A Quiet Coup At American ExpressLeah Nathans Spiro
As departures go, it seems like a throwback to more civilized days. Instead of getting the bum's rush from his own board--the inglorious fate of GM Chairman Robert Stempel--James D. Robinson III says he is relinquishing his chairmanship of American Express Co. at his own initiative. He's even heading a committee to choose his successor, now that he feels that, after 15 years, his work at AmEx is nearing an end. "We're at a point where I can genuinely say, 'This is the right strategy, we're on target, we have the right focus, and we're going to get there,' " says Robinson, 57.
But contrary to the version of events recounted by Robinson and echoed by AmEx spin doctors (box), he is exiting only one step ahead of increasingly restive AmEx directors, several sources close to the board confirm. A leader of the insurgents is a close ally of none other than Howard L. Clark Sr., the former AmEx chairman who chose Robinson to succeed him in 1977.
Now, the board must name a successor. They're measuring about 20 outside candidates against the leading internal choice, AmEx President Harvey Golub. But whoever gets the nod will be taking the helm of a deeply troubled company. AmEx' basic charge-card business has yet to turn around, Shearson Lehman Brothers Inc. lacks the capital it needs to strike out on its own, and employees are in a state of suspended animation until a new leader is named. "If it looks like you are drifting, people lose confidence," notes Colorado Treasurer Gail Schoettler, whose state pension fund is an AmEx shareholder.
BAD INK. The departing chief had been on thin ice with the board for more than a year. In 1991, directors John J. Byrne, CEO of Fund America Cos., and Roger S. Penske, president of Penske Corp., a privately held transportation services company, began agitating for change, say sources close to the board. Both Penske and Byrne declined to comment. They and the other directors were reeling from a seemingly unending torrent of bad news, from a surprise $155 million write down on Optima, a revolving credit card, to a revolt by Boston restaurateurs.
That wasn't all. At least one director was furious about the hefty bonuses Robinson approved for Lehman Brothers managers in 1991. And several directors were shocked at what they read in two 1991 books about American Express--House of Cards, which described Robinson's management failures, and Vendetta, which focused on the attempt by high-ranking AmEx employees to smear banker Edmund J. Safra.
One of Robinson's biggest behind-the-scenes critics was Clark, an adviser to the board who still attends its meetings, say several people who have spoken with Clark in the past year. Clark remains close to former Mobil CEO Rawleigh Warner Jr., 71, whom he nominated to the board in 1972. Clark worried about AmEx' low stock price, say Clark confidants. Two of Clark's friends recall his saying that hiring Robinson was the biggest mistake he ever made. "I'm not going to comment on that," Clark told BUSINESS WEEK.
The board's biggest beef with Robinson is the bottom line. AmEx earnings drooped 31%, to $380 million in the first three quarters of 1992. And the flagship card unit, Travel Related Services, will net an estimated $227 million in 1992, down from $955 million in 1990. Analysts give Golub high marks for attacking TRS's problems and believe cost-cutting and an economic upturn could boost TRS's 1993 earnings.
`DISTRACTED.' At that point, AmEx will be in better shape to cut Shearson Lehman Brothers loose. Robinson thinks Shearson is close to being a stand-alone, A-rated entity. Yet AmEx may have to inject hundreds of millions more into Shearson before spinning it off. And Shearson's estimated 1992 earnings of $200 million are disappointing, in part because compensation eats up 61% of net revenue, the highest level on the Street.
Robinson says he expects to return to the venture-capital or private deal business once he steps down. That could happen in January, says Gerard R. Roche, president of Heidrick & Struggles Inc., the search firm retained by the AmEx board. Until the board decides, employee morale will suffer. "Some people are distracted, and that will go on as long as the search goes on," says one AmEx manager.
Sources close to the company say one outside candidate is RJR Inc. Chief Executive Louis V. Gerstner, former CEO of AmEx. But Golub may have the inside track, if only because bringing in an outsider could derail the tentative progress he has made at TRS and disappoint Wall Street. "What I like about Harvey is that he's a manager, not a worldly socialite," says Alison Deans, an analyst at Smith Barney, Harris Upham & Co. But here's some free advice for AmEx' next leader: Don't wait too long to choose an heir apparent.