Early April 2020 was a grim time for many companies. But American Express chief executive Steve Squeri found himself facing particularly worrying circumstances.
Credit card billings had tumbled by 50 per cent, the company feared as much as $11.5bn in loans and credit card debt was at risk of default, and Covid-related lockdowns had devastated the travel and entertainment benefits its customers most valued.
Even if the company hunkered down, made lay-offs and sharply cut back spending, it appeared to be on track for a substantial loss.
Squeri, then two years into being chief executive, was not inclined to play it safe. He wanted to keep everyone on the payroll, keep an eye out for acquisition opportunities and spend $1bn on new kinds of rewards for cardholders who were stuck at home.
“It was based on a philosophy that we were not playing a short-term game,” Squeri remembers. “In any downturn, there’s always an upswing. And if you’re not ready for the upswing, you’ve missed an opportunity to move ahead.”
But first he had to warn the group’s largest shareholder about the potential losses and get him on board. “I called Warren Buffett and said, ‘We’re probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we’ll have long-term viability for our shareholders.’”
Buffett, who bought most of Berkshire Hathaway’s Amex shares in the 1990s and now owns a 20 per cent stake, was sold. “‘The most important thing to take care of is your customers and your brand,’ he replied. ‘It’s hard to get customers back. And once you damage the brand, it’s damaged.’”
Assured of support, Squeri charged ahead. Amex began offering cardholders rebates on their streaming and shipping fees, which not only built loyalty but also prompted customers who had previously used the card mostly for travel and entertainment to start using it for online shopping, subscriptions and day-to-day spending. Amex snapped up Kabbage, an online banking platform, to enlarge its growing small business division. The reported price of $850mn was half of its value at its previous fundraising in 2017.
“The pandemic turned us into a higher growth company,” Squeri said.
Before Covid, Amex had been aiming for 8 to 10 per cent revenue growth; last year, as billings recovered from the lockdown slump, it recorded a 25 per cent increase. This year, under more normal conditions, the company has been predicting another 15 to 17 per cent jump on the back of its success at recruiting younger customers, millennials and Gen Z, who could power growth for decades to come.
In a measure of just how far expectations have been reset, Amex announced record second-quarter revenue and profits but its share price still fell on the day.
Some Amex observers say they are pleasantly surprised by Squeri’s boldness.
Widely seen as an operations person, he was not originally in line to succeed previous chief executive Ken Chenault even though he had spent decades at the company. After stints as chief information officer and head of corporate cards, Squeri admits he was planning to retire at 60, in around 2019.
Instead, Chenault turned to him when heir apparent Ed Gilligan died of a heart attack in 2015 just as the company was facing tougher competition and the loss of its partnership with Costco, the consumer warehouse.
“One of the big questions when he came in was would he be able to take his operational focus and . . . have a strategic view of where to lead the company? I think that he’s proven over the last five or six years that he can,” says Ryan Nash, a Goldman Sachs analyst.
Amex shares are up nearly 80 per cent since Squeri took over the company, and the board awarded him a special bonus last year, bringing his total pay for 2022 to $48mn. The award placed him among the highest paid chiefs in the S&P 500. It also prompted investor disquiet. This year’s non-binding resolution on the company’s pay plan drew 46 per cent opposition, with shareholders including BlackRock complaining that pay was not sufficiently aligned with performance.
Being tarred as a corporate fat cat is at odds with Squeri’s sense of himself as someone who sits outside the privileged crowd that dominates professional services. He is the grandson of Italian and Irish immigrants and the son of an accountant who worked nights and weekends at Bloomingdale’s department store to make ends meet. During his studies at Manhattan College, Squeri lived at home, and he had never been on an aircraft until he joined a training programme at what is now the consulting group Accenture.
Four years later he moved to Amex. There, his Queens accent and cheap suits stuck out so badly that an executive took him aside. “You have a really sharp mind, but the rest of you needs a lot of work,” he said. “[Senior managers] tend to use all the letters of the alphabet when they talk.”
The mentor took Squeri shopping, arranged for elocution lessons and even organised sessions with a cultural anthropologist so the younger manager would feel comfortable when he was sent to the group’s overseas offices. “I’m an example of how anybody can get to the top with a lot of hard work and having people that run the company that . . . are looking at individuals broadly and not judging books by their cover,” Squeri says.
As chief executive, he has been guided by his father’s example. “He treated everybody the same way, regardless of whether they were a stock person, a superior, or a peer. He treated them all with total respect. And as a result, he got total respect.”
Before taking over at Amex, Squeri met individually with 80 top executives of the company, asking them what they hoped he would do and what they were most afraid of. He also worked with a Harvard Business School professor and top Amex executives to formulate what he calls a “framework for winning” — a single page that sets out the company’s vision and strategy, and continues to drive his decisions today.
“Steve is a great coach,” Jeff Campbell, the company’s outgoing chief financial officer, says. “He has a phenomenal talent for figuring out how to get along with and get the best out of all kinds of people.”
Squeri has restructured rewards across the company, eliminating ratings for business units and dramatically expanding the bonus programme. Now the entire 77,000-person workforce is eligible for a chunky annual payment based on their individual performance and the company-wide results. Before the change, “you had a load of people [whose] motivation was that the company just stay in business,” Squeri says. “Now, their motivation is, how can we make it better?”
He argues the end of business unit scores has improved strategic thinking because senior executives can focus on what will produce the best group results, rather than trying to build empires. “We get more out of our business model when all the oars are going in the right direction,” he says.
That integration is already being tested by a fresh set of challenges. This year, Amex has more than tripled provisions for credit losses, as concerns mount that the economy will slow down. Though the company continues to report record revenue and profits, it missed analysts’ expectations in the first and second quarters, knocking the share price down.
“Steve’s done an incredible job . . . but it’s a very competitive space,” says Macrae Sykes, a portfolio manager with Gabelli funds, which lists Amex among its 10 largest investments. “In a more difficult economic environment, of course their earnings are going to contract.”
Squeri, now 64, is sanguine about day-to-day vicissitudes. “You have to watch what actually happens and be willing to admit you’re wrong and to pivot,” he says. “I make mistakes every day . . . If you’re not failing that means you are not growing.”
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