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At the spring annual meeting of shareholders in 1977, James D. Robinson III was elected chairman of American Express, the New York-based financial services company known for its travellers cheques, and its unique charge now, pay now credit card. His ambition was to take the splendid cash flow that the card and cheques business generated and use it to create a giant “financial supermarket.” According to Business Week, Robinson “set about transforming American Express into a financial empire of unequaled proportions.”i[i] Financial diversification was all the fashion in the early 1980s (witness Sears, Roebuck’s acquisition of Dean Witter, or General Electric’s of Kidder Peabody), and Robinson was determined that American Express would be the biggest, the best and the brightest. As reporter and author Bryan Burrough notes: Jim Robinson outlined a vision of a financial empire that would offer all things to all people: charge cards, insurance brokerage services, money management, private banking. It would be unlike any other company ever formed, offering cradle-to-grave financial care for anyone in the world, anywhere in the world. The potential synergies were awe-inspiring: Shearson mutual funds and Fireman’s Fund insurance offered to American Express card holders; American Express travel planning offered to Shearson’s Wall St clients. The combinations seemed endless.ii[ii] To this end, American Express acquired: • in 1981, Shearson, at a cost of nearly $1 billion – “Era of Financial Conglomerate May Dawn on Wall St.” said Wall Street Journal headline; • in 1981, The Boston Company;iii[iii] • Marshall and Robinson Humphries; • • • • by early 1982, regional brokerages Foster &
in 1983, Edmond Safra’s Trade Development Bank; in 1984, Investors Diversified Services; in 1984, Lehman Brothers Kuhn Loeb; and in 1987, E.F. Hutton & Co.
Robinson pursued other targets with less success. • In September 1977, he tried to buy Philadelphia Life, which was already the subject of a takeover bid from its largest shareholder, Tenneco Inc. When American Express launched an unsolicited $230 million bid, Tenneco upped its offer and swept AmEx aside. • In 1987–88, Robinson wooed Disney and The Book-of-the-Month Club, but these overtures were rejected out of hand. • Then came McGraw-Hill in January 1979, when AmEx launched a “friendly” $830 million bid. The ensuing fight was far from friendly. McGraw-Hill responded with a series of aggressive newspaper articles, letters to shareholders, even a libel suit. At a press conference, Harold McGraw told of a letter he had sent to Robinson accusing him of a lack of integrity and cor-porate morality.iv[iv] AmEx withdrew. Bryan Burrough comments, “It was the low mark of Robinson’s career.”v[v] • Later in 1979, AmEx engaged in a joint venture with Warner Communications to
• In 1983. was Shearson.form a cable TV company called Warner-AmEx. however. an AmEx-owned insurance firm called the Fireman’s Fund posted a $242 million pre-tax loss for the year. and provide a $200 million bridge loan. Boston restaurateurs cut up their American Express cards. and declined to accept the card at their establishments. Shearson would kick in $50 million. Safra was the embodiment of exclusive.” • In 1987. The loss also spelled an end to AmEx’s cherished 36-year record of annual profit increases. while the mayor of Pittsburgh joined in a public cutting-up of AmEx cards. Kravis & Roberts. Other events damaged AmEx’s bottom line. as well as the company’s prized image and integrity. Lebanese by birth and one of the world’s richest men. and agreed to pay $8 million to Safra’s chosen charities. which eventually lost the high-publicity battle to Kohlberg. “With virtually no warning. the myth of American Express’s financial supremacy had ended. Robinson envied his franchise. with Beazer Plc. dragging AmEx’s overall earnings to barely $30 million. The operation continued to lose money until Robinson sold out in 1985. and two other senior executives promptly retired. The biggest headache of them all. The crisis came to AmEx executives as a big surprise.” Known as “Pessima” in financial circles. The Boston Company admitted “accounting errors. The incident became known as “The Boston Fee Party. and felt that Safra’s name could boost AmEx’s reputation. Robinson merged the troubled American Express Bank with the Trade Development Bank owned by Edmond Safra. AmEx introduced its own credit card called “Optima. Robinson’s travails Aborted mergers weren’t Robinson’s only headaches. Safra withdrew from the company in 1985 and later resigned from the board.” The President confessed to overstating 1988 pre-tax earnings by $30 million. Shearson’s role was savaged in a bestselling 1990 book about the contest. He was fired. private banking.”vi[vi] • Also in 1983. The negative publicity for American Express was devastating. shortly before the business became spectacularly profitable. in a highly public campaign against AmEx’s high merchant charges. Shearson became embroiled in the battle for control of RJR Nabisco on the management side. Shearson’s Mergers & Acquisition department figured they could merge Koppers. • In 1988. Robinson made a public apology.vii[vii] • In 1991. Pennsylvania Senator John Heinz threatened to introduce legislation in Congress to block the takeover. • In December 1988. • The company had been in a slide ever since its record year in 1986. In 1989 he accused AmEx of leading a smear campaign against him. a Pittsburgh chemicals manufacturer. 1989 profits were running 88 percent lower than at their peak. . the charge card cost the company $112 million. • In March 1988. Koppers launched a fierce public campaign against both Shearson and AmEx. accusing them of siding with a British firm at the expense of American jobs. a British construction firm. The stock was trading at roughly half the $34 high it had reached in April 1987. The relationship between Safra and AmEx was a disaster. Robinson ended up selling Trade Development Bank in 1990.
Before leaving the room to the outside directors at the February meeting. mistakes that had cost shareholders billions of dollars.. as a replacement. Worse. Warner requested the meeting of outside directors “to protect ourselves against a charge that all we did was sit around and play patty-cake for Jimmy. was named the new Shearson boss. Warner asked if he could make a statement. By 1992. until age 60. When a second round of talks with Weill failed. Terrible mistakes had been made. Cohen was fired. The succession issue was raised more forcefully at the September meeting. saying that Robinson was being made the victim of a boardroom cabal. Robinson said. Drew Lewis. • Talks in 1990. but that was down 39 percent from the previous year. and a successor found forthwith. Shearson’s president. AmEx announced it was going to purchase the remaining shares in Shearson that it didn’t already hold at a cost of $1 billion. defended Robinson. going back to the attempted takeover of Philadelphia Life Insurance Co. Robinson raised the question of his successor. the embarrassing episodes involving Safra and RJR Nabisco. He described the aborted mergers. the outside directors should meet alone once or twice a year. His proposal: Robinson should be asked to retire immediately. Shearson lost $116 million for the year. These results set the stage for a battle inside the American Express boardroom. As the outside directors gathered prior to an informal supper meeting of the board. Warner had joined the board in 1972. he concluded. Jr. the son of Robinson’s predecessor as CEO.”viii[viii] Robinson agreed and scheduled two such meetings for February and September 1992. In late 1989. and the erosion of the card’s market share. in 1977. along with Richard Furlaud. 1992–93 In late 1991. while other Wall Street firms were showing record profits. He identified Harvey Golub. run by former AmEx president Sandy Weill. deadlocked. Howard Clark. American Express was in a mess. as did a new issue of Shearson equity. Golub was relatively new to American Express and was unfamiliar with many parts of the sprawling AmEx empire.• By 1989. The year was not a good one for American Express. one of the longest tenures of any American corporate chief. What followed was a biting 20-minute critique of Robinson’s tenure as CEO. They were the two most senior members of the 19-person board. Peter Cohen. Robinson had served as chairman and CEO for 16 years. Some were shocked by the sheer volume of evidence Warner had brought to bear against Robinson. American Express director Rawleigh Warner asked CEO James Robinson to allow a new boardroom procedure: as a matter of regular policy. The company was on its way to posting a $243 million profit. to merge Shearson with Primerica. Moody’s placed Shearson on credit watch. but he would make a better CEO given a couple more years’ seasoning. Robinson said he wished to remain at AmEx for about two more years. AmEx president and the chief of the core Travel Related Services (TRS) division. Golub was a man of prodigious talent. CEO of Union Pacific. the future wasn’t looking any brighter. was perfect. Shearson shares had fallen to as low as $10. the losses from Optima. he argued. saying that many of the problems that Warner had described were the result of industry-wide downturns and were not attributable to poor management. At least one director was angry at Warner’s tactics. and James Robinson was not the man to bring it out. • By the start of 1990. The board’s reaction was mixed. he added. one-third of their high. Henry . Inside the boardroom. and were the only ones elected before Robinson’s appointment as CEO in 1977. The timing. was pleading with AmEx to infuse more capital. the problems at Shearson. He read out a detailed list of setbacks that had befallen AmEx under Robinson’s leadership. Weeks later.
and Frito-Lay chairman Roger Enrico. it became apparent that that the Golubversus-outsider issue had become a bone of mighty contention. this is not a coup. the board at its September meeting asked Jim to lead an orderly process to identify a successor CEO. Robinson believes he has enough support on the board to make Mr. Golub chief executive under an arrangement that would let Mr. . A committee would be set up to search for his successor and report its findings to the board.” The story continued: According to one person close to the situation. “Both the Robinson loyalists and the Warner-led insurgents wanted to prevent the other side from seizing control of the search committee. . secrets seldom stay secret for long.”xiv[xiv] The semantic difference between “coup” and “orderly succession process” was lost to investors. it carried a different headline: “Decision Nears on American Express Search. “This is an orderly succession process initiated by and managed by Jim Robinson. The suggestion that Robinson was the victim of a boardroom putsch was strongly denied. the Minneapolis-based fund management group bought by AmEx in 1984. I told them that the time was right. The company responded by announcing that Robinson had decided to retire. the search committee was appointed. Five directors. “I did not feel any pressure on the succession issue coming up to the September meeting. “Jimmy thinks he has between 12 and 14 votes and all he needs is 10 votes. sources said. To characterize it in any other way is totally inaccurate.75 on the news of the succession plan. the former secretary of state.”xi[xi] The board’s decision was not made public. Shares rose $1. Fortune wrote. the individual added. The media speculated as to possible candidates to succeed Robinson. Robinson said: “I think that would be a gross exaggeration. An obvious front-runner was AmEx’s own Harvey Golub. responsible for a $1 billion costcutting plan and a more flexible approach to merchant charges. said the issue of Robinson’s ouster was difficult for him because Robinson was “a good friend of mine. He achieved stellar performance at IDS and was a lead figure in TRS’s renaissance. The news that AmEx was to have a new CEO gave a 6 percent bounce to the stock. Mr. president of British Airways. He was known to be Robinson’s first choice. The same story reported that Enrico had issued an internal staff memo denying any interest in the job at American Express.xv[xv] Three days later.’”x[x] A compromise was reached.” When asked whether the board had pressured him to leave. “Says one source close to the proceedings: ‘Jimmy was cooked. The momentum was there.”ix[ix] But the weight of Warner’s argument was compelling. As the search committee continued its deliberations. Fortune reported in December that Robinson had been pushed out by the board. Robinson would relinquish his post. when the board had made its choice. were named to the committee.38 to $24. The press suggested that possible outsiders included Sir Colin Marshall. Clearly. but not immediately. Mr. but that he would only step down when the search committee had reached a decision. raising American Express’s market value by $667 million. Robinson would be asked to retire. Golub. “Outsider Gains in American Express Search” reported the Wall Street Journal in January 1993. Golub had moved to TRS after a spell as chief of IDS. including Robinson. In a retrospective story covering American Express. Robinson remain chairman for an indefinite period. Warner said in a statement. Pundits also suggested that a recent scandal at British Airways – in which the airline had admitted a “dirty tricks” campaign against Richard Branson’s rival Virgin .Kissinger. Clash Looms as Robinson Seeks Support on Golub. Others Back an Outsider. Robinson was informed of the decision.” the individual said.”xiii[xiii] Robinson himself said. he has been working like hell to line up [board] votes” for Mr. the Washington Post wrote.” xii[xii] Richard Furlaud commented. though in any company as closely watched as AmEx. Robinson’s goal has been “to make sure that it isn’t an outsider” who succeeds him as chief executive. “Throughout the [search] process. with Furlaud appointed as its chair. “Prompted by Jim Robinson’s discussion of his own plan for retirement before age 60 . At the meeting of the full board the next day.
Since the departure of Cohen in 1990.. knowing that a recommendation for Robinson as chairman would be rejected out of hand by some members of the board.”xvi[xvi] Another difficulty was the need to cater to Golub’s own ambitions. so Robinson had become disenchanted with Clark Jr. But having groomed Robinson for the corner office. there was the concern that Golub.Group – had harmed Sir Colin Marshall’s chances. the search committee met to make their choice. ran the argument. Senior director Furlaud told The Economist that Clark Jr. They also addressed the question of who should lead the company’s troubled Shearson operation. would want to avoid even the whiff of scandal to restore its image of cast-iron integrity. By 1992. however. Furthermore. But such a great company as American Express needs a general who has already fought a few wars. and made quickly. but if American Express did not offer Golub the top job. that they would carry a majority of the 19-member board. and there was no point running the risk of losing Golub to another company by appointing an outsider just for the sake of it. doubts also circulated about Golub. and for the sake of continuity of leadership. The elder Clark had been Robinson’s predecessor and was primarily responsible for Robinson’s rapid progress to the executive suite. however. attended virtually every board meeting as a non-voting participant. he was one of Warner’s closest allies in the bid to replace Robinson. A Robinson–Golub team appeared to solve all problems. The search committee voted unanimously to recommend Golub as CEO and keep Robinson as chairman. Nor was Robinson alone. Clark Sr. Clark had become increasingly disturbed by his protégé’s performance. Flom and Rohatyn argued that it was no use waiting for the perfect candidate to arrive. A decision had to be made. the son of legendary AmEx chairman. On January 21. In the first two years of the 1990s.’s performance as CEO of Shearson. had become disenchanted with Robinson. while not officially a member of the board. The company did not want to lose Golub’s talents. But the committee did not end its decision making there. Shearson Lehman Brothers. because “Harvey is like the sophomore at West Point who is getting all As. except one: the outright opposition of three to four members of the board to Robinson’s continued presence at the top of the company.. Having been groomed for the top job. The argument was persuasive. Howard Clark Sr. But while no clear outside candidate emerged. Golub is being sought. given his lack of experience.. he would be unwilling to remain at AmEx under another CEO. Robinson brought two advisers with him – investment banker Felix Rohatyn of Lazard Frères and lawyer Joseph Flom. There was no indication that Marshall had been involved in the misdeeds.”xvii[xvii] Clark’s tenure at Shearson had not been auspicious. but it was thought that AmEx. Keeping Robinson on as chairman. There was no outside candidate better suited than Golub. They were not questions about his ability. but about his lack of experience as a senior AmEx executive and his unfamiliarity with large parts of the sprawling AmEx empire. “seems to have got lost a little bit. Both men advised the appointment of Golub as CEO but suggested that. the continuing speculation over the succession was harming morale and damaging the company’s reputation. Shearson’s CEO had been Howard Clark Jr. still smarting from the Safra affair. while exceptionally talented. But while Clark Sr. According to accounts of the meeting. had little experience in AmEx’s global operations and was unfamiliar with AmEx’s problem-child. No one believed. Shearson . would give Golub the chance to grow into the job under Robinson’s experienced supervision. Robinson should be kept on indefinitely as chairman. The Wall Street Journal reported: An alternative to Mr. members of the search committee were reluctant to accept this advice. another company surely would. the person close to the committee said.
Robinson’s pitch was a bold one. Shearson reported a loss of $996 million. Robinson told the search committee that he wished to head Shearson. Later. as Shearson’s chief. reducing AmEx’s holdings to 51 percent in 1988. Robinson further strengthened his hand by informing Clark Sr. If Shearson continued to drag on the earnings of its parent. Harvey Golub. He believed he was being kept away for one reason: that he would oppose Robinson as chairman. Business Week quoted a source close to the situation: “Jim feels a personal obligation to get this done. would vehemently oppose both Robinson’s continued chairmanship and his appointment to Shearson. they weren’t for long. now numbering three – possibly four – and led by Warner. replacing the son of a fierce Robinson critic. Robinson did not want to leave a troubled Shearson as his legacy. They believed that. Howard Clark Jr. The talks broke down twice before they were abandoned. It epitomized Robinson’s entire acquisition strategy. Clark was incensed. and agreed to share an “office of the chief executive. They resolved to offer such a solution to the board when it met four days later. after 16 years as CEO. if Shearson started to reap the kinds of profits that Merrill Lynch and Goldman Sachs were making. As it stood. It had “deconsolidated” the firm. Hamstrung with bad debts and high costs. Robinson could be credited with making the “financial supermarket” work. Both Robinson and Golub said they were happy with the set up. Robinson engaged in talks with Sandy Weill. the largest ever for a US brokerage firm. would report to Golub as CEO.was the only business of its kind that wasn’t turning out record profits. Not only did he feel personally responsible for the firm’s success. represented Robinson’s pursuit of financial diversification. was out of his depth. In 1990 alone. The continued losses contributed to downgrading from the credit rating agencies. that he would not be welcome at this one. perhaps more than any of the other businesses AmEx had bought under his tenure. could solve. who. He wished to remain as chairman in order to provide stability and leadership to his hand-picked successor and protégé. Robinson had served his time and now should leave. Such a resolution would leave an awkward hierarchy. Finally. It was harder to predict the reaction of the remaining members of the board.” which would be the senior management decision-making body If the other members of the search committee were uncomfortable with this prescription. Robinson. to sell the operation to Weill’s Primerica Co. but he believed Shearson had the kinds of problems that he. and he would take over day-to-day running of Shearson Lehman Brothers. Shearson ex-boss.”xviii[xviii] All told. The picture did not improve. the once-promising unit lost money hand over fist. Would they reject Robinson’s gutsy power play. nay-sayers would continue to criticize Robinson’s empire-building. as a board advisor. or would they side with the man who appointed them to the board in the first place? . Yet Golub would be accountable to the board. chaired by Robinson. with his experience as an investment banker and undoubted might in the Wall Street ring. customarily attended board meetings. AmEx had bought back all the shares to inject further capital into the brokerage firm.. AmEx had attacked Shearson’s problems in a number of ways. They would settle for nothing less. On the other hand. Shearson lost $166 million in the last quarter of 1992 alone. Clark was told by Robinson subordinates that his presence would be inappropriate since his son’s performance would be one of the topics under review. He is in a do-or-die situation with Shearson. The question remained: would the board accept the recommendation of the search committee? There was no doubt that Robinson’s opponents. Shearson. in 1990.
Kissinger also sat with Beverly Sills on the board of Macy’s. Henry Kissinger. And the Council on Foreign Relations featured not just Kissinger and Furlaud. was now the CEO of Union Pacific Corp. only three were employees of the company: Robinson. Rawleigh Warner commented that these directors “seemed to me to be clearly under Mr. Robinson’s wing. Ross Johnson. where Furlaud was still a director. and made proposals just as if they were board members. selected by Robinson. News of their likely recommendation filtered out to directors over the weekend. the former secretary of state. Moreover. Warner asked Robinson to . the impetuous ex-CEO of RJR Nabisco. and Aldo Papone. and Robinson sat on the board of Bristol Myers Squibb. Byron concludes. Ford received a further $100. former secretary of the Department of Transportation. directly responsible for setting Lewis’s pay. all directors of AmEx.000 in consulting fees to Kissinger’s foreign affairs advisory firm in 1991. argued points.With 19 members.”xix[xix] As well as 19 regular directors. but Robinson and Charles Duncan as well. a senior adviser to the company.”xxv[xxv] Rawleigh Warner later wrote. as was F. But the presence of a large majority of outside directors did not free American Express from charges that its board was management’s patsy. had served as a director since 1984. Kissinger also sat on the board of Union Pacific. the civil-rights lawyer who sat on the board of Revlon with Robinson’s wife. Robinson’s opponents knew that they had failed in their bid to bring new management to American Express. And. “It’s quite obvious that most of the American Express directors were under Jimmy Robinson’s thumb. Golub.xxiii[xxiii] Lewis. In the words of one board member: “The general belief was that the board was in Jimmy’s pocket because he’d appointed 15 of the 17 outside directors.000. Kissinger served on the International Advisory Committee of Chase Manhattan Bank. Furlaud’s old company. Robinson had created American Express’s board for just this emergency.” Furlaud sat on the board of American Express. American Express paid nearly $500. “In a sense. and sometimes they forgot this caveat. He is described in media accounts as one of Robinson’s staunchest defenders in the whole succession affair. four days after the search committee had reached their final decision.xxvii[xxvii] Before the meeting had even been formally opened. Rawleigh Warner says the advisers “engaged in the dialogue. The only thing they could not do was vote. Of these. there was no question as to where its allegiance lay: the American Express chairman had instant rapport with – and could count on the support of – virtually every director ringed around him at the table. American Express had a big board by Fortune 500 standards. at meetings of the Business Roundtable. Robinson would often bump into Drew Lewis. Frank Popoff and Joseph Williams. Since every board member except Furlaud and Warner had been hand-picked over the years by Robinson himself.”xxii[xxii] Byron describes a network of interlocks that added to a sense of “clubbiness. along with Furlaud. AmEx board meetings were regularly attended by four advisory members. The board of AmEx had a reputation as one of the least independent minded around. and with Armstrong at the Center for Strategic and International Studies. and as the board met at 10 on Monday morning.xxiv[xxiv] Other interlocks existed. “The effect of all these interlocks was to develop a cozy sense of belonging to a kind of corporate in-crowd – an arrangement that no one who was already ‘in’ would want to disrupt with something so unseemly as a vote to oust one of the insiders. Both Ford and Kissinger were known to be close personal friends of Robinson’s. he also served on the compensation committee. And President Gerald Ford was a special adviser. and Vernon Jordan.”xx[xx] Christopher Bryon wrote in New York magazine. Other directors received substantial consulting fees for advice to Shearson and other AmEx units.”xxvi[xxvi] The board met on January 25. Not only did Robinson serve on the board of Union Pacific.”xxi[xxi] AmEx was attacked for “stunt casting” in the boardroom.
said that he was a voting member of the board and would therefore stay. that we were being spun by Robinson. There had been a very. “American Express Lineup Strikes Out with Investors. “I fought the good fight. “What everyone missed in this situation is that Jim’s job was never really in jeopardy at all. noting that the proposal had been supported unanimously by the search committee. On the day following the news. I accept full responsibility.. Robinson is a big negative. They were happy with Golub as CEO. . partner in Brandywine Asset Management told the Journal that his group planned to sell its million share stake in Amer-ican Express. Indeed. Whatever the P/E ratio is. “In October not one director was ready to support Harvey. and the company’s market value dropped $835 million in two days.leave so that discussion of his future would not be compromised.87 in the first full day’s trading. a PR campaign. were troubled by the bundled nature of the proposal. Bowen abstained on the basis that he could support Golub but not Robinson. and that Robinson’s “counter-coup” meant that no such shift was likely. We thought the facts were so much on our side that we turned out backs while Robinson was lobbying the rest of the board constantly. Golub was brought into the room for a final vote. and asked the question: “Who’s Really In Charge?”xxxiv[xxxiv] Other investors criticized the board for not being more aggressive in its stance towards Robinson. quoted by Byron.”xxxi[xxxi] Robinson responded to the charge: “There was a campaign to make sure that the directors had full knowledge of the strategy in place and Harvey’s grasp of it. “This was very disappointing. I realized. One director told the Washington Post that the would-be insurgents had underestimated Robinson: “We had been arrogant. Robinson.” he told a Journal writer. The dissatisfaction stemmed from a belief that AmEx was badly in need of a radical shift in strategy. If that is a PR campaign. Mr. Others. That’s how he beat us. Joseph Williams said that the board had manifestly failed in its duty and that the directors had lacked independence in the face of Robinson’s determination not to leave. He is an absolute master. Robinson is unique in his disregard for . “The newly drawn lines of power seem to be at cross purposes.”xxxii[xxxii] The new management structure might have been approved by the board. with Harvey leading dinner meetings with key directors. But in January they were. Period. and other directors did too. it’s less with Jim Robinson in the company. “and I lost.25 to $23. once again it makes you think that Mr. said. . “When you see politics win out over shareholders. including Byrne and Bowen. . some thought Robinson had actually increased his influence by taking over day-to-day responsibility of Shearson. The stock slid $1. Fifteen directors voted in favor of the search committee’s recommendation.”xxviii[xxviii] The next day two other directors resigned. but did not want to see Robinson remain as chairman. very well run campaign. A vote to separate the issues was defeated.” said a Business Week headline. Wilson Davis. Paul Ehrlichman.” he said.” A graphic accompanying the story showed how Golub and Robinson would report to each other under the new structure.”xxx[xxx] Another said.”xxix[xxix] Another source. told the Wall Street Journal. Robinson would remain chairman as well as taking over the top job at Shearson from Clark Jr.” reported the Wall Street Journal.”xxxiii[xxxiii] Observers doubted that the shake-up represented much of a power loss for Robinson at all. Three directors – Warner. analyst at Gerard Klauer Mattison & Co. Kissinger spoke in favor of the motion. AmEx stock dropped 5 percent on five times normal trading. “Arrogance and selfabsorption won out over the interests of shareholders. Furlaud announced the decision of the search committee: Golub would assume the role of CEO. Williams and Armstrong – voted against. Warner immediately announced his resignation in light of his fierce opposition to the result. but it did not sit well with the market. with Lewis coming to his defense. “Curiouser and Curiouser at AmEx.
On January 28. In an unprecedented display of concern. In just over a week since the search committee had made its decision. Richard Furlaud was selected. Three senior directors. and causing a collapse of employee morale.”xxxvi[xxxvi]There was trouble inside the company as well. and J. “The company’s mission. In an interview with the Post.P. “The reception was glacial.” he told one journalist. off again. He considered giving up the Chairman role but remaining CEO of Shearson. The meeting ended in turmoil according to a source when one of the Shearson managers stormed out of the room having threatened to physically assault Robinson. Furlaud told Golub that Robinson should consider stepping down.”xl[xl] Robinson’s withdrawal gave the AmEx board the opportunity to appoint a non-executive chairman. even the traditionally least active Wall Street funds registered their displeasure. “has become a bit muddled. faced some difficult meetings of his own. The shareholders were not interested in Golub’s plan for the future – they just wanted to know how Robinson had managed to cling to. it was just that with Robinson holding positions both above and below. Robinson concluded that his position was untenable. xxxviii[xxxviii] Golub. a motion was made and seconded for Robinson to rescind his resignation. sometimes conciliatory and realistic.”xli[xli] But Robinson’s ouster still rankled with certain members of the board. it was doubtful how much power Golub would actually be wielding. he attended a breakfast meeting with a dozen of AmEx’s largest institutional investors. Later. observers believed that Furlaud would be forceful in advancing a clear strategy for American Express.shareholders and control over the company. The Journal also reported that Lehman Brothers bankers were complaining that winning clients had become harder because Robinson gave the firm a credibility problem. sometimes bitter and mad. The mission needs to be made clear. on January 29. As a plan for forging a bold new strategy at American Express. Morgan Investment Management pointed out the decline in share value since the announcement. Golub later discussed the issue with Robinson and Joe Flom over dinner.”xxxix[xxxix] Finally. Maybe someone of [Furlaud’s] stature can do that. A source close to Robinson told the Post: “Jim’s mood was on again. then suddenly here was the board of directors saying he wouldn’t be going after all – and expecting investors to feel as if nothing had happened. It was clear to members of the board that more needed to be done. the chairmen of various board committees.” said one of AmEx’s largest institutional investors to Byron. “It’s incredible. Mindful of his aggressive turnaround of Squibb Co. He was not greeted favorably. to appoint Furlaud as chairman. even increase. meanwhile. gathered to discuss what should be done.. Robinson continued to vacillate through Thursday night and Friday: “I went through a whole series of permutations in my own mind about what would be most helpful to Harvey and the company. Robinson insisted that he was still undecided about leaving. The Economist carried a cartoon of Jim Robinson with the AmEx board wrapped around his little finger. an idea that received short shrift from Golub. so I decided to pull up stakes and get out of town. in which Robinson discussed some of his ideas for Shearson with the firm’s executives.” one attendee told the Wall Street Journal.”xxxv[xxxv] In the same vein. a measure designed to salve the discontent of the company’s largest shareholders. American Express’s value had dropped 13 percent. since he had been . held by telephone. and expressed reservations about Robinson’s continued tenure at the company. Funds such as Alliance Capital Management. Putnam Management Co. In a statement he denied that pressure from the board had forced his hand: “A combination of things led me to the conclusion that it’s nuts to leave confusion over whether Harvey is really boss. Here was all of Wall Street expecting Robinson to be tossed out on his ear. At a board meeting. Investors mostly approved of Golub’s assumption of the CEO post.xxxvii[xxxvii] The Washington Post described another meeting on January 28. He would resign from all positions at American Express. harming the company’s valuable reputation. it looked like a non-starter.. Golub suggested that Robinson step aside for the good of the company. Another account reported that Robinson had walked out of the meeting early after some hostile remarks from the audience.” said a Morgan Stanley analyst to the Wall Street Journal. “Think of just how out of touch that company’s board really was. Robinson addressed a group of about 400 Shearson branch managers. Robinson’s counter-coup was damaging American Express in the market place. his power. On the day following the announcement.
How and why did they differ? In 1993. As Warner comments. shareholders re-elected a board of directors whose rearrangement of executive functions had five months earlier been utterly repudiated by these same shareholders.” he said. and a company that is in serious and potentially harmful trouble and under attack from the shareholders. A small group of dissenting directors with a split board has very little capability to do batle with a CEO who is determined to hold on and has access to the full apparatus of the corporate public relations department. It is extraordinarily difficult to mount an attack on a CEO who has been in the job for a long time and who has appointed a majority of a board’s directors. What does this tell you about the ultimate significance of the board? What does it tell you about the board’s accountability to the shareholders? How meaningful is the electoral process? .pushed out by outsiders. “since he was on the board during all of this. was the case with Mr. That large a board. in this instance. Later in 1993. and analysts for extended poor performance. Robinson commented on Warner’s damning indictment of Robinson’s leadership. It is imperative to have directors who are not only independent but who can tell the difference between a company that is having some difficulties but moving to correct them with reasonable chance of success. I believe. Directors unable to distinguish between such different situations tend to circle the wagons around the embattled CEO rather than represent the owner shareholders. Do you agree with this comment? In an interview with the Washington Post. I believe. makes for an unwieldy number and prevents an opportunity for each member to speak freely. Rawleigh Warner was elected “Director of the Year” by the National Association of Corporate Directors. media.”xlii[xlii] The motion never went to a vote. at the annual meeting. “The outsiders. Warner shared the lessons he had learned from the AmEx experience: The size of the board does make a difference.xliii[xliii] What does this case tell you about the relationship between management and the board? “In the final analysis a board of directors can only be as effective as its chairman wants it to be” (Hugh Parker). American Express stock rose $1. “I am amused at Rawleigh listing all this.37 in the two trading days following Robinson’s resignation and Furlaud’s appointment. The American Express Board had 19 members and four advisors to the board. Should they have acted sooner? Compare the roles played by the public pension funds and the other institutional investors. Robinson and the majority of American Express directors. only happened to be shareholders.”xliv[xliv] Who should we blame for long-term under-performance – management or the board? Should Warner have acted sooner? Could he have done? Most shareholders did not register their discontent with Robinson’s tenure until after the board elected to keep him on as chairman. This.
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