquire and maintain this share ownership threshold within five years of joining the Board.

Other. Non-management directors have access to individual members of management or to other employees of the Company on a confidential basis. Directors are authorized to conduct independent investigations and to hire outside consultants or experts at the Company’s expense. Directors also have access to Company records and files, and directors may contact other directors without informing Company management of the purpose or even the fact of such contact.

The Board of Directors encourages all its members to attend the Annual Meeting of Shareholders but understands there may be situations that prevent such attendance. In 2010, all but one of our directors was present at the Annual Meeting.

Board Meetings

Director Attendance. During 2010, the Board of Directors met ten times. All of our directors attended 75% or more of the meetings of the Board and Board Committees on which they served in 2010.

Committees of the Board. The following table lists our five Board Committees, the Chairs of each Committee, the directors who currently serve on them and the number of Committee meetings held in 2010.

 

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Membership on Board Committees

 

Name   Audit and Risk  

Compensation

and Benefits

  Innovation and
Technology*
 

Nominating

and

Governance

 

Public

Responsibility

Mr. Akerson

               

Ms. Barshefsky

                  C

Ms. Burns

                 

Mr. Chenault

                   

Mr. Chernin

             

Mr. Leschly

      C          

Mr. Leonsis

          C        

Mr. Levin

               

Mr. McGinn

             

Mr. Miller

             

Mr. Reinemund

             

Mr. Walter

          C    

Mr. Williams

  C                

2010 Meetings

  14   14   1   6   3

 

* The Innovation and Technology Committee was formed in July 2010.

C = Chair

• = Member

Audit and Risk Committee

All members of the Audit and Risk Committee are independent directors as required by the listing standards of the NYSE and the Company’s Governance Principles. The Board has also determined that each of the members of the Audit and Risk Committee meets the requirements for being an “audit committee financial expert” as defined by SEC rules. The Audit and Risk Committee meets regularly in executive session with the Company’s Chief Risk Officer with regard to the Company’s risk management processes, controls, and capabilities, with the Company’s General Auditor with regard to significant operational matters, internal controls, and other control matters, with the Company’s General Counsel with respect to significant legal, compliance, and regulatory matters, and with the Company’s independent registered public accounting firm.

The duties of the Audit and Risk Committee with respect to oversight of the Company’s financial reporting process are described in the following Report of the Audit and Risk Committee.

Report of the Audit and Risk Committee

The role of the Audit and Risk Committee is to assist the Board of Directors 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 controls. The Company’s independent auditors are responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity to accounting principles generally accepted in the United States.

In the performance of its oversight function, the Audit and Risk Committee has reviewed and discussed with management and the independent auditors the Company’s audited financial statements. The Audit and Risk Committee also has discussed with the independent auditors the matters required to be discussed by Statement on

 

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Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, relating to communication with audit committees. In addition, the Audit and Risk Committee has received from the independent auditors the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the audit committee concerning independence, has discussed with the independent auditors their independence from the Company and its management, and has considered whether the independent auditors’ provision of non-audit services to the Company is compatible with maintaining the auditors’ independence.

The Audit and Risk Committee discussed with the Company’s internal auditors and independent auditors the overall scope and plans for their respective audits. The internal auditors are responsible for preparing an annual audit plan and conducting internal audits under the control of the Company’s General Auditor, who is accountable to the Audit and Risk Committee. The Audit and Risk Committee met with the internal auditors and independent auditors, 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 Risk 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 Risk 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 2010 Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the SEC.

AUDIT AND RISK COMMITTEE

Ronald A. Williams, Chairman

Daniel F. Akerson

Ursula M. Burns

Richard C. Levin

Steven S Reinemund

Compensation and Benefits Committee

All members of the Compensation Committee are independent directors as required by the listing standards of the NYSE and the Company’s Governance Principles. The Compensation Committee has oversight responsibility for the compensation of, and the compensation plans and arrangements covering, executive officers and designated key employees of the Company, as well as the Company’s employee benefit plans. 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 in accordance with applicable regulations, reviewing the Company’s compensation practices to ensure that they do not encourage excessive risk taking.

The processes and procedures by which the Compensation Committee considers and determines named executive officer compensation are described in the Compensation Discussion and Analysis included in this proxy statement. The Compensation Committee may delegate certain of its responsibilities to one or more Compensation Committee members, senior executives, or committees in accordance with applicable laws, regulations, and plan requirements.

Compensation Committee Interlocks and Insider Participation. The current members of the Compensation Committee are Messrs. Chernin, Leschly, McGinn, Miller, and Walter. None of the current members is a former or current officer or employee of the Company or any of its subsidiaries. None of the current members has any relationship required to be disclosed under this caption under the rules of the SEC.

 

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Innovation and Technology Committee

The Innovation and Technology Committee was established by the Board of Directors in July 2010 to assist the Board in its oversight of strategic innovation and technology. In carrying out its responsibilities, this Committee is responsible for reviewing and making recommendations to the Board on major strategies and plans developed by management relating to the Company’s approach to technological and commercial innovation, the innovation and technology acquisition process to assure ongoing business growth, and measurement and tracking systems in place to achieve successful innovation.

Nominating and Governance Committee

All members of the Nominating Committee are independent directors as required by the listing standards of the NYSE and the Company’s Governance Principles. The Nominating Committee 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.

Director Nomination Process. The Nominating Committee considers and recommends the annual slate of director nominees. In so doing, the Nominating Committee reviews the skills, experience, and qualifications of each nominee, as well as the performance as a director of each incumbent nominee. The Nominating Committee also assesses the knowledge, skills, and experiences of the Board as a whole in relation to the strategic vision and business circumstances of the Company to determine if there is particular knowledge, skills, or expertise that it should seek to add to the Board. The Nominating Committee will consider candidates for election to the Board who are submitted by shareholders. Each member of the Nominating Committee participates in the review and discussion of director candidates. Where appropriate, directors who are not on the Nominating Committee are encouraged to meet with and evaluate the suitability of potential candidates.

Director Criteria and Qualifications. Our Governance Principles provide that directors should be persons who have achieved prominence in their fields and who possess significant experience in areas of importance to the Company, such as general management, finance, marketing, technology, law, international business, and public sector activities. The minimum personal characteristics that must be met by a nominee include integrity, independence, energy, forthrightness, strong analytical skills, and the commitment to devote the necessary time and attention to the Company’s affairs. Candidates must also demonstrate a willingness to work as part of a team in an atmosphere of trust and a commitment to represent the interests of all shareholders rather than those of a specific constituency. Candidates are assessed based on their history of achievement, background, specific skills, expertise or experience, and personal attributes. The Nominating Committee also looks for directors who have the ability to challenge and stimulate management. Our directors’ qualifications and experience are discussed on pages 17 to 24.

Our Governance Principles provide that while the Board need not adhere to a fixed number of directors, generally a board composed of 12 to 14 directors offers a sufficiently large and diverse group to address the important issues facing the Company while being small enough to encourage personal involvement and discussion. While the Company does not have a specific policy on diversity, the Company’s Governance Principles state that the Board of Directors should be diverse, engaged, and independent. The Nominating Committee considers diversity, including gender and racial diversity, in its recruitment of directors and considers that the current Board reflects diversity of skills, backgrounds, and experiences.

Shareholders who wish to submit nominees for election at an annual or special meeting of shareholders should follow the procedure described on page 71. The Nominating Committee applies the same standards in considering candidates submitted by shareholders as it does in evaluating candidates submitted by directors.

 

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Public Responsibility Committee

The Public Responsibility Committee reviews issues that affect the communities in which we work or the public interest in general. These issues include legislation and regulation affecting the Company, philanthropic programs, the Company’s political action committee and corporate political contributions, government relations activities, other policies affecting the communities in which the Company operates, and the environment.

Political Activities. The Company reports regularly to the Public Responsibility Committee regarding its engagement in the public policy arena, and its fundraising activities and political contributions. Information regarding the Company’s political activities, including annual U.S. political contributions, may be found on the Company’s Web site at http://ir.americanexpress.com.

Risk Oversight

The key objective of risk management at the Company is to maintain and continuously improve risk management controls and processes in order to enable profitable growth and deliver outstanding customer service, while managing adverse developments. This objective is accomplished by investing in talent and global capabilities as well as by creating a company-wide culture focused on risk-return tradeoffs within established risk limits, and identifying excessive, unacceptable, and uneconomic risks. The Company relies on its comprehensive enterprise risk management process (ERM) to aggregate, monitor, measure, and manage risks. The ERM approach is designed to enable the Board of Directors to establish a mutual understanding with management of the effectiveness of the Company’s risk management practices and capabilities, to review the Company’s risk exposure, and to elevate certain key risks for discussion at the Board level. The Company’s ERM program is overseen by its Chief Risk Officer, who is an executive officer of the Company and a member of the Company’s most senior management.

Enterprise risks are identified by management and are overseen by the Board, or appropriate Board Committee in the case of risks that are under the purview of a particular Committee. Board Committees report regularly to the Board on the matters reviewed at the Committee level. The Board monitors the “tone at the top” and culture of the Company, oversees strategic risks through regular and comprehensive reviews of the Company’s strategies and plans, and reviews specific risks as needed. The Board approves decisions regarding major strategic initiatives, such as acquisitions and divestitures, major investments, financings, and capital commitments.

The Audit and Risk Committee approves the Company’s Enterprise-wide Risk Management Policy, which defines risk management objectives, risk appetite, risk limits, and escalation triggers, and establishes the internal governance structure for managing risks. The Policy focuses on the major risks that are relevant to the Company given its business model—credit risk (individual and institutional), operational risk, and reputational risk. The Audit and Risk Committee also approves the risk policies governing the areas of individual credit risk, institutional credit risk, market risk, liquidity risk, operational risk, as well as the policy governing the launch of new products and services. Internal management committees, including the Enterprise Risk Management Committee (ERMC), chaired by the Company’s Chief Risk Officer, and the Asset-Liability Committee (ALCO), chaired by the Company’s Chief Financial Officer, are responsible for implementing the policies across the Company. Policies governing reputational risk management and model governance and validation are approved by the ERMC. Policies governing capital management and investments are approved by the ALCO. The Audit and Risk Committee receives regular reports from senior risk leaders on risk management of the major risks referred to above and on the areas of compliance, fraud, technology and information security, and privacy risks. The Audit and Risk Committee meets regularly in private session with the Company’s Chief Risk Officer and other senior management with regard to the Company’s risk management processes, controls, and capabilities.

The Compensation Committee oversees the Company’s executive compensation arrangements, including the Company’s actions to foster the appropriate linkage between pay and performance, attract and retain high-performing executive talent with the skills needed to promote the Company’s success, and develop compensation programs that are aligned with the Company’s strategy and risk profile. The Compensation Committee meets periodically with the Chief Risk Officer to assess the effectiveness of the design and operation of the Company’s

 

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incentive compensation programs in controlling excessive risk taking. After the end of each year, the Chief Risk Officer reviews with the Committee his assessment of the material risks inherent in the Company’s businesses, the time horizons over which those risks may materialize, and whether the Company achieved its results through taking economic and controlled risks consistent with the Company’s risk tolerance and without incurring excessive risks. In addition, annual goals established for the Company’s business units and staff groups include a comprehensive framework of risk-related metrics measuring both risk outcomes and risk culture.

COMPENSATION OF DIRECTORS

 

The following table provides information on the Company’s compensation of non-management directors for 2010. In addition, the Company reimburses directors for reasonable out-of-pocket expenses attendant to Board membership.

 

Name  

Fees Earned

or Paid
in Cash

($)(1)

   

Stock

Awards
($)(2)

   

Option

Awards
($)(3)

   

Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)(4)

    All Other
Compensation
($)(5)
    Total ($)  

Mr. Akerson

  $ 130,000      $ 150,000      $ 0      $ 24,238      $ 16,339      $ 320,577   

Ms. Barshefsky

  $ 100,000      $ 150,000      $ 0      $ 0      $ 26,558      $ 276,557   

Ms. Burns

  $ 110,000      $ 150,000      $ 0      $ 0      $ 24,646      $ 284,646   

Mr. Chernin

  $ 100,000      $ 150,000      $ 0      $ 0      $ 11,460      $ 261,460   

Mr. Leschly

  $ 115,000      $ 150,000      $ 0      $ 0      $ 16,339      $ 281,339   

Mr. Levin

  $ 110,000      $ 150,000      $ 0      $ 0      $ 8,836      $ 268,836   

Mr. Leonsis(6)

  $ 45,000      $ 0      $ 0      $ 0      $ 505,113      $ 550,113   

Mr. McGinn

  $ 100,000      $ 150,000      $ 0      $ 0      $ 16,339      $ 266,339   

Mr. Miller

  $ 100,000      $ 150,000      $ 0      $ 0      $ 25,185      $ 275,185   

Mr. Reinemund

  $ 105,000      $ 150,000      $ 0      $ 0      $ 8,836      $ 263,836   

Mr. Walter

  $ 130,000      $ 150,000      $ 0      $ 0      $ 22,127      $ 302,127   

Mr. Williams

  $ 110,000      $ 150,000      $ 0      $ 0      $ 15,072      $ 275,072   

 

(1) Annual Retainers. In 2010, the Company paid its non-management directors an annual retainer of $90,000 for Board service and paid an additional annual retainer of $20,000 to members of the Audit and Risk Committee and $10,000 to members of the Compensation Committee, including the Chairs. The Company also paid an annual retainer to the Chair of each of the Committees as follows: Audit and Risk $20,000; Compensation $15,000; Nominating $10,000; and Public Responsibility $10,000. The Company pays 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% of our Board meetings and meetings of any Committee on which he or she serves. All the non-management directors, except for Messrs. McGinn and Reinemund, deferred all or a portion of their 2010 retainers into a cash account, a share equivalent unit account, or both, under the Deferred Compensation Plan for Directors and Advisors described below in note 2.

 

(2) Share Equivalent Unit Plan. To assure that each non-management director’s annual compensation is aligned with shareholder interests, each non-management director is credited with share equivalent units (SEUs) having a value of $150,000 upon election or re-election at each annual meeting of shareholders. Each SEU reflects the value of a common share of the Company. Each director receives additional SEUs as dividend equivalents on the units in his or her account. SEUs do not carry voting rights and must be held until a director ends his or her service. At that time, each SEU is payable in cash equal to the then value of one Company common share. The SEUs do not count toward the share ownership guidelines we have established for directors.

 

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   Upon his or her re-election to the Board on April 26, 2010, each non-management director was credited with 3,165 SEUs, based on the price of Company common shares on such date. We have reported in this column the aggregate grant date fair value of these SEUs in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation.

 

     As of December 31, 2010, the SEU balance in each director’s account was: Mr. Akerson 24,459; Ms. Barshefsky 38,802; Ms. Burns 37,740; Mr. Chernin 17,610; Mr. Leschly 24,459; Mr. Leonsis 0; Mr. Levin 13,928; Mr. McGinn 24,459; Mr. Miller 38,349; Mr. Reinemund 13,928; Mr. Walter 32,583; and Mr. Williams 24,063. 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 the Company’s Deferred Compensation Plan for Directors and Advisors, retainer amounts deferred into their SEU account and dividend equivalents thereon.

 

     Deferred Compensation Plan for Directors and Advisors. Non-management directors may defer the receipt of up to 100% of their annual cash retainer fees into either: (1) a cash account in which amounts deferred will be credited either to an account linked to 120% 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.

 

(3) Option Awards. The Company has not granted stock options to directors since April 2002. In April 2002 and in prior years, the Company made stock option grants to each non-management director on the date of the annual shareholders’ meeting. As of December 31, 2010, Mr. Leschly had 6,854 vested outstanding options.

 

(4) Retirement Benefits. We offer no retirement benefits to non-management directors who began their Board service after March 31, 1996. We pay a retirement benefit to non-management directors who began their Board service on or before March 31, 1996, have served on our Board for at least five years, and have never been our employees. The retirement benefit consists of a payment of $30,000 per year for each year a director served on the Board. Payments cease after a director’s death. One of our current directors, Mr. Akerson, is eligible to receive retirement benefits in the future. Included in this column is the change in actuarial present value from 2009 to 2010 of the accumulated benefit for Mr. Akerson in the amount of $24,238.

 

(5) Insurance. We provide our non-management directors who were directors for the full fiscal year 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 2010 in the amounts stated: Mr. Akerson $16,294; Ms. Barshefsky $26,513; Ms. Burns $24,602; Mr. Chernin $11,415; Mr. Leschly $16,294; Mr. Levin $8,791; Mr. McGinn $16,294; Mr. Miller $25,141; Mr. Reinemund $8,791; Mr. Walter $22,083; and Mr. Williams $15,027.

 

     Directors’ Charitable Award Program. The Company maintains 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. We will receive a $1,000,000 benefit following the death of a director, and we expect to donate one-half of the benefit to the American Express Foundation and one-half to the charitable organization that the director recommends. In 2010, the Company paid no premiums for policies on the participating directors.

 

     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.

 

(6) Consulting Agreement. As described on page 69, in July 2010 the Board of Directors elected Mr. Leonsis to the Board and at the same time asked him to devote significant time beyond that spent as a director to advise the Company in the areas of digital, online and mobile payments, strategic initiatives, technology development, and potential transactions. The Board approved a consulting services agreement between Mr. Leonsis and the Company. Amounts in this column include consulting fees in the amount of $505,113 earned by Mr. Leonsis in 2010.

 

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OWNERSHIP OF OUR COMMON SHARES

 

The table below shows how many American Express Company common shares certain individuals and entities beneficially owned on March 4, 2011. These individuals and entities include: (1) owners of more than 5% of our outstanding common shares; (2) our current directors; (3) the executive officers named in the Summary Compensation Table on page 48; and (4) all current directors and executive officers as a group. A person has beneficial ownership over 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.

 

Name

   Number of Shares
Owned(3)(4)
    Right to
Acquire(5)
     Percent of
Class(%)
 

Warren Buffett,
Berkshire Hathaway Inc. and subsidiaries
1440 Kiewit Plaza
Omaha, NE 68131

     151,610,700 (1)      —           12.61

Davis Selected Advisers, LP
2949 East Elvira Road, Suite 101
Tucson, AZ 85756

     66,218,899 (2)      —           5.51

Daniel F. Akerson

     85,541        —           *   

Charlene Barshefsky

     20,134        —           *   

Ursula M. Burns

     20,000        —           *   

Kenneth I. Chenault(6)

     984,067        3,835,876         *   

Peter Chernin

     24,400        —           *   

Edward P. Gilligan

     240,083        1,541,632         *   

Daniel T. Henry

     60,414        495,072         *   

Theodore J. Leonsis

     25,000        —           *   

Jan Leschly

     155,559        3,427         *   

Richard C. Levin

     2,000        —           *   

Richard A. McGinn

     18,412        —           *   

Edward D. Miller

     20,000        —           *   

Steven S Reinemund

     20,000        —           *   

Daniel H. Schulman

     150,488        —           *   

Stephen J. Squeri

     136,621        856,009         *   

Robert D. Walter

     230,300        —           *   

Ronald A. Williams

     27,500        —           *   

All current directors and executive officers (24 individuals)(7)

     2,976,908        11,836,046         1.23

 

 * 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, 2010. Of the shares listed in the table, National Indemnity Co. beneficially owns 120,255,879 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 owns 33.9% 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.

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 so long as Berkshire owns 10% or more of our voting securities. Berkshire made similar commitments to the Board of Governors of the Federal Reserve System. Berkshire and its subsidiaries have also agreed to follow our Board of Directors’ recommendations in voting Company common shares they own so long as Mr. Chenault is our Chief Executive Officer and

 

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Berkshire owns 5% 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% 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 Davis Selected Advisers, LP filed with the SEC, which contained information as of December 31, 2010.

 

(3) This column includes shares held in RSP accounts on March 4, 2011, as follows:

 

Name

   Number of Shares
in Plan Accounts
 

K.I. Chenault

     22,432   

E.P. Gilligan

     1,581   

D.T. Henry

     19   

D.H. Schulman

     0   

S.J. Squeri

     4,631   

All current executive officers

     63,141   

 

(4) Certain executive officers held restricted shares on March 4, 2011, which we include in this column. Restricted stock units are not included in this table, since they are not beneficially owned under SEC rules. The executive may vote the restricted shares, but may not sell or transfer them during the restricted period. These restrictions lapse over a period of years ending in 2014. The individuals in the table held the following number of restricted shares:

 

Name

   Number of
Restricted Shares
 

K.I. Chenault

     0   

E.P. Gilligan

     139,676   

D.T. Henry

     0   

D.H. Schulman

     150,488   

S.J. Squeri

     38,545   

All current executive officers

     424,432   

 

(5) These are shares that the named individuals have the right to acquire within 60 days upon the exercise of stock options they hold.

 

(6) Includes 375,535 shares that are beneficially owned by Mr. Chenault and serve as security for a credit facility that he may draw on from time to time. The current outstanding balance on that facility is zero. The remaining 500,000 shares that Mr. Chenault owns are not part of this facility.

 

(7) On March 4, 2011, the current directors and executive officers beneficially owned 14,812,954 shares, or about 1.23% of our outstanding shares. No current director or executive officer beneficially owned more than 1% of our outstanding shares.

ELECTION OF DIRECTORS

 

Item 1—Election of Directors

Our Board of Directors currently has 13 members. Each current director is standing for re-election to hold office until the next Annual Meeting of Shareholders and until his or her successor is duly elected and qualified. If a director resigns or retires during the year, the Board of Directors, with input from the Nominating Committee, may elect another director as a replacement. The Board may also add new members during the year based on a number of factors, such as the size of the Board and the Board’s desire to add fresh perspectives or expertise. In July 2010, the Board elected Theodore J. Leonsis as a new director. Mr. Leonsis is an Internet pioneer with extensive experience in digital businesses, and he had been advising the Company on digital and online payments strategy since the beginning of 2010 after the Company acquired Revolution Money Inc., of which he had been Chairman.

 

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The Board has appointed Daniel T. Henry, Louise M. Parent, and Carol V. Schwartz as proxies who will vote your shares on your behalf. These individuals intend to vote for the election of each of the 13 candidates nominated by the Board unless you indicate on the proxy or voting instruction form that your vote is withheld from any or all of the nominees. The telephone and Internet voting procedures will include instructions on how to withhold your vote. We expect that each nominee will be able to serve if elected as a director. However, if any nominee is not able to serve, the persons named as proxies may vote for another person as nominated by the Nominating Committee.

As described on pages 71 to 72 under Other Matters, Peter Lindner, a former employee of the Company, notified the Company in January 2011 of his request that he be listed by the Company as a nominee for election to the Company’s Board of Directors at the Meeting and of his intention to nominate himself at the Meeting. The Company determined not to nominate him as a director. However, based on his notice, the number of nominees for election at the Meeting will exceed the number of directors to be elected, which will result in a contested election. Under the Company’s majority voting policy, in a contested election majority voting is replaced by plurality voting, so that the number of persons equal to the number of directors to be elected who receive more votes than other nominees will be the persons elected to the Board for the following year. The Board recommends that you vote your shares for the candidates nominated by the Board.

Director Qualifications and Experience

The Board of Directors, acting through the Nominating Committee, seeks a Board of Directors that, as a whole, possesses the experiences, skills, backgrounds, and qualifications appropriate to function effectively in light of the Company’s current and evolving business circumstances. The Nominating Committee reviews the size of the Board, the tenure of our directors, and their skills, backgrounds, experiences, and contributions in determining the slate of nominees and whether to seek one or more new candidates. The Nominating Committee seeks directors with established records of significant accomplishment in business and areas relevant to our strategies and who also share the individual characteristics identified in our Governance Principles that we believe are essential to achieve a well-functioning deliberative body: integrity, independence, energy, forthrightness, analytical skills, commitment to the Company and to the interests of all shareholders, and willingness to challenge and stimulate management in an environment of trust. We believe that all of our director nominees share these important characteristics, which has resulted in an active, highly engaged, and well-functioning Board of Directors.

Our Company is a global service company that provides customers with access to products, insights, and experiences that enrich lives and build business success. We provide innovative payment, travel, and expense management solutions for individuals and businesses of all sizes around the world. We have a highly valued brand, we are regulated in many jurisdictions, and we operate in a rapidly evolving, technology-dependent, and highly competitive environment. Our directors’ skills, expertise, backgrounds, and experiences collectively encompass the following areas:

 

   

Banking and financial services industry experience, which is relevant to understanding our business operations, competitive environment, and regulatory requirements;

 

   

Digital, online, mobile, and technology experience, which is relevant as we evolve our traditional businesses for an increasingly digital world;

 

   

Government, legal, and public policy experience, which is relevant to the oversight of our Company’s legal and regulatory compliance, government and regulatory relations, and social and public responsibility;

 

   

Brand management and marketing expertise, which is relevant as we fulfill our vision to be the world’s most respected service brand;

 

   

Global expertise, which is relevant as we grow our businesses in international and emerging markets;

 

   

Financial expertise, which is relevant to advising on and overseeing our capital structure, financing and capital markets strategies, investments, financial reporting, and internal controls;

 

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Financial, investment, and mergers and acquisitions expertise, which is relevant to advising on our business development, acquisition, and joint venture strategies and to evaluating potential business partners and business plans;

 

   

Public company board and committee experience, which is relevant to providing guidance and insights relating to company and board governance, board operations and effectiveness, oversight of financial reporting, compliance, controls and risk management, assessment of management performance, and oversight of our corporate citizenship philosophy and programs.

Our directors have held senior positions as leaders of various large, complex organizations and in government, demonstrating their ability to develop and execute significant and complex policy and operational objectives at the highest levels. Many of our directors have been chief executive or chief operating officers of large, global businesses through which they have developed expertise and experience in core business skills such as strategy and business development, responding to rapidly evolving business environments, fostering innovation, operations, talent management and leadership development, and compliance, controls and risk management.

The expertise, skills and experiences of our directors enable the Board to provide sound judgment, critical viewpoints, and guidance about the issues, opportunities and challenges facing the Company in today’s environment and to evaluate our performance.

The Board of Directors recommends a vote FOR the election of these nominees as Directors.

We indicate below, in italics, the principal occupation of each nominee. We also indicate other information about the backgrounds and experiences of the nominees including specific qualifications, experience, skills and expertise considered by the Nominating Committee as relevant to each of the nominee’s candidacy as a director.

 

DANIEL F. AKERSON   Director since 1995   Age 62

Chairman and Chief Executive Officer, General Motors Company, since January 2011 and Chief Executive Officer since September 2010. Prior to joining General Motors, Mr. Akerson was a Managing Director of The Carlyle Group, a private equity firm (from March 2003 to August 2010), serving variously as the head of global buyout and as co-head of U.S. buyout. Mr. Akerson has been a director of General Motors since July 2009. He is a former director of Booz Allen Hamilton, Inc., Freescale Semiconductor, Inc., Manor Care, Inc., MultiPlan, Inc., Time Warner, Inc. and XO Holdings, Inc. Mr. Akerson served as a chairman, chief executive officer, or president of several major companies including General Instrument Corp. (1993 to 1995), MCI Communications Corp. (1983 to 1993), Nextel Communications Inc. (1996 to 1999), and XO Communications (late 1999 to 2003). Mr. Akerson led the successful restructuring of XO Communications, Inc., which filed a voluntary bankruptcy petition in June 2002.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience, including as chief executive officer, in global technology-related and consumer goods businesses

 

   

Core business, management, and leadership skills

 

   

Financial, investment, mergers and acquisitions, and global expertise

 

   

Public company director and committee experience

Mr. Akerson is an accomplished executive with extensive public company operating and management experience, and he brings to the Board his financial expertise, business analytic skills, and outstanding financial, operational, and core business skills as well as the perspective of a current chief executive officer and his public company director experience.

 

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CHARLENE BARSHEFSKY   Director since 2001   Age 60

Senior International Partner, WilmerHale, multinational law firm, Washington, D.C., since 2001, practicing in areas including international business transactions, government relations, market access, and regulation of business and investment. Prior to joining WilmerHale, Ambassador Barshefsky was the United States Trade Representative and a member of the President’s Cabinet from 1997 to 2001 and Acting and Deputy United States Trade Representative from 1993 to 1996, during which time she served as chief trade negotiator and principal trade policymaker for the United States and negotiated complex market access, regulatory, and investment agreements with virtually every major country in the world. Amb. Barshefsky is a director of The Estée Lauder Companies Inc., Starwood Hotels & Resorts Worldwide, Inc., and Intel Corporation. She is a trustee of the Howard Hughes Medical Institute and a member of the Council on Foreign Relations. Through her government and private experience, Amb. Barshefsky has substantial expertise in doing business in China and other emerging markets.

Specific qualifications, experience, skills, and expertise:

 

   

Senior leadership and government experience

 

   

Government, legal, and public policy expertise

 

   

Public company director and committee experience at global technology and consumer branded corporations

 

   

Global expertise

Ambassador Barshefsky brings to the Board a combination of high-level U.S. government service, experience as a strategic advisor to numerous U.S. and international companies with respect to their international businesses, experience with foreign governments, and broad legal and public policy expertise, as well as her public company director experience.

 

URSULA M. BURNS   Director since 2004   Age 52

Chairman and Chief Executive Officer, Xerox Corporation, a global company engaged in business processes and document management, since May 2010; Chief Executive Officer and Director since July 2009; President and Director, April 2007 to July 2009; Senior Vice President and President, Business Group Operations, January 2003 to April 2007. Ms. Burns is a director of The University of Rochester, The National Academy Foundation, CASA (The National Center on Addiction and Substance Abuse) at Columbia University, Massachusetts Institute of Technology, the U.S. Olympic Committee, and FIRST (For Inspiration and Recognition of Science and Technology). Ms. Burns was named by President Barack Obama to help lead the White House national program on STEM (Science, Technology, Engineering, and Math) in November 2009 and was appointed Vice Chair of the President’s Export Council in March 2010. Ms. Burns is a former director of Boston Scientific Corporation.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience, including as chief executive officer, at a technology-driven global business services company

 

   

Core business, management, and leadership skills

 

   

Global and technology expertise

 

   

Public company director and committee experience

Ms. Burns has extensive senior management, operating, and leadership experience through her business career at Xerox. Ms. Burns brings to the Board her core business and leadership skills, her perspective as a current CEO of a technology-driven global company, her experience in driving innovation, technology development, and business expansion, as well as her public company director and public policy experience.

 

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KENNETH I. CHENAULT   Director since 1997   Age 59

Chairman and Chief Executive Officer, American Express Company, April 2001 to present; Chief Executive Officer, January 2001 to April 2001. Mr. Chenault serves as a director of International Business Machines Corporation and The Procter & Gamble Company. Mr. Chenault was appointed by President Barack Obama to the President’s Council on Jobs and Competitiveness in February 2011. Mr. Chenault is a member of The World Trade Center Memorial Foundation and a trustee of the NYU Hospitals Center and the New York University School of Medicine Foundation.

Specific qualifications, experience, skills, and expertise:

 

   

Company Chief Executive Officer’s unique perspective and insights, including in respect of the Company’s businesses, relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges

 

   

Operating, business, and senior management experience as chief executive officer of a global business

 

   

Expertise in payments, network, and travel businesses and in brand management

 

   

Core business, management, and leadership skills

 

   

Public company director and committee experience

Mr. Chenault brings the unique perspective of the Company’s Chief Executive Officer, his expertise in the payments, network, and travel businesses, his relationships in the United States and internationally with the Company’s customers, suppliers, and business partners, and his deep knowledge of the Company’s industry, competitive developments, and executive talent, as well as his public company director experience, to his leadership of the Board.

 

PETER CHERNIN   Director since 2006   Age 59

Founder and Chairman, Chernin Entertainment, Inc., a film and television production company, and The Chernin Group, which is involved in strategic opportunities in media, technology, and entertainment, June 2009 to present. Mr. Chernin was President, Chief Operating Officer, and a director of News Corporation from October 1996 to June 2009, and was Chairman and Chief Executive Officer of the Fox Group, where he oversaw the global operations of the company’s film, television, satellite cable, and digital media businesses. At News Corporation, Mr. Chernin led the company’s expansion into the broadband and mobile markets, through the creation of Fox Interactive Media, Hulu, Jamba, and other digital properties. Mr Chernin is a chairman and co-founder of Malaria No More and a director of the Harvard AIDS Initiative. Mr. Chernin is a former director of News Corporation, DirecTV, Inc., and Gemstar/T.V. Guide International.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience at a leading global media corporation

 

   

Core business, management, and leadership skills

 

   

Expertise in online and digital markets, media, social networking, and other new technologies

 

   

Public company director and committee experience

Mr. Chernin brings to the Board his extensive senior leadership, financial, and management experience, and his expertise in building industry leading businesses, developing innovative and forward-thinking approaches, and expanding traditional businesses in online and digital markets, as well as his core business skills and public company director experience.

 

THEODORE J. LEONSIS   Director since 2010   Age 55

Chairman and Chief Executive Officer, Monumental Sports & Entertainment, LLC, a sports and entertainment company that owns the NBA’s Washington Wizards, NHL’s Washington Capitals, WNBA’s Washington Mystics, the Verizon Center in Washington, D.C. and the Baltimore-Washington Ticketmaster franchise, since 1999. Mr. Leonsis is also a Vice Chairman Emeritus of AOL LLC, a leading global ad-supported Web company, since December 2006.

 

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Mr. Leonsis held a number of other executive positions with AOL from September 1994 to December 2006, most recently as Vice Chairman and President, AOL Audience Business. Mr. Leonsis is a filmmaker, an author, and a director of Rosetta Stone, NutriSystem, Inc., and several private Internet and technologies companies including Groupon, Clearspring Technologies, and SnagFilms. Mr. Leonsis was Chairman of Revolution Money, Inc., which the Company acquired in January 2010.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience at technology-driven global Internet services company

 

   

Internet pioneer, including as founder of a company considered the first new-media marketing business

 

   

Expertise in identifying business opportunities and driving new strategies based on changing technologies, social media, digital marketing, and the Internet

 

   

Brand management and marketing expertise

Mr. Leonsis is an acknowledged innovator and Internet entrepreneur. He brings to the Board his experiences in digital businesses, his innovative approaches, and his expertise in identifying business opportunities and driving new strategies based on changing technologies, social media, and the Internet.

 

JAN LESCHLY   Director since 1997   Age 70

Founder and Chairman, Care Capital LLC, a private investment firm, since May 2000. Prior to establishing Care Capital, Mr. Leschly was Chief Executive Officer of SmithKline Beecham PLC from 1994 to 2000. Mr. Leschly serves as a director of The A.P. Moller-Maersk Group, Vaxart Pharmaceuticals, and Elevation Pharmaceuticals. He is Chairman of the Board of Directors of EPIGenesis Pharmaceuticals Inc. and an Adjunct Professor at the Copenhagen Business School. Mr. Leschly is a former director of Viacom, Inc. and Dynavax Technologies, Inc.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and management experience, including as chief executive officer, of global consumer, branded businesses

 

   

Core business, management, and leadership skills

 

   

Financial, investment, and mergers and acquisitions expertise

 

   

Public company director and committee experience

Mr. Leschly brings to the Board his extensive experience growing and leading a global consumer, branded corporation, his financial, investment, brand management, leadership, and core business skills, his expertise in evaluating and guiding new business ventures, and his public company director experience.

 

RICHARD C. LEVIN   Director since 2007   Age 63

President, Yale University, a private, independent university, since July 1993, and Frederick William Beinecke Professor of Economics. Former Chair of Yale’s Economics Department and Dean of Yale’s Graduate School of Arts and Science. Mr. Levin is a trustee of the William and Flora Hewlett Foundation, one of the largest philanthropic organizations in the United States. He is a member of the National Committee on United States-China Relations and a Fellow of the American Academy of Arts and Sciences. Mr. Levin is a trustee and vice chair of The Climate Works Foundation. He is a director of C-3, an energy resource management company, and a former director of Satmetrix Systems, Inc. and Lucent Technologies. Mr. Levin has served on a number of Presidential Commissions and was appointed by President Barack Obama to serve on the President’s Council of Advisors for Science and Technology.

 

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Specific qualifications, experience, skills, and expertise:

 

   

Recognized as a leader of American higher education

 

   

Distinguished economist, with expertise in economic theory, statistical analysis, modeling, and analyzing economic trends

 

   

Leader in U.S.-China cooperation through his development of extensive relationships between Yale University and China

 

   

Public company director and committee experience

Mr. Levin brings to the Board his experience and vision in leading Yale University, one of the world’s most prestigious institutions of higher education, his involvement in a wide range of international initiatives at Yale University, his expertise in economics, statistics, and analysis, and his public company director and public policy experience.

 

RICHARD A. MCGINN   Director since 1998   Age 64

General Partner, MR Investment Partners, a private equity firm that invests in technologies businesses, since April 2010. Mr. McGinn was formerly a General Partner of RRE Ventures, a private firm that invests in early stage technologies businesses, from August 2001 to April 2010. Prior thereto, Mr. McGinn was the Chairman (from February 1998 to October 2000), Chief Executive Officer (from 1997 to 2000), and President (from 1996 to 1997) of Lucent Technologies, Inc. Mr. McGinn serves as a director of VeriFone Holdings, Inc. and Viasystems Group, Inc.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and management experience, including as chief executive officer, in global communication systems, networking, and technology businesses

 

   

Core business, management, and leadership skills, and financial and investment expertise

 

   

Expertise in global business opportunities in telecommunications, mobile, online, and new technologies

 

   

Public company director and committee experience

Mr. McGinn brings to the Board his deep business, investment, and financial experience, his expertise in analyzing business developments and opportunities in telecommunications, mobile, online, and new technologies, as well as his core business and leadership skills and public company director experience.

 

EDWARD D. MILLER   Director since 2003   Age 70

Former President and Chief Executive Officer, AXA Financial, Inc., a U.S.-based financial services organization providing asset management, financial advisory, and insurance services, since May 2001; member, Supervisory Board and Senior Advisor to Chief Executive of AXA Group, June 2001 to April 2003; Chief Executive Officer, August 1997 to June 2001. Prior to joining AXA Financial, Mr. Miller served as the President of Chemical Bank and held senior positions at Manufacturers Hanover Trust and The Chase Manhattan Bank. Mr. Miller is a director of Korn/Ferry International and The Feinstein Institute for Medical Research. He serves as Chairman of the Partnership for New York City’s Security and Risk Management Task Force and as a trustee of the New York City Police Foundation and of Phoenix House. Mr. Miller is a former director of KeySpan Corp. and Topps Company.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience, including as chief executive officer, at highly regulated, global financial services businesses

 

   

Core business, management, and leadership skills

 

   

Banking and financial services expertise, and expertise in card and payment networks

 

   

Public company director and committee experience

 

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Mr. Miller brings to the Board his extensive experience in the U.S. banking and payments industry and in global financial services businesses, his experiences leading highly regulated global entities, and his extensive leadership, operating, management, and core business skills, as well as his public company director experience.

 

STEVEN S REINEMUND   Director since 2007   Age 62

Dean, Wake Forest Schools of Business, at Wake Forest University, a private, independent university, July 2008 to present, and Professor of Leadership and Strategy. Retired Chairman of the Board, PepsiCo, Inc., a company that produces beverages and convenient foods, since May 2007; Executive Chairman of the Board, October 2006 to May 2007; Chairman and Chief Executive Officer, May 2001 to October 2006; President and Chief Operating Officer, September 1999 to May 2001. Mr. Reinemund is a director of Marriott International, Inc., Exxon Mobil Corporation and Wal-Mart Stores, Inc. He is a Trustee of The Cooper Institute and a member of The Business Council. Mr. Reinemund is a former director of Johnson & Johnson and PepsiCo, Inc.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience, including as chief executive officer, of global consumer, branded businesses

 

   

Core business, management, and leadership skills

 

   

Expertise in brand management, business strategy, and leadership

 

   

Public company director and committee experience

Mr. Reinemund brings to the Board his expertise in growing leading businesses, developing global business strategies, brand management, innovation and strategy, and leadership development, as well as his core business skills and public company director experience.

 

ROBERT D. WALTER   Director since 2002   Age 65

Founder and Former Chairman and Chief Executive Officer, Cardinal Health, Inc., a company that provides products and services supporting the health care industry. Mr. Walter retired from Cardinal Health in June 2008. Prior to his retirement, he served as Executive Director, November 2007 to June 2008; Executive Chairman of the Board, April 2006 to November 2007; and Chairman and Chief Executive Officer, 1979 to April 2006. Mr. Walter is a director of Nordstrom, Inc., YUM! Brands, Inc., and Battelle Memorial Institute. Mr. Walter is a former director of Cardinal Health and CBS Corporation (and its predecessor, Viacom Inc.).

Specific qualifications, experience, skills, and expertise:

 

   

Operating and management experience, including as chief executive officer, of a global corporation

 

   

Core business, management, and leadership skills

 

   

Financial, investment, and mergers and acquisitions expertise

 

   

Public company director and committee experience

Mr. Walter brings to the Board his business acumen and financial, investment, core business, and leadership skills developed as the founder and chief executive officer of a global Fortune 100 company, a successful entrepreneur and investor, as well as his public company director experience.

 

RONALD A. WILLIAMS   Director since 2007   Age 61

Chairman, Aetna Inc., a leading diversified health care benefits company, since November 2010; Chairman and Chief Executive Officer, October 2006 to November 2010; President and Chief Executive Officer, February 2006 to October 2006; and President, May 2002 to February 2006. Mr. Williams is a director of The Boeing Company. He is

 

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a member of The Business Council and a member of the Dean’s Advisory Council and Alfred P. Sloan Management Society at the Massachusetts Institute of Technology. He is a former director of Lucent Technologies. Prior to joining Aetna, Mr. Williams co-founded several businesses and served in senior management positions at a number of other companies.

Specific qualifications, experience, skills, and expertise:

 

   

Operating and senior management experience, including as chief executive officer, in a highly regulated industry

 

   

Core business, management, and leadership skills and financial expertise

 

   

Expertise in creating innovation through information technology

 

   

Public company director and committee experience

Mr. Williams brings to the Board his extensive management, operations, and business experience leading in a rapidly changing and highly regulated industry, his focus on innovation through information technology, his leadership, financial and core business skills, and his public company director experience.

 

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RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Item 2—Ratification of Appointment of Independent Registered Public Accounting Firm

On February 24, 2011, the Audit and Risk Committee of the Board of Directors appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year beginning January 1, 2011.

Each year the Audit and Risk Committee reviews our accounting firm’s qualifications, performance, and independence in accordance with regulatory requirements and guidelines. At least every ten years, the Audit and Risk Committee charter requires a detailed review of the Company’s accounting firm, which includes a comparison of resources available in other firms. The Committee conducted such a review in 2004, and appointed PricewaterhouseCoopers LLP on November 22, 2004 as our independent registered public accounting firm for the year beginning January 1, 2005.

We are asking shareholders to ratify the Committee’s appointment of PricewaterhouseCoopers LLP for 2011. In the event the shareholders fail to ratify the appointment, the Audit and Risk Committee will consider it a direction to consider other accounting firms for the subsequent year.

One or more representatives of PricewaterhouseCoopers LLP will be present at the Meeting and will be given the opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions.

Audit Fees

The aggregate fees billed or to be billed for each of the last two fiscal years for professional services rendered for the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and services that were provided in connection with statutory and regulatory filings or engagements and other attest services were $17.9 million for 2010 and $17.0 million for 2009.

Audit-Related Fees

The aggregate fees billed or to be billed for each of the last two fiscal years for assurance and related services that were reasonably related to the performance of the audit or review of the Company’s financial statements were $2.2 million for 2010 and $1.9 million for 2009. The nature of the services performed for these fees included, among other things, employee benefit plan audits, internal control reviews, attest services not required by statute or regulation, and consultations concerning financial accounting and reporting matters not classified as audit.

Tax Fees

The aggregate fees billed or to be billed for each of the last two fiscal years for professional services rendered for tax compliance and expatriate tax services were $28,000 for 2010 and $127,000 for 2009.

All Other Fees

The aggregate all other fees billed or to be billed for fiscal 2010 was $1.7 million. The reason for the increase over 2009 was that these fees related to permissible services, primarily consulting and advisory services, that were provided to the Company by Diamond Management & Technology Consultants, Inc. (Diamond) under agreements that the Company had entered into with Diamond prior to its acquisition by PricewaterhouseCoopers LLP in November 2010. There were no fees billed or to be billed for 2009 for products and services other than those reported in the three prior categories.

 

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Policy on Pre-Approval of Services Provided by Independent Registered Public Accounting Firm

The terms of the engagement of the Company’s independent registered public accounting firm are subject to the specific pre-approval of the Audit and Risk Committee. All audit and permitted non-audit services require pre-approval by the Audit and Risk Committee in accordance with pre-approval procedures established by the Committee. All such services provided by our independent registered public accounting firm have been pre-approved. The procedures require all proposed engagements of such firm for services of any kind to be directed to the Company’s General Auditor and then submitted for approval to the Audit and Risk Committee prior to the beginning of any services.

Other Transactions with PricewaterhouseCoopers

We have a number of business relationships with individual member firms of the worldwide PricewaterhouseCoopers organization. Our subsidiaries provide card and travel services to some of these firms and these firms pay fees to our subsidiaries. These services are in the normal course of business, and we provide them pursuant to arrangements that we offer to other similar clients.

The Board of Directors recommends that you vote FOR the following resolution:

RESOLVED, that the appointment by the Audit and Risk Committee of the Board of Directors of PricewaterhouseCoopers LLP, independent registered public accounting firm, to audit the accounts of the Company and its subsidiaries for 2011 is ratified and approved.

 

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EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

The American Express executive compensation program is designed to reward the Company’s senior management for effectively building shareholder value. In 2010, the Compensation Committee of the Board of Directors sought input from investors and adjusted the program to more closely align the interests of our shareholders and senior executives.

2010: A Year of Momentum and Industry Leading Performance

 

American Express made the transition from recession to recovery sooner— and better— than most of our major competitors. Despite continued uncertainty in economic and regulatory environments, American Express delivered on its priorities for the year to: drive growth, drive efficiency and deliver superior service. Through the strength of the business model we have built and our senior leadership team, we led the card-issuing businesses of our major competitors in:

 

•    Billed business growth

 

•    Credit quality

 

•    Bottom line earnings

 

•    Customer satisfaction

     

A Differentiated Business Model

 

The American Express business model is unique in the payments industry. We are the only company with a strong global presence in all parts of the payments chain as a card issuer, network, merchant processor and acquirer. We are strong proponents of the “Service Profit Chain”— engaged employees deliver superior customer service, resulting in satisfied customers, which leads to superior financial results for shareholders.

Our performance on key measures compared to last year’s results is shown below:

 

       
Measure   2010 Actual Results   Change from Last Year   Comments
       
Billed Business   $713 billion   +$93 billion   Achieved record level of billed business as well as record average spend per card
       

Diluted EPS (EPS)

  $3.35   $1.81 increase   Net income of $4.1 billion was back to the peak we achieved in 2007
       
ROE   27.5%   +12.9 percentage points   ROE in line with “on average and over time” target

In addition to delivering these 2010 results, we made strong progress on an overall digital strategy that entails capitalizing on new technologies and online capabilities. We made a record level of investments throughout the Company following a carefully developed roadmap of short-, medium-, and longer-term initiatives that focused on both organic growth and acquisitions to broaden our Company’s product offerings globally. These investments included the launch of Enterprise Growth, a new organization designed to expand our mobile and online capabilities and develop fee-based services.

 

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At year-end 2010, the Company’s 1-year Total Shareholder Return (TSR) was below the S&P Financials and S&P 500 indices, while 2-year TSR exceeded both indices by a significant amount, and 3-year TSR exceeded the S&P Financials Index. We focus on sustained TSR performance over a long-term time horizon as well as short-term performance, which can be influenced by near-term external factors.

 

   
      Total Shareholder Return  
   1-Year      2-Year      3-Year  
       

S&P Financials Index

     12.2      31.5      (41.2 %) 
       

S&P 500 Index

     15.1      45.5      (8.3 %) 
       

American Express

     7.8      143.8      (11.6 %) 

Overview of Compensation Program

Our pay program is designed to reward achievement of goals and to attract, retain and motivate our leaders in an increasingly competitive talent market. The components of our annual total direct compensation (TDC) are:

 

   
Component    Description
   
Base Salary    Provides competitive fixed pay based on responsibilities, skill set, and experience
   
Annual Incentive Award (AIA)    Pays annual cash reward for performance against annual financial, customer, and employee goals as well as for progress against strategic initiatives that we expect to drive our growth over the moderate to long term
   
Long-Term Incentive Awards (LTIA)   

Rewards executives when they achieve goals that drive TSR, through a combination of:

 

•    Performance-vested cash awards (Portfolio Grants or PGs), focused on medium-term goals that create shareholder value

 

•    Stock options (SOs), focused on sustained stock performance

 

•    Performance-vested shares (Restricted Stock Units or RSUs), focused on both a medium-term goal (ROE) and stock price

New Developments

The Compensation Committee changed several components of our executive compensation program in 2010 to strengthen the linkage between pay and long-term performance. The changes reflect bank regulatory guidance, feedback from shareholders and the Compensation Committee’s independent compensation consultant, and the Compensation Committee’s consideration of the results of the prior shareholder advisory votes regarding executive compensation. Most of these changes are effective for awards granted beginning January 2011 and apply to all Named Executive Officers (NEOs) except where noted.

 

   
What Changed    Why and How It Changed
   
AIA and Portfolio Grant payouts in restricted stock instead of cash for the CEO   

Consistent with emerging practices for financial services firms to emphasize long-term awards and equity ownership, most of the CEO’s cash AIA and all PG payouts were in the form of RSUs, which vest one year from the grant date.

 

One-half of the net shares received upon vesting cannot be sold until one year after retirement.

 

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What Changed    Why and How It Changed
   
RSUs vest based on our ROE performance target and now comprise half of annual LTIA share awards    Consistent with emerging practices for performance-vested equity awards, half of the LTIA equity shares granted to NEOs are RSUs that vest depending on Company performance against our “on average and over time” ROE target of at least 25%. The other half of the LTIA shares granted are stock options.
   
Portfolio Grants will be earned over a three-year performance period    All new PGs will have a three-year performance period rather than the one-year performance period we used in 2009 and 2010, as multi-year business plans become clearer following the economic crisis.
   
Eliminated performance-based above-market interest in the Company’s deferred compensation plan    Consistent with current market practices, the nonqualified deferred compensation plan now uses market-based investment choices, replacing the previous design that provided an opportunity for above-market interest depending on our ROE performance.
   
Eliminated single-trigger for equity vesting in change in control situations    Consistent with emerging practices, equity grants made after 2010 now require termination of employment in addition to a change in control for acceleration of equity grant vesting (known as “double-trigger” vesting).
   
Stock option grants are better aligned with market practice    Consistent with current market practices, stock option valuation has been changed so that grants are based on the Black-Scholes value on the grant date (the Company had been using a 4:1 option-to-share ratio as a planned value).
   
Eliminated several perquisites    Consistent with emerging practices, we eliminated several perquisites. For example, we now require our CEO to reimburse the Company for personal use of corporate aircraft in excess of $200,000. We continue to pay for up to $200,000 in personal use without reimbursement, because a significant portion of this use is for our CEO to attend outside board meetings, which the SEC characterizes as personal use.

Other Recently Adopted Best Practices

 

   
What Changed    How It Changed
   
Eliminated cash dividends paid on unvested RSUs to NEOs    Dividends on unvested RSUs are not payable to NEOs unless and until the underlying shares vest (effective with January 2011 grants).
   
Eliminated excise tax gross-up in change in control situations    Excise tax gross-ups were eliminated (in the case of LTIAs, applies to grants after December 31, 2010).
   
Robust stock ownership guidelines    NEOs are required to own a specific number of shares and retain a portion of shares for one year after stock option exercises and RSU vestings.
   
Clawback condition on CEO’s 2009 and 2010 bonus    We added a clawback provision to cash bonuses paid to our CEO for 2009 and 2010 performance.

 

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CEO Pay At-A-Glance

The Compensation Committee determined that the appropriate total direct compensation for Mr. Chenault for 2010 performance was $20.5 million. This amount is the same as for 2009 despite our stronger financial performance (including a 118% increase in EPS) and a substantial rise in billed business that translated into a greater share of total plastic spending. It also reflected a return to revenue growth that came in below our “on average and over time” target but still outpaced the card businesses of our major competitors.

The pay mix for 2010 performance remained the same as in the prior year with respect to salary, AIA, and LTIA. However, the Compensation Committee changed the CEO’s LTIA mix to place more emphasis on performance RSUs. The Compensation Committee also determined to pay 61% ($3.125 million) of Mr. Chenault’s 2010 AIA in RSUs rather than cash. These RSUs vest in one year, and one-half of the net shares received upon vesting cannot be sold until one year after retirement to align the CEO’s post-retirement financial interest with the financial success of the Company.

 

   
Pay Component   Year-End Decisions  
  January 2010     January 2011  
  $000s     $000s     % of Pay  

Annualized Base Salary

  $ 2,000      $ 2,000        10

Annual Incentive Award (AIA)

  $ 5,125      $ 5,125        25

•    Cash

  $ 5,125      $ 2,000       

•    Stock

    —        $ 3,125       

Long-Term Incentive Awards

         

•    Restricted Stock Units

  $ 2,050      $ 6,057        30

•    Stock Options

  $ 6,200      $ 2,193        10

•    Portfolio Grants Target

  $ 5,125      $ 5,125        25
                     

Total TDC

  $ 20,500      $ 20,500        100

It is important to recognize that the way the Compensation Committee presents TDC in the table above is different from the SEC-required disclosure in the “Summary Compensation Table” and is not a substitute for the information in that table (shown on page 48). Rather, it is intended to show how the Compensation Committee linked the CEO’s TDC and its components to the Company’s performance results for the prior year. The number of stock options for January 2010 is based on a 4:1 option to share ratio, while the number of stock options for January 2011 is based on the Black-Scholes value.

The Compensation Committee also approved $6.093 million in payouts of Portfolio Grants awarded in prior years whose performance period ended in 2010 (not shown above because these payments relate to TDC awarded in prior years). Consistent with the change in the form of payments of the 2010 AIA, these PGs were also paid in RSUs rather than cash. These RSUs vest in one year, and one-half of the net shares received upon vesting cannot be sold until one year after retirement. (See pages 42 to 43 for the performance metrics behind these PG payouts.)

 

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2010 PERFORMANCE REVIEW

Our Performance Framework

Our Company and CEO performance are assessed using a four-component performance framework. This framework was developed in 2010 at the direction of the Compensation Committee to provide more clarity and transparency around how performance is evaluated and compensation decisions are made. The framework was developed with input from the Compensation Committee, its independent compensation consultant, and management. The framework provides a broad and balanced view of the Company’s and CEO’s performance considering both quantitative and qualitative factors and assists with the Compensation Committee’s judgment when making pay decisions.

LOGO

 

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A. Performance Against Annual Goals

Overall we performed well against all of our annual service profit chain goals by focusing on our priorities for 2010: drive growth, drive efficiency, and deliver superior service.

Shareholder Goals and Transformational Initiatives. The performance goals for 2010 were set by the Compensation Committee at a time of overall weakness in the economy. Nonetheless, they called for a significant increase in net income, a return to revenue growth, higher returns on equity, and higher levels of customer satisfaction. Our 2010 results relating to EPS, ROE and billed business growth, and our managed net write-off rates exceeded our goals. We fell short of our cards-in-force growth goal, but showed significant improvement over 2009 results (a decline of 4.9% in 2009; an increase of 3.5% in 2010).

 

       
Measure   2010 Goals   2010 Actual Results   vs. Goal
Year Over Year EPS Growth   Greater than 60% Growth   118%   Exceeds
Year Over Year ROE Growth   5 to 7 percentage points   12.9 percentage points   Exceeds
Year Over Year Billed Business Growth   7% to 12%   15%   Exceeds
Cards-in-Force Growth   5% to 6%   3.5%   Below Target
Managed Net Write-Off Rate (U.S.)   7.6% to 6.5%   5.8%   Exceeds

We implemented a digital strategy that generated strong growth in online cardmember spending and developed an overall investment roadmap to put the Company in a strong position for the years ahead. We launched more than our target number of new or modified products across major markets, together with new fee services. Across the Company, we continued to improve our processes and lower marginal costs by expanding our online service capabilities, optimizing our internal business processes in areas such as procurement, and optimizing our real estate footprint.

Customer Goals. American Express earned the J.D. Power Award for Customer Satisfaction within the U.S. Credit Card industry for the fourth year in a row. Our “Recommend to a Friend” and “Top Box” customer scores in the United States, which we developed as measures of customer satisfaction, improved over 2009 by 11 and 7 percentage points, respectively. Attrition rates across all Proprietary Card portfolios improved significantly.

Employee Goals. American Express continued to be recognized as an employer of choice on a global basis as evidenced by multiple external recognitions, including Working Mother 100 Best Companies, DiversityInc Top 50, Fortune’s 100 Best Companies to Work For, and various Employer of Choice awards in Argentina, Mexico, Japan, Australia, India, and the United Kingdom. Our employee engagement remains high despite the challenges of the economic environment. The results of our internal employee survey were above external benchmarks in eight out of ten categories. Our results were particularly strong for employee engagement and loyalty, the two most important measurements that we believe correlate to sustainable business performance.

B. Relative Performance

Our billed business and credit indicators improved much faster than the industry. We outperformed most of our major competitors in terms of revenue growth, billed business, write-off rates, and net income growth. Compared to our competitors:

 

   

Our 15% growth in worldwide billed business was the highest among major card issuers; our 2010 worldwide billed business of $713 billion was more than double the billings of our nearest card-issuing competitor.

 

   

Our 5.8% U.S. lending managed net write-off rate was the lowest among major issuers.

 

   

Our share of U.S. credit and charge purchase volume grew from 23.8% to an estimated 25.4%, the highest share among U.S. issuers.

 

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Our financial performance compared to our 20-Company Sample (see page 37) based on the most recent available data was above median on EPS growth and ROE. One-year TSR of 7.8% was at the 45th percentile of this group.

The Compensation Committee considered our relative performance to be positive in the overall performance assessment.

C. Risk, Compliance, and Controls

Regulators expect stronger and tighter risk compliance and control processes at financial institutions, including American Express, and the Company remains focused on, and responsive to, heightened compliance requirements from external regulators.

Separate assessments by each of our Internal Auditor, Chief Risk Officer, and Chief Compliance Officer confirmed for the Company as a whole and for each business unit and staff group that they were meeting or exceeding expectations.

Performance in this area met expectations and did not result in an adjustment to the overall Company performance assessment.

Overall

The Compensation Committee determined that the Company’s performance was very strong in all of the dimensions of our performance framework (shown on pages 31 to 33).

COMPENSATION PHILOSOPHY AND STRUCTURE

The success of our Company requires continuous achievements in all parts of our Service Profit Chain— including employees, customers, and shareholders. Our executives are rewarded primarily based on long-term results— more than half of our NEOs’ pay is in long-term incentive awards. At the same time, our pay program reinforces the importance of achieving annual financial goals, strategic milestones, and day-to-day operational excellence.

Guiding Principles

Our executive compensation program is driven by our guiding principles of compensation:

 

   
Program Feature    Guiding Principles
Pay Level   

•    Provide competitive opportunities for pay commensurate with job scope, required talent, and performance

Pay Mix   

•    Use a mix of fixed and incentive compensation with different time horizons and payout form (cash and stock) to reward annual and sustained performance over the long term

Performance Measurement   

•    Assess performance from both a financial and a non-financial perspective, with a wide range of performance measures, including compliance and control measures

 

•    Encourage balanced performance and discourage excessive risk taking by avoiding too much emphasis on any one metric or short-term performance

 

•    Use judgment and discretion when making pay decisions to avoid relying solely on rigid formulaic designs, taking into account both what was accomplished (Goal rating) and how it was accomplished (Leadership rating)

 

•    Subject the cash portion of the CEO’s AIA to a clawback provision, which permits the Compensation Committee, at its discretion, to recoup some or all of the cash portion of the AIA if the Company does not achieve acceptable performance the next year

Ownership   

•    Require executive officers to have significant long-term ownership of Company shares

 

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Program Structure—Balanced for Appropriate Risk Taking

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 market performance metrics measured 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 issues are different than those of other financial services firms; for example, we do not trade securities, derivatives, or other financial instruments. However, our executive compensation program is aligned with the Federal Reserve Board’s principles for safety and soundness by:

 

•    Providing a significant weighting on both near and long-term results

 

•    Using multiple metrics to discourage undue focus on any one metric because that result alone would not generate higher compensation

 

•    Applying Compensation Committee judgment and discretion to all incentive compensation decisions

 

•    Including Risk, Controls, and Compliance as part of our performance framework

 

•    Following policies that discourage excessive risk taking:

     

 

Chief Risk Officer’s (CRO) Role

 

The Compensation Committee meets periodically with the CRO to assess the effectiveness of the Company’s incentive compensation programs. After a year ends, the CRO reviews with the Compensation Committee his assessment of inherent material risks, risk time horizons and whether the Company achieved its results through taking economic and controlled risks consistent with the Company’s risk tolerance and without incurring excessive risks. In addition, all business units’ annual goals include a comprehensive framework of risk-related metrics measuring both risk outcomes and risk management culture.

 

 

   

50% of the net shares received by NEOs after vesting of RSUs or upon exercise of stock options must be held for at least one year

 

   

Stock ownership requirement of 500,000 shares for our CEO. Other NEOs have ownership requirements ranging from 37,500 to 75,000 shares reflecting their role and pay mix (see page 46)

 

   

We are entitled to recover performance-based compensation from NEOs if they engage in “detrimental conduct” or if there is a restatement of financial results due to fraud or misconduct

 

   

The CEO’s cash AIA is subject to clawback at the Compensation Committee’s discretion if the Company does not achieve acceptable performance the next year

 

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    Overview of Year-End 2010 Total Direct Compensation (TDC)
         
    Pay Element   Description/Rationale   Key Measures   Year-End 2010 Changes
         
Fixed   Base Salary  

•   Competitive fixed pay

 

•   Balances risk-taking concerns with pay for performance

 

•   Market pay, job scope, and experience

 

•   None

         
Variable  

Annual

Incentive

Award

 

•   Competitive annual incentive opportunity

 

•   Based on individual, business unit, and Company performance

 

•   Annual Service Profit Chain goals (shareholder, customer, employee), including EPS growth, billed business growth, ROE

 

•   Relative financial performance

 

•   Individual leadership

 

•   Compensation Committee judgment

 

•   CEO award paid in cash and RSUs

 

Cash
Portfolio

Grant Award

 

•   Annual grant of cash incentive based on multiple 3-year metrics

 

•   Payout range is 0-125%
of target award

 

•   3-year financial (e.g., EPS)

 

•   3-year market (e.g., relative TSR)

 

•   Strategic milestones

 

•   Return to 3-year performance period

 

•   CEO award paid in RSUs

  Restricted Stock Unit  

•   Annual grant

 

•   Aligns with share price

 

•   Vests based on disclosed “on average over time” ROE target

 

•   Payout range 0-125%

 

•   3-year average ROE payout (2011-13)

 

•   30% = Maximum (125%)

 

•   28% = Above Target (105%)

 

•   25% = Target (100%)

 

•   22% = Below Target (95%)

 

•   20% = Below Target (75%)

 

•   10% = Below Target (25%)

 

•     5% = Threshold (0%)

 

•   Vesting linked to “on average over time” ROE targets

 

•   Increased weighting in pay mix

  Stock Option  

•   Annual grant

 

•   Exercise price is closing price on grant date

 

•   Aligns with share price

 

•   Share price over 10-year term

 

•   4-year ratable vesting

 

•   Black-Scholes value used to calculate number of options

 

•   Lower weighting in pay mix

 

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Total Direct Compensation Mix

The charts below show that most of our NEOs’ pay is variable (85% – 90%). The proportions of each pay component, shown below for the performance year 2010, may change in the future based on market or performance considerations.

LOGO

Performance Metrics

The following chart summarizes the relevant performance metrics used among our different incentive plans and the time frame for each. The combination of metrics and time horizons is intended to foster and reward performance from all perspectives:

 

   

Profitable growth (measured by growth in EPS, revenue, and billed business)

 

   

Efficient use of capital (measured by ROE)

 

   

Shareholder value creation (measured by relative TSR and stock price)

 

   

Market share and sustainable competitive advantage (attainment of strategic milestones)

 

     
Pay
Element
   Number of Years In Measurement Period    Performance Metrics
   1    3    10     
       
AIA                 EPS, billed business growth, ROE, strategic milestones, customer satisfaction and employee engagement
     
PG              

EPS growth, relative TSR, strategic milestones

     
RSU              

ROE, stock price

     
SO                  

stock price

 

 
Where certain metrics are used in more than one incentive vehicle, they are set and measured over different time frames (i.e., 1, 3, or 10 years) so that there is no duplication of metrics with the same time horizon.

 

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Perquisites

Perquisites support our objective to attract and retain talent for key positions, as well as to address security concerns for our NEOs. We provide a flexible cash perquisite allowance of $35,000, which executives can use on items such as financial and tax planning, and life and disability insurance. The Compensation Committee reviews these programs periodically, as market trends and shareholder input evolve. In response to that input, the Compensation Committee took the following steps:

 

   

Effective 2011, eliminated reimbursements to NEOs related to the installation and monitoring of home security equipment (however, the monitoring of Mr. Chenault’s system will continue, for security reasons). The Company’s security objective for all NEOs remains a priority and is unchanged.

 

   

Require Mr. Chenault to reimburse the Company for non-business use (which is defined by SEC rules to include his travel to outside public company Board meetings) of the corporate aircraft above $200,000 (effective for 2010).

 

   

Eliminated medical examination reimbursements for NEOs.

Detailed information on perquisites is provided under the Perquisites and Other Personal Benefits Table on page 51.

Company Sample

The Compensation Committee examines pay data for a group of 20 companies to review pay practices and competitive practice. The “Company Sample” is reviewed by the Compensation Committee every year and has not changed from 2009. It consists of companies that have one or more characteristics similar to American Express and could appear on the company sample list for a variety of reasons, including strong brands, relevant business models, similar size, international presence, or similar talent needs.

 

3M   Colgate-Palmolive   Johnson & Johnson   Procter & Gamble
Bank of America   FedEx   JPMorgan Chase   State Street
Bank of New York-Mellon   General Electric   Marriott   US Bancorp
Capital One Financial   Hewlett-Packard   MasterCard   Visa
Coca-Cola   IBM   PepsiCo   Wells Fargo

COMPENSATION PROCESS AND 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 met 14 times over the course of 2010, which included two meetings without management, and most other meetings ended with executive sessions without management. These meetings facilitate the Compensation Committee’s decisions with respect to the design of the executive compensation program, as well as compensation for the CEO and other NEOs.

The Compensation Committee conducts in-depth reviews of performance and then applies judgment to make compensation decisions, rather than relying solely on formulaic results to calculate incentive award payouts. The Compensation Committee believes its process, described below, is an effective way to assess the quality of performance, risk management, and leadership demonstrated by Mr. Chenault and his senior management team.

The Compensation Committee’s Process

Each year, the Compensation Committee:

 

   

Reviews and approves the metrics and goals in the Company’s performance framework and the CEO’s performance objectives early in the year

 

   

Reviews corporate performance at the end of the second and third quarters and progress against the CEO’s objectives and incentive plan goals

 

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In January:

 

   

Discusses full-year financial and strategic performance at length, seeking to understand what was accomplished relative to established objectives, how it was accomplished, quality of financial results, and strategic positioning for future competitive advantage

 

   

Meets with the Chief Risk Officer

 

   

Evaluates the CEO’s and other NEOs’ performance in light of these discussions (which are shared with the full Board)

 

   

Determines TDC amount for the CEO and each of the other NEOs, starting with the prior year’s compensation adjusted based on:

 

   

Performance assessments (described in the next section)

 

   

Market pay levels and trends

 

   

Input from the Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (Cook)

 

   

For the other NEOs: the CEO’s recommendations, succession planning, and retention considerations

 

   

Allocates TDC to each pay component based on:

 

   

Company pay mix guidelines

 

   

Individual performance

 

   

Market considerations

 

   

Reviews and approves payouts for each PG whose performance period was completed at the end of the prior year

 

   

Approves any design changes to the executive compensation program for the coming year

How We Assess NEO Performance

To rate performance in the year just ended, the Compensation Committee looks at two key factors for each NEO:

 

   

Goal Assessment. The Goal Assessment is based on the overall performance of the Company and the business units or staff groups for which an NEO is responsible. Specifically, the Goal Rating assesses results against our Service Profit Chain goals:

 

Service Profit Chain    Performance Weighting
Shareholder-Related Goals    50%
Customer-Related Goals    25%
Employee-Related Goals    25%

Shareholder goals are tied primarily to financial metrics, and customer and employee goals reinforce the long-term strength of our business and help reduce the potential for excessive risk taking. Individual executives’ collaboration efforts are also assessed, so that contributions to the achievement of goals outside their business unit or staff group are considered.

 

   

Leadership Assessment. The Leadership Assessment is based on individual performance and includes feedback from peers and employees, as appropriate, with regard to key leadership attributes.

 

 

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Performance assessments are made on a three-point scale that assists with performance and pay differentiation. The performance objectives are set at the beginning of each year, based on recommendations by the CEO and risk/compliance inputs from the Internal Auditor, Chief Risk Officer, and Chief Compliance Officer. At the end of the year, the CEO presents Goal and Leadership ratings for each of the other NEOs and reviews each NEO’s key strengths and development actions with the Compensation Committee.

 

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The Compensation Committee’s 2010 TDC Decisions

K.I. Chenault, Chairman and CEO

 

 

For 2010, the Compensation Committee approved Mr. Chenault’s TDC to be $20.5 million— the same as it was for 2009 despite stronger financial performance in 2010 (including a 118% increase in EPS) and a substantial rise in billed business that translated into a greater share of total plastic spending. It also reflected a return to revenue growth that came in below our “on average and over time” target but still outpaced the card businesses of our major competitors.

     

Note Regarding 2010 TDC Decisions

 

It is important to recognize that the way the Compensation Committee presents TDC in the tables that follow is different from the SEC-required disclosure in the “Summary Compensation Table” and is not a substitute for the information in that table (shown on page 48). Rather, it is intended to show how the Compensation Committee linked NEOs’ TDC and its components to the Company’s 2010 performance results.

 

 

    Year–End Decisions  ($mils)
    January 2010   January 2011

Base Salary

 

•    The Compensation Committee kept Mr. Chenault’s salary at $2 million.

 

•    No other component of TDC is based on salary. Therefore, an increase in salary, if any, doesn’t drive increases in AIA and LTIA.

  $2.0   $2.0

AIA

 

•    The Compensation Committee awarded Mr. Chenault $5.125 million, the same as last year.

 

•    $2 million (39%) of this amount was paid in cash and the remainder ($3.125 million, or 61%) was issued in restricted stock units.

 

•    Restricted stock portion vests one year from its grant and 50% of the net shares must be held until one year after retirement.

 

•    The cash portion of the AIA continues to include a clawback provision, which permits the Compensation Committee, at its discretion, to recoup some or all of the cash portion of the AIA if 2011 performance is not acceptable.

 

  $5.125   $5.125

Equity Awards (RSUs and SOs) Granted on January 27, 2011

 

•    The Compensation Committee awarded 40% of Mr. Chenault’s TDC—$8.25 million, the same amount as last year—in the form of equity grants.

 

•    The grants were divided equally into 135,981 shares of performance-vested RSUs and 135,981 stock options.

 

•    Mr. Chenault’s equity awards were granted in January 2011. The SOs have an exercise price per share of $44.54. The RSU target is average 3-year (2011-13) ROE of 25% (“on average over time” target).

 

  $6.200* SO

$2.050 RSU

$8.25* Total

  $2.193 SO

$6.057 RSU
$8.25 Total

PG

 

•    Mr. Chenault received a PG grant (PG2011-13) for the three-year performance period starting in 2011 and ending in 2013.

 

•    Based on performance, the PG2011-13 payout may be higher or lower than the target value at the time of grant.

  $5.125   $5.125

Total

  $20.5   $20.5

 

* Represents planned value based on 4:1 option to share ratio; Black-Scholes value is shown in the Summary Compensation Table.

 

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The CEO’s recommendations for the other NEOs are based on his review of performance and our pay mix guidelines. Generally, we expect annual LTIA grants to be less variable from one year to the next. Therefore, a significant portion of pay changes, based on individual and business performance, is generally reflected through changes in AIA. The following discussions provide highlights of specific individual and business performance considered by the CEO when making his pay recommendations to the Compensation Committee. The Compensation Committee also considers overall performance of the Company when approving pay decisions for other NEOs.

E.P. Gilligan, Vice Chairman

Mr. Gilligan is responsible for our Company’s global Consumer, Small Business Services, Merchant Services, and Network Services businesses. A summary of his achievements over 2010, the first full year in his current role, follows:

 

   

Delivered strong financial results, especially with regard to billed business

 

   

Demonstrated significant progress against strategic goals (e.g., strong focus on Premium Customers, launched new and modified Charge Card products)

 

   

Accelerated international growth and strengthened our Company’s network

 

   

Built digital communities and capabilities (e.g., launched “Pay with Points” through Amazon, introduced “Small Business Saturday” through OPEN)

D.H. Schulman, Group President, Enterprise Growth

Mr. Schulman is responsible for the Company’s global strategy to expand alternative payments, drive the Company’s digital transformation via mobile and online services, form new partnerships, oversee all related mergers and acquisitions, and build new fee-based revenue streams. Mr. Schulman joined American Express in August 2010. Prior to that, he was the founding CEO of Virgin Mobile USA, which was acquired by Sprint Nextel Corporation in November 2009. A summary of his achievements over 2010 follows:

 

   

Developed the strategic vision and detailed strategies for Enterprise Growth

 

   

Began staffing new talent into the new Enterprise Growth Group

 

   

Developed relationships with significant new business partners

 

   

Formed the Company’s Fee Services Task Force and Mobile Task Force

D.T. Henry, Executive Vice President and Chief Financial Officer

Mr. Henry serves as a key advisor on strategic and financial matters worldwide and represents American Express to investors, lenders, and rating agencies. A summary of his achievements over 2010 follows:

 

   

Created a framework for investment optimization and resource allocation to drive short, moderate and long-term growth

 

   

Led the development and communication of our Company’s business strategy to regulators and the external financial community

 

   

Positioned our Company to meet ever-changing capital and other financial regulatory requirements, and evolved our internal processes to better identify and mitigate risk

 

   

Expanded our Personal Savings programs to continue the transformation of our Company’s funding profile

 

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S.J. Squeri, Group President, Global Services

Mr. Squeri oversees World Service, Global Business Services, Technologies, and Global Credit Administration. A summary of his achievements over 2010, the first full year in his current role, follows:

 

   

Achieved substantial improvements in efficiency, while strategically investing in new capabilities

 

   

Created a new global, integrated and unified World Service organization which delivered world-class customer service (evidenced by our fourth consecutive J.D. Power Award)

 

   

Delivered major new technology capabilities including the successful implementation of all changes and enhancements necessary to comply with the CARD Act

 

   

Built a new Global Business Services organization focused on bringing an end-to-end process and efficiency mindset to the enterprise

The Compensation Committee’s January 2011 decisions are reflected in the table below:

Other NEOs TDC Decisions ($000s)

 

     Mr. Gilligan   Mr. Schulman   Mr. Henry   Mr. Squeri
Base Salary   $1,450   $1,100   $   850   $1,000
AIA   $4,450   $2,500   $2,350   $3,500
Equity—RSUs*   $2,129   $1,835   $1,358   $1,468
Equity—SOs   $   771   $   665   $   492   $   532
PG   $1,500   $1,300   $1,100   $1,000
TDC   $10,300 (up 4.6% from January 2010)   $7,400**  

$6,150 (up 6.0%

from January 2010)***

  $7,500 (up 15.4% from January 2010)

 

* Similar to the CEO’s equity awards, other NEOs received RSUs that are earned based on three-year ROE performance. Total equity awards were divided into equal number of performance-vested RSUs and stock options.

 

** In addition, Mr. Schulman received equity grants with a value as reported in the Summary Compensation Table of $7.85 million and a 2010-11PG award with a target value of $1.3 million and a 2009-10PG award with a target value of $650,000. These grants were made to make up what he forfeited at his prior employer by joining American Express (see page 52 for details).

 

*** 6% increase from January 2010 excludes impact of January 2010 Special Leadership RSU Award ($3 million); if these amounts were included in January 2010 TDC, January 2011 TDC was lower than January 2010 TDC.

2010 PG Payouts Related to 2008 and 2009 Awards

The Compensation Committee approved the payout percentages for PG2008-10 and PG2009-10 shown below. For PG2008-10, three of the four metrics were below threshold and did not result in any payout; only relative TSR generated a payout. For PG2009-10, four of the six metrics exceeded the maximum, one exceeded the target, and one was slightly below the target.

PG2008-10

 

           2008-2010 Performance Metric   Weighting   2008-10 Result  

Performance Required for
Target Payout

  Payout %

•    EPS Growth

  25%   (15.1)%   12%   0

•    Revenue Growth

  25%   0.3%   8%   0

•    Average Return on Equity

  25%   21.5%   33%   0

•    Total Shareholder Return vs. S&P 500

  25%
  0.7% below index
return*
  At index   94%

* Under the terms of the Award.

      Total   24%

 

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2010 Portion of PG2009-10

 

         
          2010 Performance Metric   Weighting   2010 Result  

Performance Required for
Target Payout

  Payout%
         

•    EPS

  15%   $3.35 (118%
growth)
  Greater than 60%
growth
  125%
         

•    ROE

  15%   27.5% (12.9
percentage
point increase)
  5 percentage point
increase
  125%
         

•    Drive Growth (Billed Business)

  15%   15% growth   7% growth   125%
         

•    Drive Efficiency (Operating Expenses)

  15%   $10.75 billion   $10.70 billion*   96%
         

•    Deliver Superior Service
(“Recommend to a Friend”)

  15%   11 percentage
point increase
  2 percentage point
increase
  125%
         

•    Enterprisewide Transformation—developing new or modified “pay in full” products across major markets, launching optimization efforts in international markets, and creating new fee services

  25%   Significant
progress,
exceeded
targets
  Targets for new
products, fee
services, and
optimization efforts
  122%
   
      Total   120%
* Target is based on planned total expenses less planned marketing and promotion, cardmember rewards, and cardmember services expenses, in each case as presented to the Board of Directors in January 2010. The terms approved by the Compensation Committee exclude incremental and unplanned expenses (e.g., restructuring cost) of approximately $250 million when calculating actual results. For 2010, actual total expenses less marketing and promotion, cardmember rewards, and cardmember services expenses were approximately $11 billion.

Applying these payout percentages to the NEOs’ respective grants resulted in the following individual PG payouts for year-end 2010:

 

       
Executive   PG2008-10  

PG2009-10

(2010 portion)

  Total PG Payout
       
K.I. Chenault   $1,142,640   $4,950,000   $6,092,640
       
E.P. Gilligan   $   180,000   $1,500,000   $1,680,000
       
D.H. Schulman   N/A   $   780,000   $   780,000
       
D.T. Henry   $   132,000   $1,080,000   $1,212,000
       
S.J. Squeri   $   120,000   $1,260,000   $1,380,000

POST-EMPLOYMENT COMPENSATION

Retirement Benefits

NEOs receive retirement benefits through the following plans:

 

   
Plan    Description
   
Retirement Savings Plan (RSP)   

•    A qualified savings 401(k) plan available to all employees

   
Retirement Restoration Plan (RRP)   

•    A nonqualified savings plan that makes up 401(k) benefits that would otherwise be lost as a result of the U.S. tax limits

 

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As part of NEOs’ planning for retirement and other long-term financial needs, we have provided them an annual opportunity to defer a portion of their base salary and AIA payout under the RRP. The total annual deferral is limited to 100% of base salary.

NEOs (except Mr. Schulman) also continue to earn interest on outstanding account balances under the American Express Retirement Plan, which was frozen in 2007. All retirement benefits are more fully described under Retirement Plan Benefits on pages 56 to 57 and under Nonqualified Deferred Compensation on page 58.

Severance

 

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 receive cash severance benefits equal to two years of base salary and AIA, except in cases of misconduct. Severance payments are made in installments, except in certain terminations following a change in control, when payment is made in a lump sum. 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. The severance agreement includes non-competition, non-denigration, and other provisions.

     

Severance

 

In order 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 CIC of the Company. The Company has modified its CIC provisions 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 on pages 60 to 64.

COMPENSATION GOVERNANCE

The Role of the Board’s Compensation and Benefits Committee

The Compensation Committee, comprised solely of independent directors, has, among other duties, overall responsibility for:

 

   

The compensation of, and the compensation plans and arrangements covering, the executive officers and designated key employees of the Company; and

 

   

The employee benefit plans of the Company.

The Compensation Committee’s charter, which sets forth its responsibilities and authority, may be accessed through the “Corporate Governance” link found on our Web site at http://ir.americanexpress.com.

 

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The Role of Independent Consultants

The Compensation Committee engaged Frederic W. Cook & Co., Inc. (Cook) as its independent compensation consultant and considered advice and information from the firm in determining the amount and form of compensation for NEOs. Cook’s work for the Compensation Committee has included a review of our compensation practices in light of emerging best practices, confirming our sample group of companies, collecting and providing relevant market data, reviewing data and analyses provided by other consultants, and developing alternatives to consider for CEO compensation.

In connection with its work for the Compensation Committee, in 2010 Cook attended Compensation Committee meetings with and without management present. Cook also provided services to the Nominating Committee of the Board with respect to director compensation. Under the terms of its agreement with the Compensation Committee, Cook does not provide any other services to the Company, unless the Compensation Committee approves in advance such services in support of the Compensation Committee’s objectives. In 2010, Cook provided no such other services. The Company incurred $535,132 in fees from Cook for services performed for the Compensation and Nominating Committees during 2010.

Clawback Policies

American Express maintains a “detrimental conduct” policy, covering approximately 560 employees globally, including the NEOs. Each covered executive is required to sign an agreement that requires him or her to forfeit unvested awards and to repay the proceeds from some or all of his or her compensation issued under the LTIA program in the event the executive engages in conduct that is detrimental to the Company. This compensation includes stock and PG awards and, in the case of NEOs, AIAs that were 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. In addition, to the extent practicable, we will seek to recover 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.

The Company has added a clawback condition to the cash portion of AIA paid to the CEO for 2009 and 2010 performance years. In addition, the Dodd-Frank legislation mandates regulation to add additional clawback requirements, and the Company will take appropriate steps to implement the final requirements under this legislation.

 

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Stock Ownership Guidelines

Our stock ownership guidelines require our NEOs to own and maintain a substantial stake in the Company. Our NEOs are required to accumulate a target number of net after-tax shares (i.e., shares owned, not including unvested/unearned shares and unexercised stock options), and retain a portion of their awards as follows:

 

   

NEO

  Ownership Guidelines
 

Target

# of Shares

  Holding Requirement
    Before Target Met   After Target Met
       

K.I. Chenault*

  500,000   75% of net shares
until target # of
shares is met
  50% of net shares for
one year

E.P. Gilligan

    75,000    

D.H. Schulman

    75,000    

S.I. Squeri

    75,000    

D.T. Henry

    37,500    
* In addition to these requirements, Mr. Chenault is required to hold, one year beyond his retirement from the Company, 50% of the portion of his 2010 year-end AIA and PG payouts delivered in RSUs.

With the exception of Mr. Schulman, who was hired in August 2010, all our NEOs own more than the target number of shares.

Hedging Policy

The Company’s Code of Conduct prohibits our employees from using short sales or put and call transactions to hedge their ownership of Company securities.

Award Timing

As has been the practice in the past, annual cycle LTIA awards are granted to NEOs in January, on the third trading day after the Company publicly announces financial results for the fiscal year just ended. Our off-cycle LTIA awards are granted on pre-established grant dates.

Tax Treatment

Internal Revenue Code (IRC) Section 162(m) generally limits the deductibility of compensation paid to our NEOs to $1 million during any fiscal year unless such compensation is “performance-based” under Section 162(m). The Company intends to structure its compensation arrangements in a manner that would comply with Section 162(m). However, the Compensation Committee maintains the flexibility to pay non-deductible compensation if they believe it is in the best interest of the Company and its stakeholders.

 

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Report of the Compensation and Benefits Committee

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors, and the Board approved, that the Compensation Discussion and Analysis be included in this Proxy Statement.

COMPENSATION AND BENEFITS COMMITTEE

Jan Leschly, Chairman

Peter Chernin

Richard A. McGinn

Edward D. Miller

Robert D. Walter

 

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Summary Compensation Table

The following table summarizes the compensation of our NEOs for the year ended December 31, 2010.

 

Summary Compensation Table(1)  
Name and Principal
Position
  Year     Salary
($)
    Bonus
($)(2)
    Stock
Awards
($)(3)
    Option
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(4)
    Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)(5)
    All Other
Compensation
($)(6)
    Total
($)
 

K.I. Chenault

    2010      $ 1,942,308      $ 2,000,000      $ 2,049,971      $ 9,164,925      $ 0      $ 560,421      $ 1,095,647      $ 16,813,272   

Chairman and Chief

    2009      $ 1,201,923      $ 5,125,000      $ 0      $ 3,985,637      $ 5,325,000      $ 780,929      $ 980,079      $ 17,398,568   

Executive Officer

    2008      $ 1,250,000      $ 0      $ 9,524,931      $ 9,775,850      $ 6,112,500      $ 640,711      $ 1,503,053      $ 28,807,046   
                   

E.P. Gilligan

    2010      $ 1,423,077      $ 4,450,000      $ 724,967      $ 3,215,112      $ 1,680,000      $ 212,876      $ 699,438      $ 12,405,470   

Vice Chairman

    2009      $ 862,019      $ 4,000,000      $ 1,999,990      $ 2,648,690      $ 1,612,500      $ 228,200      $ 1,371,487      $ 12,722,885   
      2008      $ 825,000      $ 3,500,000      $ 1,068,971      $ 1,584,600      $ 1,125,000      $ 67,388      $ 4,499,830      $ 12,670,789   
                   

D.H. Schulman

    2010      $ 401,923      $ 2,500,000      $ 5,999,957      $ 1,853,515      $ 780,000      $ 0      $ 100,895      $ 11,636,290   

Group President

                                   

Enterprise Growth

                                   
                   

D.T. Henry

    2010      $ 838,462      $ 2,350,000      $ 3,437,458      $ 1,940,154      $ 1,212,000      $ 51,989      $ 362,540      $ 10,192,602   
Executive Vice     2009      $ 619,711      $ 2,100,000      $ 0      $ 797,125      $ 1,162,500      $ 72,072      $ 255,585      $ 5,006,994   
President and Chief     2008      $ 625,000      $ 2,100,000      $ 718,968      $ 1,251,000      $ 300,000      $ 65,304      $ 280,737      $ 5,341,010   
Financial Officer                                    
                   

S.J. Squeri

    2010      $ 980,769      $ 3,500,000      $ 499,986      $ 2,217,318      $ 1,380,000      $ 84,387      $ 319,991      $ 8,982,452   

Group President

    2009      $ 614,423      $ 2,500,000      $ 999,978      $ 3,762,926      $ 1,335,000      $ 121,082      $ 169,723      $ 9,503,131   

Global Services

    2008      $ 600,000      $ 1,650,000      $ 499,996      $ 1,084,200      $ 675,000      $ 55,873      $ 203,424      $ 4,768,493   

 

(1) Amounts shown are not reduced to reflect the NEOs’ elections, if any, to defer receipt of base salary, bonus, or non-equity incentive plan compensation under our deferred compensation programs.

 

(2) The amounts in this column reflect AIA cash payments made for annual performance. The 2010 amount excludes the portion of Mr. Chenault’s 2010 AIA ($3.125 million out of $5.125 million) that was made in the form of RSUs granted in January 2011 that vest one year from the grant date. One-half of the net shares upon vesting cannot be sold until one year after retirement.

 

(3) The amounts in these columns reflect stock and option awards that were granted in 2010, 2009, and 2008. The amounts represent the aggregate grant date fair value of awards granted in each respective year computed in accordance with stock-based compensation accounting rules (FASB ASC Topic 718). See the Grants of Plan-Based Awards table on page 52 for further information on awards made in 2010. A discussion of the assumptions used in computing the award values may be found in Note 20 to our 2010 Consolidated Financial Statements on pages 104 to 105 of our 2010 Annual Report to Shareholders.

 

     In addition, the amounts shown for Mr. Chenault under “Option Awards” include the value recognized in connection with a special grant of SOs made in January 2008, the vesting of which is subject to meeting various performance requirements (i.e., EPS growth, ROE, revenue growth, and TSR performance). In accordance with accounting rules, the amounts in the table above reflect the aggregate grant date fair value associated with only the TSR-based portion of the award. Because it was not “probable” (as determined by reference to the accounting literature) that the portions of the award related to EPS growth, ROE, and revenue growth would vest, the estimated grant date fair value of the award associated with these portions was $0. If all the performance hurdles were to be achieved and the award were to vest, the maximum grant date fair value would be an additional $14.9 million in 2008.

 

(4)

For 2010, the amounts in this column reflect the cash payment made to the NEO in respect of (i) PG2008-10 awards granted in 2008 (covering the 2008-2010 performance period) and (ii) the second half of PG2009-10 awards granted in 2009 (covering the 2010 performance period), each of which was paid in February 2011.

 

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The 2010 amount excludes payments of $6.093 million to Mr. Chenault, which were made in the form of RSUs granted in January 2011 that vest one year from the grant date. One-half of the net shares upon vesting cannot be sold until one year after retirement.

 

(5) The amounts in this column reflect (a) the actuarial increase in the present value of the NEOs’ benefits under all defined benefit pension plans established by the Company and (b) the above-market portion of earnings on compensation deferred by the NEO under our nonqualified deferred compensation programs, which are shown below. For 2010, the above-market earnings on compensation deferred reflect the recent changes to the Executive Retirement Program, see pages 59 to 60 for further information. For the deferrals that were paid out during 2010 only, the Company used the Moody’s “A” Rate, which is 6.14%, as an approximation for market-level earnings. However, for purposes of this table, SEC rules require that market-based earnings be considered to be no more than 5.02%. Accordingly, the table below shows the earnings attributed to the difference between the two rates.

 

     
Name   Change in
Pension Value
    Above-Market
Earnings on
Deferred
Compensation
 

K.I. Chenault

  $ 560,421      $ 0   

E.P. Gilligan

  $ 212,415      $ 461   

D.H. Schulman

  $ 0      $ 0   

D.T. Henry

  $ 50,454      $ 1,535   

S.J. Squeri

  $ 82,567      $ 1,820   

 

(6) See All Other Compensation Table below for additional information.

 

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All Other Compensation Table

The table below shows the components of the amounts included for each NEO under the All Other Compensation column in the Summary Compensation Table.

 

 
All Other Compensation Table   
Name   Year     Perquisites
and Other
Personal
Benefits
($)(1)
    Tax Payments/
Reimbursements
($)(2)
    Company
Contributions
to Defined
Contribution
Plans
($)(3)
    Executive
Life
Insurance
($)(4)
    Dividends
and
Dividend
Equivalents
($)(5)
    Total
($)
 

K.I. Chenault

    2010      $ 517,438      $ 0      $ 438,942      $ 3,589      $ 135,679      $ 1,095,647   
      2009      $ 660,272      $ 0      $ 117,428      $ 3,274      $ 199,105      $ 980,079   
      2008      $ 887,125      $ 0      $ 331,250      $ 2,965      $ 281,714      $ 1,503,053   
               

E.P. Gilligan

    2010      $ 183,077      $ 36,587      $ 346,923      $ 1,830      $ 131,021      $ 699,438   
      2009      $ 839,179      $ 279,747      $ 145,816      $ 1,710      $ 105,035      $ 1,371,487   
      2008      $ 1,937,152      $ 2,223,690      $ 218,625      $ 1,598      $ 118,765      $ 4,499,830   
               

D.H. Schulman

    2010      $ 72,427      $ 0      $ 0      $ 1,380      $ 27,088      $ 100,895   
               

D.T. Henry

    2010      $ 85,577      $ 0      $ 211,538      $ 4,340      $ 61,085      $ 362,540   
      2009      $ 96,743      $ 0      $ 139,855      $ 3,939      $ 15,049      $ 255,585   
      2008      $ 95,480      $ 0      $ 165,625      $ 3,570      $ 16,062      $ 280,737   
               

S.J. Squeri

    2010      $ 84,004      $ 0      $ 199,038      $ 1,870      $ 35,079      $ 319,991   
      2009      $ 71,459      $ 0      $ 88,695      $ 1,750      $ 7,819      $ 169,723   
      2008      $ 61,838      $ 0      $ 132,000      $ 1,633      $ 7,953      $ 203,424   

 

(1) See the Perquisites and Other Personal Benefits table below for additional information regarding the components of this column.

 

(2) For Mr. Gilligan, the amount shown in this column includes tax equalization payments and tax reimbursements in connection with his international assignment in London, which ended in July 2009. 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 amounts shown have been reduced to reflect the Company’s retention of certain amounts related to home country taxes from Mr. Gilligan’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. 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.

 

(3) This column reports Company contributions to the NEOs’ accounts under the Company’s RSP and to the RSP Related Account under the Company’s RRP. See pages 56 to 59 for a further description of the RSP and the RSP Related Account under the Company’s RRP.

 

(4) This column reports imputed income to the NEO under the Company’s executive life insurance program.

 

(5) This column reports dividends and dividend equivalents paid in connection with RSAs and RSUs awarded to the NEO under the 1998 Incentive Compensation Plan (1998 Plan) or the 2007 Incentive Compensation Plan (2007 Plan). Beginning with awards granted in 2011, dividends and dividend equivalents on unvested RSAs and RSUs granted to executive officers will be paid only if and when the underlying shares vest.

 

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Perquisites and Other Personal Benefits

 

 
Perquisites and Other Personal Benefits Table   
Name   Year     Local and
Other
Travel
Benefits
($)(1)
    Personal
Use of
Company
Aircraft
($)(2)
    Flexible
Perquisite
Allowance
($)
    Home
Security
System
($)
    Security
During
Personal
Trips
($)
    International
Assignment
($)(3)
    Other
Benefits
($)(4)
    Total
($)
 

K.I. Chenault

    2010      $ 139,273      $ 200,000      $ 35,000      $ 75,556      $ 53,671        n/a      $ 13,938      $ 517,438   
      2009      $ 138,635      $ 401,527      $ 35,000      $ 54,176      $ 18,326        n/a      $ 12,608      $ 660,272   
      2008      $ 152,299      $ 414,702      $ 35,000      $ 200,898      $ 45,729        n/a      $ 38,496      $ 887,125   
                   

E.P. Gilligan

    2010      $ 40,500      $ 3,466      $ 35,000      $ 1,815        n/a      $ 99,296      $ 3,000      $ 183,077   
      2009      $ 48,000      $ 4,776      $ 35,000      $ 0        n/a      $ 748,131      $ 3,272      $ 839,179   
      2008      $ 48,000      $ 4,383      $ 35,000      $ 1,609        n/a      $ 1,841,340      $ 6,820      $ 1,937,152   
                   

D.H. Schulman

    2010      $ 12,500      $ 0      $ 14,585      $ 40,861        n/a        n/a      $ 4,481      $ 72,427   
                   

D.T. Henry

    2010      $ 40,500      $ 0      $ 35,000      $ 0        n/a        n/a      $ 10,077      $ 85,577   
      2009      $ 48,000      $ 0      $ 35,000      $ 0        n/a        n/a      $ 13,743      $ 96,743   
      2008      $ 48,000      $ 0      $ 35,000      $ 0        n/a        n/a      $ 12,480      $ 95,480   
                   

S.J. Squeri

    2010      $ 40,500      $ 0      $ 35,000      $ 744        n/a        n/a      $ 7,760      $ 84,004   
      2009      $ 25,500      $ 0      $ 35,000      $ 695        n/a        n/a      $ 10,264      $ 71,459   
      2008      $ 18,000      $ 0      $ 35,000      $ 513        n/a        n/a      $ 8,325      $ 61,838   

 

(1) Amount includes local travel allowance and cost of certain executive travel services. For Mr. Chenault, the Company’s security policy adopted by the Audit and Risk Committee of the Board requires him to use, to the maximum extent practicable, Company-owned automobiles for personal use as well as business travel. We have included costs relating to required personal use of Company-owned automobiles in this column.

 

(2) The Company’s security policy adopted by the Audit and Risk Committee of the Board requires our CEO to use, to the maximum extent practicable, Company-owned aircraft for personal use as well as business travel. The calculation of incremental cost for personal use of Company aircraft is based on the variable cost to the Company of operating the aircraft and includes, among other things, fuel costs, trip-related maintenance, 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 aircraft (e.g., aircraft purchase costs and depreciation, flight crew salaries and benefits, insurance costs, etc.). SEC rules require that for purposes of this table, we also include in this amount those costs incurred in connection with travel to outside corporate board meetings (other than those in which the executive serves as a designee of the Company).

 

     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.

 

(3) The amount shown includes expatriate services and allowances in connection with Mr. Gilligan’s repatriation to the United States, due to his international assignment. The services received by Mr. Gilligan 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.

 

(4) 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% of the total amount of all perquisites and other personal benefits reported for the NEO. These other benefits consist of amounts for premiums for Directors’ Charitable Award Program life insurance (only for Mr. Chenault in 2008), office parking, incidental business gifts (in 2008), reimbursement for certain information technology, cost of certain meals from the Company’s dining facilities, and reimbursement for the out-of-pocket portion of fees for certain routine medical examinations.

 

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This column also includes the above-market portion of earnings in connection with deferred compensation payouts previously disclosed in 2009 and 2008. See footnote 5 to the Summary Compensation Table for above-market earnings for 2010.

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.

Grants of Plan-Based Awards

The following table provides information on SO, RSA, RSU, and PG awards granted to each of our NEOs in 2010 under the 2007 Plan. There can be no assurance that the grant date fair value of awards will ever be realized by the NEOs.

 

Grants of Plan-Based Awards  
Name   Award
Type (1)
  Grant
Date
    Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards(2)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards
    All Other Option
Awards
    Grant Date
Fair Value
of Stock
and Option
Awards
($)(4)
 
      Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
    Number of
Securities
Underlying
Options
(#)
    Exercise
Price or
Base
Price of
Option
Awards
($/Sh)(3)
   

K.I. Chenault

  PG2010-11     1/26/2010      $ 0      $ 5,125,000      $ 6,406,250        n/a        n/a        n/a               
    SO     1/26/2010                        650,918      $ 38.10      $ 9,164,925   
    RSU     1/26/2010                  53,805                  $ 2,049,971   
               

E.P. Gilligan

  PG2010-11     1/26/2010      $ 0      $ 1,500,000      $ 1,875,000        n/a        n/a        n/a               
    SO     1/26/2010                        228,346      $ 38.10      $ 3,215,112   
    RSA     1/26/2010                  19,028                  $ 724,967   
               

D.H. Schulman

  PG2009-10     8/31/2010      $ 0      $ 650,000      $ 812,500        n/a        n/a        n/a               
    PG2010-11     8/31/2010      $ 0      $ 1,300,000      $ 1,625,000        n/a        n/a        n/a               
    SO     8/31/2010                        125,407      $ 39.87      $ 1,853,515   
    RSA     8/31/2010                  31,351                  $ 1,249,964   
    RSA     8/31/2010                  119,137                  $ 4,749,992   
               

D.T. Henry

  PG2010-11     1/26/2010      $ 0      $ 1,100,000      $ 1,375,000        n/a        n/a        n/a               
    SO     1/26/2010                        137,795      $ 38.10      $ 1,940,154   
    RSU     1/26/2010                  11,482                  $ 437,464   
    RSU     1/26/2010                  78,740                  $ 2,999,994   
               

S.J. Squeri

  PG2010-11     1/26/2010      $ 0      $ 1,000,000      $ 1,250,000        n/a        n/a        n/a               
    SO     1/26/2010                        157,480      $ 38.10      $ 2,217,318   
    RSA     1/26/2010                                        13,123                              $ 499,986   

 

(1) PG Awards. PG2010-11 awards link compensation to our financial, strategic, and operational performance during two one-year performance periods: 2010 and 2011. For 2010, the value of the PG award was based 60% on financial metrics, 25% on strategic goals and milestones and 15% on customer service goals, the same as the goals described on page 43 for PG2009-10. The potential award payout is determined based on a table of possible performance and earned payout levels for each performance period, including a cap on the overall earned payout level for each performance period. The actual payout could be higher or lower than the notional target value based on actual financial, strategic, and operational performance.

 

     The performance targets for the 2010 performance period were set in the first quarter of 2010. Payments associated with the first half of PG2010-11 are subject to additional capital adequacy requirements in 2011. The performance targets for the 2011 performance period will be set in March 2011. Both halves of the award are scheduled to pay out in February 2012. To receive a payout the executive officer generally must be employed by the Company through the vesting and payment date.

 

     Restricted Stock Awards and Restricted Stock Units. We granted RSA/RSUs as part of our annual long-term incentive award program and for other special circumstances. Except as specified otherwise below, the RSA/RSUs vest 25% per year over four years beginning on the first anniversary of the grant date, subject to continuous employment with the Company.

 

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     Mr. Schulman was granted two RSAs at the time he joined the Company. One award (119,137 shares) will vest 50% per year over two years beginning on the first anniversary of the grant date, subject to continuous employment with the Company. The other award (31,351 shares) vests 25% per year over four years beginning on the first anniversary of the grant date, subject to continuous employment with the Company.

 

     The RSU award of 78,740 shares granted to Mr. Henry in January 2010 will vest on the third anniversary of the grant date.

 

     For tax deduction purposes, the vesting of all RSA/RSU grants is subject to a performance hurdle of positive cumulative net income over the vesting period. We pay cash dividends or dividend equivalents on the RSA/RSUs in the same amount that we pay cash dividends or dividend equivalents on our common shares. For grants made after December 31, 2010, dividends and dividend equivalents will be accrued but will not be paid unless and until the underlying shares vest. All unvested RSA/RSUs may also become vested upon death, disability termination, retirement, or a change in control of the Company, as we describe on pages 60 to 64.

 

     Stock Options. We granted SOs as part of our annual long-term incentive award program. The SOs have a ten-year term. Award holders may exercise up to 25% of their SOs after one year, 50% after two years, 75% after three years, and 100% after four years, subject to continuous employment with the Company. Prior to the exercise of a SO, the holder has no rights as a shareholder with respect to the shares subject to a SO. All outstanding SOs may also become exercisable upon death, disability termination, retirement, or a change in control of the Company, as we describe on pages 60 to 64.

 

     Mr. Schulman was granted SOs at the time of hire that vest in four equal annual installments, subject to his continuous employment with the Company.

 

(2) The amounts shown under these columns represent potential payouts to the NEOs under the PG2010-11 payout guidelines applicable to executive officers. The amounts reflect the aggregate potential payouts for the two one-year performance periods that comprise PG2010-11. The threshold payout is zero, since it represents the level of performance for which no award would be earned for each of the metrics by which performance is measured. The “target” payout is equal to 100% of the executive’s grant value, and represents the amount that may be paid for achieving the target level of performance across all performance components of the award. The “maximum” payout represents the amount that may be paid for achieving the maximum level of performance across all performance components, subject to an overall cap for the payout amount.

 

     Mr. Schulman was granted a PG2009-10 award at the time he joined the Company in August 2010.

 

(3) The exercise price of the SOs shown in this column reflects the closing price of a share of our common stock as reported on the NYSE on the date of grant. The exercise price per share of our common stock on the January 26, 2010 grant date was $38.10 and on the August 31, 2010 grant date was $39.87.

 

(4) Restricted Stock Awards and Restricted Stock Units. We value RSAs and RSUs in this column based on the closing price of the Company’s common shares on the NYSE on the grant date ($38.10 on January 26, 2010 and $39.87 on August 31, 2010).

 

     Stock Options. These amounts show hypothetical values at grant under a variation of the Black-Scholes option pricing model. This model is a mathematical formula that makes assumptions about stock option features. A number of these assumptions do not apply to the options we grant to our executive officers and other employees. In particular, the model assumes that holders can exercise stock options immediately and freely transfer them. For these reasons, we caution that the values we show in the table are theoretical and may not reflect the amounts that option holders will realize. Whether and to what extent an option holder realizes value will depend on what our share price will be relative to the exercise price. The assumptions and Black-Scholes values listed below are consistent with the assumptions that we used to report stock option valuations and expense in our 2010 Annual Report to Shareholders.

 

     The following assumptions are used for SOs granted in January and August 2010:

 

     
Assumptions   January     August      

Dividend yield

    1.8     1.7  

Expected volatility

    41.1     43.2  

Risk-free interest rate

    2.9     1.8  

Expected life of stock option (years)        

    6.2        6.2     

Exercise price

  $ 38.10      $ 39.87     

 

     The expected volatility is based on weighted historical and implied volatilities of the Company’s common stock price. The expected life of the options is based on historical data and expectations of options currently outstanding.

 

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Outstanding Equity Awards at Fiscal Year-End 2010

The following table shows the number of shares covered by exercisable and unexercisable SOs and unvested RSAs and RSUs granted under the 1998 Plan or the 2007 Plan held by our NEOs on December 31, 2010.

 

 
Outstanding Equity Awards at Fiscal Year-End 2010  
       
            Option Awards            Stock Awards  
       
Name   Grant Date     Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
           Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
    Market
Value
of Shares
or Units
of Stock
that
Have Not
Vested
($)(a)
   

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other Rights
that Have Not
Vested

(#)

   

Equity Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units,
or Other Rights
that Have Not
Vested

($)(a)

 

K.I. Chenault

    1/26/2010        0        650,918 (1)        $38.100        1/26/2020              53,805 (b)    $ 2,309,311   
      1/29/2009        299,222 (1)      897,666          $16.710        1/29/2019               
      1/31/2008        312,500 (1)      312,500          $49.130        1/30/2018               
      1/31/2008        0        0        1,375,000 (4)      $49.130        1/30/2018              122,124 (c)    $ 5,241,562   
      11/30/2007        0        0        1,375,000 (4)      $58.980        11/30/2017               
      1/25/2007        468,750 (1)      156,250          $57.770        1/25/2017               
      1/23/2006        425,000 (2)      0          $51.865        1/22/2016               
      1/24/2005        445,537 (2)      0          $45.768        1/23/2015               
      1/26/2004        555,208 (2)      0          $43.977        1/25/2014               
      1/27/2003        555,208 (2)      0                $29.239        1/26/2013                                           

E.P. Gilligan

    1/26/2010        0        228,346 (1)        $38.100        1/26/2020              19,028 (d)    $ 816,682   
      10/30/2009        0        114,810 (5)        $34.840        10/30/2019              57,405 (e)    $ 2,463,823   
      1/29/2009        83,782 (1)      251,346          $16.710        1/29/2019               
      1/31/2008        95,000 (1)      95,000          $49.130        1/30/2018              21,758 (f)    $ 933,853   
      7/31/2007        112,500 (3)      337,500          $58.540        7/31/2017              68,000 (g)    $ 2,918,560   
      1/25/2007        112,500 (1)      37,500          $57.770        1/25/2017               
      1/23/2006        150,000 (2)      0          $51.865        1/22/2016               
      1/24/2005        165,648 (2)      0          $45.768        1/23/2015               
      1/26/2004        195,351 (2)      0          $43.977        1/25/2014               
      7/28/2003        10,282 (2)      0          $39.876        7/27/2013               
      1/27/2003        185,069 (2)      0          $29.239        1/26/2013               
      1/28/2002        205,632 (6)      0          $31.941        1/27/2012               
      2/26/2001        205,632 (7)      0                $38.922        2/25/2011                                           

D.H. Schulman

    8/31/2010        0        125,407 (1)        $39.870        8/31/2020              31,351 (d)    $ 1,345,585   
      8/31/2010                                                                        119,137 (h)    $ 5,113,360   

D.T. Henry

    1/26/2010        0        137,795 (1)        $38.100        1/26/2020              11,482 (b)    $ 492,807   
      1/26/2010                          78,740 (j)    $ 3,379,521   
      1/29/2009        59,844 (1)      179,533          $16.710        1/29/2019               
      1/31/2008        75,000 (1)      75,000          $49.130        1/30/2018              14,634 (c)    $ 628,091   
      10/31/2007        71,250 (1)      23,750          $60.950        10/31/2017               
      1/25/2007        20,625 (1)      6,875          $57.770        1/25/2017          1,719 (i)    $ 73,779         
      1/23/2006        30,000 (2)      0          $51.865        1/22/2016               
      1/24/2005        28,560 (2)      0          $45.768        1/23/2015               
      1/26/2004        68,544 (2)      0          $43.977        1/25/2014               
      3/25/2003        2,582 (2)      0                $31.057        3/24/2013                                           

S.J. Squeri

    1/26/2010        0        157,480 (1)        $38.100        1/26/2020              13,123 (d)    $ 563,239   
      10/30/2009        0        229,621 (5)        $34.840        10/30/2019              28,702 (e)    $ 1,231,890   
      1/29/2009        0        157,092 (1)        $16.710        1/29/2019               
      1/31/2008        65,000 (1)      65,000          $49.130        1/30/2018              10,177 (f)    $ 436,797   
      1/25/2007        97,500 (1)      32,500          $57.770        1/25/2017               
      1/25/2007        100,000 (3)      300,000          $57.770        1/25/2017               
      1/23/2006        130,000 (2)      0          $51.865        1/22/2016               
      5/16/2005        36,557 (2)      0          $45.575        5/16/2015               
      1/24/2005        26,275 (2)      0          $45.768        1/23/2015               
      1/24/2005        68,544 (2)      0          $45.768        1/23/2015               
      1/26/2004        75,399 (2)      0                $43.977        1/25/2014                                           

 

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Notes Relating to Option Awards

 

(1) These SOs vest 25% (subject to rounding) on the first, second, third, and fourth anniversaries of the grant date.

 

(2) These SOs vested 25% (subject to rounding) on the first, second, third, and fourth anniversaries of the grant date.

 

(3) These SOs vest 25% (subject to rounding) on the third and fourth anniversaries of the grant date, and 50% on the fifth anniversary of the grant date.

 

(4) These SOs comprising the Special Grant will vest only if the Company meets performance levels with respect to (i) growth in diluted EPS from continuing operations, (ii) revenue growth, (iii) average annual ROE, and (iv) annual TSR as compared to the S&P 500 Index, in each case during the six-year period from January 1, 2008 through December 31, 2013. Further details are described on page 24 of the March 13, 2009 proxy statement.

 

(5) These SOs vest 100% on the fourth anniversary of the grant date.

 

(6)

These SOs vested 33 1/3% (subject to rounding) on the first, second, and third anniversaries of the grant date.

 

(7)

These SOs vested 33 1/3% (subject to rounding) on the second, third, and fourth anniversaries of the grant date.

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, 2010, which was $42.92.

 

(b) These RSUs vest 25% on each of the first, second, third, and fourth anniversaries of the grant date, subject to continuous employment with the Company and our achieving positive cumulative net income from continuing operations over each vesting period.

 

(c) These RSUs vest on the third anniversary of the grant date, subject to continuous employment with the Company and our achieving average annual ROE of 15% or more over the vesting period.

 

(d) These RSAs vest 25% on each of the first, second, third, and fourth anniversaries of the grant date, subject to continuous employment with the Company and our achieving positive cumulative net income from continuing operations over each vesting period.

 

(e) These RSAs vest on the third anniversary of the grant date, subject to continuous employment with the Company and our achieving positive cumulative net income from continuing operations for the period October 1, 2009 through September 30, 2012.

 

(f) These RSAs vest on the third anniversary of the grant date, subject to continuous employment with the Company and our achieving average annual ROE of 15% or more over the vesting period.

 

(g) For Mr. Gilligan, these RSAs vest 20% on each of the third, fourth, and fifth anniversaries of the grant date and 40% on the sixth anniversary of the grant date, subject to continuous employment with the Company and our achieving average annual ROE of 15% or more over the vesting periods.

 

(h) For Mr. Schulman, these RSAs vest 50% on each of the first and second anniversaries of the grant date, subject to continuous employment with the Company and our achieving positive cumulative net income from continuing operations over each vesting period.

 

(i) These RSUs vest 25% on the first, second, third, and fourth anniversaries of the grant date, subject to continuous employment with the Company.

 

(j) These RSUs vest on the third anniversary of the grant date, subject to continuous employment with the Company and our achieving positive cumulative net income from continuing operations over the vesting period.