Curiouser And Curiouser At Amex

'It's bizarre," says Dean Witter Reynolds Inc. analyst Michael A. Lewis. "It's peculiar," says Harvard business school professor Jay Lorsch. "It's sad," says a shareholder.

That's not the reaction American Express Co. hoped for when it named the card giant's new boss. After months of damaging uncertainty and a failed coup, the AmEx board kept James D. Robinson III, 57, as chairman. His protege, AmEx President Harvey Golub, 53, was named chief executive.

That raises questions about where the power lies. Both will share a renamed Office of the Chief Executive. And Robinson will become chairman and CEO of AmEx' Shearson Lehman Brothers Inc. So he'll report to Golub as CEO, while Golub reports to the board--over which Robinson still presides.

"Nobody knows who is running the show," says Dean Witter's Lewis. "Is Golub? Is he still accountable to Robinson? Who is the board's allegiance to?" Adds Harvard's Lorsch, an expert on corporate boards: "I don't like to see an ex-CEO become chairman, because it makes it hard for Golub. You are living in the shadow of your predecessor."

'COMFORTABLE.' AmEx director Richard M. Furlaud dismisses the complaints. He says Golub "enthusiastically endorsed" Robinson's new role, and Robinson "is comfortable working for his former subordinate." Golub confirms those views and notes: "I'm moving into what is now Jim's office," adding that he's "accountable to the board," while Robinson "reports to me inside the company."

Still, the notion of a chairman, Robinson, stepping in to run an operating division seems, at the least, unusual. "That, I have never heard of before," says Lorsch. "It's as if President Clinton became Secretary of Defense in the middle of a war and reported to the Vice-President," says E. Wilson Davis, an analyst at Gerard Klauer Mattison & Co.

The stock market's take was not auspicious. AmEx shares dropped 10% in the two days following the news, in part because of AmEx' disappointing earnings report. Profits dropped 39% in '92, to $243 million. And while other brokerages have been raking it in, Shearson only broke even. With special charges, it racked up a miserable $166 million loss.

For months, a handful of dissident directors have been using AmEx' poor performance to push for Robinson's ouster. They apparently took their case to the media. The dirtiest linen was aired just prior to the board meeting in a nasty piece in The New Yorker on why some directors didn't like Golub.

But they proved no match for Robinson, a savvy boardroom politician. Over the years, Robinson has forged close ties with his handpicked board. AmEx' 1992 proxy discloses that Director Henry A. Kissinger got a $350,000 consulting fee from AmEx. Robinson and director Drew Lewis, CEO of Union Pacific Corp., sit on each other's boards, and Lewis' son manages some money for AmEx. (Lewis and Kissinger did not return calls.) By the time the board met on Jan. 25, many members were eager to take action because the leaks about board strife were making them look bad. And on Jan. 27, three dissidents, former Mobil Corp. CEO Rawleigh Warner Jr., Fund American Cos. CEO John J. Byrne Jr., and Williams Co. CEO Joseph H. Williams, announced their resignations.

'DO OR DIE.' The biggest surprise in the shuffle was Robinson's takeover of Shearson. "Jim feels a personal obligation to get this done. He is in a do-or-die situation with Shearson," says a source close to the situation. The shift shocked Shearson executives, especially Howard L. Clark Jr., whom Robinson installed as CEO in 1990 and who is now being moved aside, to vice-chairman. Clark Jr. was a Robinson loyalist, but an anti-Robinson campaign by his father, former AmEx CEO Howard L. Clark Sr., soured relations between Robinson and Clark Jr. Also stunned were J. Tomilson Hill and Richard S. Fuld Jr., who were recently promoted to co-presidents of Shearson. Clark Jr., Hill, and Fuld declined comment.

Robinson will have his hands full at Shearson. Clark had made progress in repairing Shearson's balance sheet (BW--Aug. 22). But he never controlled the firm's bloated costs.

Despite the turmoil, a prominent shareholder, money manager Mario Gabelli, applauds the changes. That optimism could depend on two things that are far from clear: Robinson relinquishing control and Golub assuming it.

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