American Express

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American Express Company

Type	Public (NYSE: AXP)
Founded	1850
Headquarters	New York, New York
Key people	Kenneth Chenault, Chairman & CEO
Industry	Finance and Insurance
Products	Financial services
Revenue	$27.136 billion USD (2006) [1]
Net income	$3.707 billion USD (2006) [2]
Employees	65,800 (2005)
Slogan	Do More
Website	www.americanexpress.com

American Express (NYSE: AXP), sometimes known as "Amex," is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses.

The company's common stock trades on the New York Stock Exchange under the ticker symbol "AXP." It is one of the 30 stocks that comprise the Dow Jones Industrial Average and is ranked as the 74^th largest company by Fortune. In 2006, BusinessWeek and Interbrand ranked American Express as the 14^th most valuable brand in the world, estimating the brand to be worth US$19.64 billion.^[1]

The current CEO is Kenneth Chenault, who took over in 2001 from Harvey Golub, CEO from 1993 to 2001. Prior to that, it was headed by James D. Robinson III from 1977 to 1993.

1 History
2 Credit card advertising
3 Workplace
- 3.1 Offices
- 3.2 Diversity
4 Management & corporate governance
5 References
6 External links

[edit] History

[edit] Early history

American Express was founded in 1850, in Buffalo, New York, by Henry Wells, William Fargo, and John Butterfield as an express business. In 1882, American Express launched its money order business to compete with the US Post Office's money orders. This product quickly spread to Europe where no such financial product existed.

Sometime between 1888 and 1890, J.C. Fargo took a trip to Europe and returned frustrated and infuriated. Despite the fact that he was president of American Express and that he carried with him traditional letters of credit, he found it difficult to obtain cash anywhere except in major cities. Mr. Fargo went to Marcellus Flemming Berry and asked him to create a better solution than the traditional letter of credit. Mr. Berry created the American Express Travelers Cheque which was launched in 1891 in denominations of $10, $20, $50, and $100.^[2]

The travelers cheque established American Express as a truly international company and in 1915 they announced the establishment of a travel department and soon established its first travel agencies. This was not the firm's first foray into this field, however. In 1914, at the outbreak of the First World War, American Express offices in Europe were among the few companies to honor the letters of credit (issued by various banks) held by Americans in Europe, despite other financial institutions having refused to assist these stranded travellers.

During the winter of 1917 the US suffered a severe coal shortage and on December 26 President Woodrow Wilson commandeered the railroads on behalf of the US government to move US troops, their supplies, and coal. Treasury Secretary William Gibbs McAdoo was assigned the task of consolidating the railway lines for the war effort. All contracts between express companies and railroads were nullified and McAdoo proposed that all existing express companies be consolidated into a single company to serve the country's needs. This ended American Express's express business. The result was a new company called the American Railway Express Agency company formed in July 1918. The new entity took custody of all the pooled equipment and property of existing express companies (the largest share of which, 40%, came from American Express who had owned 71,280 miles of railroad lines, 10,000 offices, with over 30,000 employees).

The Great Salad Oil Swindle forced American Express to take a massive loss. On November 19, 1963, De Angelis's company (Allied Crude Vegetable Oil Refining Corporation) filed for bankruptcy. American Express stocks lost nearly 50 percent of worth (see 'External Links'). Interestingly, keen observer and investor Warren Buffett took advantage of the stock plunge of American Express and bought 5% of the company for $20 Million (US).

[edit] Charge card services history

American Express executives discussed the possibility of launching a travel charge card as early as 1946, but it was not until Diners Club launched their own card in March 1950 that American Express began to seriously consider the possibility. At the end of 1957 American Express CEO Ralph Reed decided to get into the card business, and by the launch date of October 1, 1958 public interest had become so significant that they actually issued 250,000 cards prior to the official launch date. The card was launched with an annual fee of $6, $1 higher than Diners Club, to be seen as a premium product. The first cards were paper, with the account number and cardmember's name typed. It was not until 1959 that American Express began issuing embossed ISO 7810 plastic cards, an industry first.

In 1966 American Express introduced the Gold Card and in 1984 the Platinum Card, clearly defining different market segments within its own business, a practice that has proliferated across a broad array of industries. The Platinum Card was billed as super-exclusive and had a $250 annual fee. It was offered by invitation only to American Express customers with at least 2 years of tenure, significant spending, and excellent payment history.

In 1987, American Express introduced the Optima card, their first credit card product. Previously, all American Express cards had to be paid in full each month, but Optima allowed customers to carry a balance (as does the Gold card, for qualifying purchases over $200), which is now commonplace among most American Express cards (with the exception of the traditional green, platinum, and Centurion cards, which remain charge cards). Although Optima is no longer heavily promoted, an upgraded Optima Platinum is still available on the American Express website.

In 1994, the Optima True Grace card was introduced. The card was unique in that it offered a grace period on all purchases whether a balance was carried on the card or not (as opposed to traditional revolving credit cards which charge interest on new purchases if so much as $1 was carried over.) The card was discontinued a few years later; however, the currently-available One from American Express card offers a similar feature called "Interest Protection".

In 1999 American Express introduced the Centurion Card or "black card" catering to an even more affluent and elite customer segment and is made of titanium. It charged a $1,000 annual fee at the time of its introduction (today, it is $2,500), and offered (and continues to offer) a variety of exclusive benefits. There have always been rumors of a super-exclusive card that gives American Express' richest and most powerful customers special perks. It was this rumor that sparked the launch of Centurion.^[3]

Also in 1999, the company introduced Blue from American Express, which quickly became a popular card among young adults. Based on a successful product for the European market, Blue had no annual fee, a rewards program, and a multi-functional onboard chip. A cashback version, "Blue Cash", quickly followed.

American Express also launched an exclusive agreement with Costco in 1999, replacing an earlier agreement with Morgan Stanley-owned Discover Card. Under the agreement, American Express cards replaced Discover as the only credit/charge card accepted at the warehouse club in the US, and American Express became the first and only credit/charge card accepted at Costco's locations outside the US. To introduce Costco members to American Express, a no-annual-fee co-branded cashback credit card was also introduced. The agreement was highly successful, and was renewed in 2004 for an additional 10 years.

As of 2005, the US Centurion card has a $2500 annual fee, while other American Express cards range between no annual fee (for Blue and many other consumer and business cards) and a $450 annual fee (for the Platinum Card). Annual fees for the Green card start at $95, while Gold card annual fees start at $125.

In 2005 American Express introduced Clear from American Express, touted as the first card that has absolutely no fees of any kind. It also incorporates their ExpressPay technology found in the Blue card. Also in 2005, American Express introduced One from American Express, a card with a "Savings Accelerator Plan" that contributes 1% of eligible purchases into an FDIC-insured High-Yield Savings Account in your name. Other cards introduced in 2005 include "The Knot" and "The Nest" Credit Cards from American Express, which are co-branded cards developed with the wedding planning website theknot.com. They have also introduced City Reward Cards to earn INSIDE Rewards points to eat, drink, and play at New York, Chicago and LA hot spots.

Also, in 2005, American Express introduced ExpressPay, a wireless RFID payment method that requires a card to simply be tapped to a special reader and not swiped. This technology replaced the smart chip on the Blue card. A growing number of merchant and restaurant partners including 7-Eleven, CVS/pharmacy, McDonald's, Regal Entertainment Group, and Ritz Camera, now offer ExpressPay at most or all of their locations. This winter, skiers in Utah will be able to use the ExpressPay option when using the ski bus from Salt Lake City to local resorts. If successful, this could help promote this technology in nationwide public transportation.

In 2006, the UK division of American Express began to issue its Red Card. With each cardmember purchase the company contributes to good causes through The Global Fund to help African women and children suffering from HIV/AIDS, malaria and other diseases.

In 2007, American Express again raised the annual fee for their Platinum charge cards, moving the Personal cards fee to $450, and the Business division to $395. With the increase, customers now get four complimentary companion coach tickets per calendar year. Additionally, the long rumoured "relationship" fee of $5,000 to establish a Centurion card has been established. The annual fee of $2500 remains the same, however.

[edit] The "Boston Fee Party"

From the early 1980s until the early 1990s, American Express was known for cutting its merchant fees (also known as a "discount rate") to merchants and restaurants if they only accepted American Express and no other credit or charge cards. This prompted competitors such as Visa and MasterCard to cry foul for a while, as the tactics "locked" restaurants into American Express.

However, in 1991, several restaurants in Boston started accepting and encouraging the use of Visa and MasterCard due to their far lower fees as compared to American Express's fees at the time (which were about 4% for each transaction versus around 1.2% at the time for Visa and MasterCard). A few even stopped accepting American Express credit and charge cards. The revolt, known as the "Boston Fee Party" in reference to the Boston Tea Party, quickly spread nationwide to over 250 restaurants across the US, including restaurants in other cities such as New York City, Chicago, and Los Angeles. In response, American Express decided to reduce its discount rate gradually to compete more effectively and add new merchants to its network such as supermarkets and drugstores. Many elements of the exclusive acceptance program were also phased out so American Express could effectively encourage businesses to add American Express cards to their existing list of payment options.

Currently, American Express' average US merchant rate is about 2.3%, while the average Visa/MasterCard credit card US merchant rate is about 1.9% (Visa/MasterCard signature debit cards are at 1.7%). Some merchant sectors, such as quick-service restaurants including McDonald's, have special reduced rates to accommodate business needs and profit margins.

Not all the changes from 1991 have taken wind: A very small number of restaurants in major cities still exclusively accept American Express due to the fact that the vast majority of their customers primarily use Amex cards. Likewise, Neiman Marcus only accepts American Express and their store card; however, the current exclusive agreement with American Express is due to expire soon and may not be renewed as an exclusive agreement. Costco also has an exclusivity agreement with American Express; however, Costco's agreement with Amex was the result of a long negotiation process for exclusive acceptance with multiple parties that also included Visa, MasterCard, and Morgan Stanley-owned Discover.

[edit] Financial services history

During the 1980s, American Express embarked on its dream to become a financial services supercompany. In mid-1981 it purchased Shearson Loeb Rhoades Inc the second largest securities firm in the US. In 1984 it purchased the 90-year old Investors Diversified Services, bringing with it a fleet of financial advisors and investment products. Also in 1984, American Express acquired the investment banking and trading firm, Lehman Brothers Kuhn Loeb, and added it to the Shearson family, creating Shearson Lehman/American Express. In 1988, the Firm acquired E.F. Hutton, forming Shearson Lehman Hutton until 1990, when the Firm's name became Shearson Lehman Brothers. When Harvey Golub took the reins in 1993 he negotiated the sale of Shearson's retail brokerage and asset management business to Primerica and in following year, spun-off of the remaining investment banking and institutional businesses as Lehman Brothers Holdings Inc.

In April 1992, American Express spun off its subsidiary, First Data Corp., in an IPO. Then, in October 1996, the company distributed the remaining majority of its holdings in First Data Corp., reducing its ownership to less than 5%.

In December 2000, American Express agreed to acquire the credit card portfolio of Bank of Hawaii, then a division of Pacific Century Financial Corp. Bank of Hawaii, along with its sister bank, Pacific Century Bank, became the first U.S. banks to issue American Express cards when the deal was completed the following year. In January 2006, American Express sold its Bank of Hawaii card portfolio to Bank of America (MBNA). Bank of America will issue Visa and American Express cards under the Bank of Hawaii name.

In January 2004, American Express reached a deal to have its cards issued by a U.S. bank, MBNA America. Initially decried by MasterCard executives as nothing but an "experiment", these cards were released in October of 2004. Some said that the relationship was going to be threatened by MBNA's merger with Bank of America, a major Visa issuer. However, an agreement was reached between American Express and Bank of America on December 21, 2005. Under the terms of the agreement, Bank of America will own the customer loans and American Express will process the transactions. Also, American Express will dismiss Bank of America from its antitrust litigation against Visa, MasterCard and a number of U.S. banks. Finally, both Bank of America and American Express also said an existing card-issuing partnership between MBNA and American Express will continue after the Bank of America-MBNA merger. The first card from the partnership, the no-annual-fee Bank of America Rewards American Express card, was released on June 30, 2006.

American Express Travelers Cheque Card

Since then, Citibank, GE Money, and USAA have also started issuing American Express cards. Citibank currently issues several American Express cards including an American Airlines AAdvantage co-branded card, while GE is currently issuing a co-branded card for Dillard's. HSBC Bank USA will also introduce co-branded American Express cards later this year for several of its private-label retail partners; however, those partners have yet to be announced at this time. Also, UBS launched its Resource Card program for US Wealth Management clients issuing Visa Signature credit cards and American Express charge cards linked to their customers accounts and employing a single rewards program for the two cards.

In 2005, American Express released the American Express Travelers Cheque Card, a stored-value card that serves the same purposes as a traveler's cheque, but can be used in stores like a credit card.

On 30 September, 2005, American Express spun off its American Express Financial Advisors unit as a publicly traded company, Ameriprise Financial, Inc.. Due to this, American Express revenues for 2005 are down around $5 billion, however, like-for-like they are up 10.5% in 2005.

[edit] Credit card advertising

In 1975, David Ogilvy of Ogilvy & Mather developed the highly successful "Don't Leave Home Without It" ad campaign for the American Express card, featuring Oscar-award-winning actor Karl Malden. A typical ad showed a celebrity saying "Do you know me?", giving some hints, but the person's name was never mentioned except as imprinted on an American Express card. The ad campaign ended in 1987; however, the "Don't Leave Home Without It" slogan was revived in 2005 for the prepaid American Express Travelers Cheque Card.

Sesame Street parodied the "Do you know me?/Don't Leave Home Without It" ad campaign with two skits involving holding a grownup's hand while crossing the street. One skit had Forgetful Jones and the other had Bert and Ernie. Both skits ended with their names being embossed onto a card looking like an American Express card, and a voiceover saying "A grownup's hand. Don't cross the street without it."

The Adventures of Seinfeld & Superman

To this day, American Express continues to use celebrities in their ads. Some notable examples include a late 1990s ad campaign with comedian Jerry Seinfeld, including the two 2004 webisodes in a series entitled "The Adventures of Seinfeld and Superman." In late 2004, American Express launched the "My life. My card." brand campaign (also by Ogilvy & Mather) featuring famous American Express cardmembers talking about their life. The ads have featured actors Kate Winslet, Robert De Niro, Ken Watanabe, Duke University basketball coach Mike Krzyzewski, Comedian and talk show hostess Ellen DeGeneres, Professional golfer Tiger Woods, US Open tennis pro Andy Roddick, Chelsea Football Club manager José Mourinho, and film directors Martin Scorsese, Wes Anderson and M. Night Shyamalan among others.

Many American Express credit card ads feature a sample American Express card with the name "C F Frost" on the front. This is not a fabricated name, as Charles F. Frost was an advertising executive.^[4]

In addition, American Express was one of the earliest users of cause marketing, to great success. A 1983 promotion advertised that for each purchase made with an American Express card, American Express would contribute one penny to the renovation of the Statue of Liberty. The campaign generated contributions of $1.7 million to the Statue of Liberty restoration project. What would soon capture the attention of marketing departments of major corporations was that the promotion generated approximately a 28% increase in American Express card usage by consumers. Building on its earlier promotion, American Express later conducted a four-year Charge Against Hunger program, which generated approximately $22 million for a charity addressing poverty and hunger relief. In 2006, as part of Bono's Product Red, American Express launched the American Express Red Card. The card, currently only available in the United Kingdom, makes a donation to fight AIDS with every purchase made using the card.

[edit] Workplace

[edit] Offices

American Express Tower in New York City

In April 1986 American Express moved its headquarters to Three World Financial Center in New York City. The 51-storey building was an architectural triumph and noted as a significant and important addition to the city. After the events of September 11, 2001, American Express had to leave its headquarters temporarily as it was located directly opposite to the World Trade Center and was damaged during the fall of the towers. The American Express tower became the backdrop to efforts in rescue, recovery, and reconstruction at Ground Zero. The company began gradually moving back into its rehabilitated building in 2002.

Amex Canada is based just north of Toronto, in the City of Markham.

American Express has a European Service Center in Brighton, England. It is a large 1970s-built white tower block, surrounded by several other smaller offices around the city. The official UK HQ is located in London at Belgrave House on Buckingham Palace Road, SW1; other important UK offices are based in Sussex at Burgess Hill.

The Asia-Pacific Headquarters is located in Singapore, at 16 Collyer Quay.

The headquarters of the Latin America & Caribbean division is in Miami.

[edit] Diversity

American Express was named one of the 100 Best Companies for Working Mothers living in the U.S. in 2006 by U.S. based Working Mothers magazine.

[edit] Management & corporate governance

Key executives include:^[5]

Kenneth Chenault: Chairman and Chief Executive Officer
Edward Gilligan: Group President - Global Corporate Services and International Payments
Alfred Kelly, Jr.: Group President - U.S. Consumer and Small Business Services
Dan Henry: Executive Vice President and acting Chief Financial Officer^[6]
Jonathan Linen: Vice Chairman - American Express Company
L. Kevin Cox: Executive Vice President Human Resources and Quality
John D. Hayes: Executive Vice President Global Advertising & Brand Management, and Chief Marketing Officer
Louise Parent: Executive Vice President and General Counsel
Steve Squeri: Executive Vice President and Chief Information Officer
Thomas Schick: Executive Vice President Corporate Affairs and Communications