DEF 14A 1 amex3289431-def14a.htm DEFINITIVE PROXY STATEMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

AMERICAN EXPRESS COMPANY

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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A heritage built on service and sustained by innovation

We’re a global services company that provides customers
with access to products, insights and experiences that
enrich lives and build business success




Our
Vision

Provide the world’s best customer experience every day

 

Our
Mission

Become essential to our customers by providing differentiated
products and services to help them achieve their aspirations








 
       



Your vote is important to us!
Please vote today at
www.proxyvote.com



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American Express Company
200 Vesey Street
New York, New York 10285

Notice of Annual Meeting of Shareholders

WHEN  

WHERE

 

RECORD DATE

Monday, May 7, 2018
9:00 a.m. Eastern Time

American Express Company
200 Vesey Street, 26th Floor
New York, New York 10285

March 9, 2018

ITEMS OF BUSINESS

To vote on the following proposals:

1

Election of directors proposed by our Board of Directors for a term of one year, as set forth in this proxy statement

     

4

Two shareholder proposals if properly presented at the meeting

         

2

Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2018

5

Such other business that may properly come before the meeting

         

3

Advisory resolution to approve executive compensation


TANGELA S. RICHTER
Corporate Secretary and Chief Governance Officer
March 19, 2018

Important notice regarding the availability of proxy materials for the 2018 annual meeting to be held on May 7, 2018

Our proxy statement and annual report are available online at http://ir.americanexpress.com.* We will mail to certain shareholders a notice of internet availability of proxy materials, which contains instructions on how to access these materials and vote online. We expect to mail this notice and to begin mailing our proxy materials on or about March 20, 2018.

*

Web links throughout this document are provided for convenience only. Information from the American Express website is not incorporated by reference into this proxy statement.

Cautionary Note Regarding Forward-Looking Statements

This proxy statement contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You can identify forward-looking statements by words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “estimate,” “predict,” “potential,” “continue” or other similar expressions. Actual results may differ from those set forth in the forward-looking statements due to a variety of factors, including those contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the Company’s other filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.


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Table of Contents

Table of Contents

3       Notice of Annual Meeting
of Shareholders
5 Proxy Summary and Voting Roadmap
10 Corporate Governance
at American Express
10 ITEM 1 Election of Directors for a Term
of One Year
10 Our Director Nominees
17 Our Board’s Composition
23 Our Board’s Primary Role and Responsibilities,
Structure and Processes
30 Shareholder Engagement
33 Board Committees
37 Compensation of Directors
38 Director Stock Ownership
39 Director and Officer Liability Insurance
39 Certain Relationships and Transactions
41 The Service Effect: Corporate Social
Responsibility at American Express
45 Audit Committee Matters
45 ITEM 2 Ratification of Appointment
of Independent Registered Public Accounting Firm
47 PricewaterhouseCoopers LLP Fees and Services
48 Report of the Audit and Compliance Committee
49 Executive Compensation
49 ITEM 3 Advisory Resolution to Approve
Executive Compensation (Say on Pay)
50 Compensation Discussion and Analysis
51 Executive Summary
54 Executive Compensation Principles and Strategy
55 Elements of Total Direct Compensation
59 The Compensation Process
60 Pay Decisions, Performance and Outcomes
for 2017
69 Other
69 Stock Ownership Guidelines
72       Report of the Compensation
and Benefits Committee
74 Summary Compensation Table
77 Grants of Plan-Based Awards
79 Outstanding Equity Awards
at Fiscal Year-End 2017
80 Option Exercises and Stock Vested in 2017
81 Retirement Plan Benefits
82 Nonqualified Deferred Compensation
84 Potential Payments Upon Termination or CIC
88 Equity Compensation Plans
89 Shareholder Proposals
89 ITEM 4 Shareholder Proposal Relating
to Action by Written Consent
91 ITEM 5 Shareholder Proposal Relating
to Independent Board Chairman
94 Stock Ownership Information
95 Section 16(a) Beneficial Ownership
Reporting Compliance
96 Other Information
96 Attending the Annual Meeting of Shareholders
and Webcast
97 Notice of Business to Come Before the Meeting
97 2018 Annual Meeting of Shareholders Information
98 Additional Voting Information
100 Multiple Shareholders Sharing the Same Address
100 Availability of Form 10-K
101 Annex A–Additional Information
Regarding Participants in the Solicitation
106 Annex B–Information Regarding
Non-GAAP Financial Measures
108 Location of the 2018 Annual Meeting
and How to Get There

4       2018 Proxy Statement


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Proxy Summary and Voting Roadmap

This section provides a summary of certain information in this proxy statement. Please review the complete proxy statement and annual report before you vote.

ITEM 1

Election of Directors
for a Term of One Year

  The Board recommends a vote FOR each of these director nominees.
   
You are being asked to elect 13 directors. With the exception of Robert D. Walter and Ursula M. Burns, who are retiring from our Board of Directors (Board), each of our current directors is standing for election to hold office until the next annual meeting of shareholders or until his or her successor is duly elected and qualified.
Detailed information about each nominee’s background, skills and expertise can be found starting on page 11.

Details regarding our retiring directors can be found on page 17.

Director
Since
Board Committees Other Public Boards
Name AC CB IT NG PR R

Charlene Barshefsky, 67
Senior International Partner, WilmerHale

2001 The Estée Lauder Companies Inc.
Intel Corporation

John J. Brennan, 63
Chairman Emeritus and Senior Advisor,
The Vanguard Group

2017 General Electric Company

Peter Chernin, 66
Founder and CEO, Chernin Entertainment, LLC
and The Chernin Group LLC

2006

Ralph de la Vega, 66
Former Vice Chairman, AT&T Inc.

2016 Amdocs

Anne Lauvergeon, 58
Chairman and CEO, A.L.P.

2013 Suez
Koç Holding

Michael O. Leavitt, 67
Founder and Chairman, Leavitt Partners, LLC

2015 Medtronic, Inc.

Theodore J. Leonsis, 62
Chairman and CEO,
Monumental Sports & Entertainment, LLC

2010 Groupon, Inc.

Richard C. Levin, 70
Senior Advisor and Former CEO, Coursera

2007

Samuel J. Palmisano, 66
Former Chairman, President and CEO, IBM

2013 Exxon Mobil Corporation

Stephen J. Squeri, 59
Chairman and CEO, American Express Company

2018

Daniel L. Vasella, 64
Honorary Chairman and Former Chairman and CEO,
Novartis AG

2012 PepsiCo, Inc.

Ronald A. Williams, 68
Former Chairman and CEO, Aetna, Inc.

2007 The Boeing Company
Johnson & Johnson

Christopher D. Young, 46
CEO of McAfee, LLC

2018 Snap Inc.
Chairman AC Audit and Compliance NG Nominating and Governance
Lead Independent Director CB Compensation and Benefits PR Public Responsibility
Member IT Innovation and Technology R Risk

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2018 Proxy Statement     Proxy Summary and Voting Roadmap

Director Attendance

During 2017, our Board met nine times and our committees met 45 times (in the aggregate). All directors attended 75 percent or more of the meetings of the Board and Board committees on which they served in 2017.

Twelve of our 14 directors serving in 2017 attended the 2017 annual meeting. Our Board strongly encourages all of its members to attend the annual meeting but understands there may be exigent circumstances.

Board Highlights (Directors Standing for Election)

GENDER 2 female
ETHNICITY 3 minorities
GEOGRAPHIC
LOCATION
2 reside outside the U.S.
DIRECTOR
INDEPENDENCE
12 independent

Diversity of Tenure (Non-management Directors)

YEARS
<1
1-3
4-6
7-10
>10
AVERAGE TENURE

6.3 YEARS

AVERAGE AGE

63.6 YEARS


Diversity of Viewpoints and Experience

                             
Core Business,
Operations and
Management
Expertise
Senior
Management and
Leadership Skills
Technology and
Cybersecurity
Experience
 
Government,
Legal and Public
Policy Experience
Financial,
Investment and
M&A Experience
Public Company
Governance
Experience
 
                 
Risk and Audit
Oversight
Experience
Brand and
Marketing
Expertise
Global Business
Experience
Financial Literacy
Corporate Governance
Highlights

Active and ongoing shareholder engagement

Well-executed Chief Executive Officer (CEO) succession plan in 2017-2018 and ongoing Board and senior management succession planning

Strong Lead Independent Director with explicit duties and responsibilities

Diverse Board that provides a range of viewpoints

Regular Board and committee refreshment with a range of tenures

Executive sessions led by the Lead Independent Director at each regular in-person board meeting without management present

Annual off-site Board meeting focused on Company strategy

Key management and rising talent reviewed at an annual talent review board meeting

Risk aware culture overseen by a separate Risk Committee of the Board

Annual election of all directors

All directors are independent except the Chairman

Majority voting for directors (in uncontested elections)

Mandatory retirement age policy for all directors

Proxy access rights

25 percent of shareholders are able to call special meetings

Significant share ownership requirements for senior executives and directors

Robust Director Code of Conduct

Annual board and committee performance evaluations

Director access to experts and advisors, both internal and external


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Proxy Summary and Voting Roadmap     2018 Proxy Statement

ITEM 2

Ratification of Appointment of
PricewaterhouseCoopers LLP for 2018

  The Board recommends a vote FOR this item.
   
The Audit and Compliance Committee reappointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for 2018. We are asking you to ratify this appointment. PwC has been our independent auditor since 2005.

One or more representatives of PwC will be present at the annual meeting and available to respond to appropriate questions.
Additional information about the committee’s appointment of PwC and PwC’s fees for 2017 and 2016 can be found beginning on page 47.



ITEM 3

Advisory Resolution to Approve
Executive Compensation (Say on Pay)

  The Board recommends a vote FOR this item.
   
We are asking you to approve on an advisory basis the compensation of our Named Executive Officers (NEOs). We believe that the compensation of our NEOs appropriately motivates and retains our executives and delivers pay which is strongly linked to the Company’s performance over time.
Additional information about the Company’s compensation program can be found beginning on page 49.


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2018 Proxy Statement     Proxy Summary and Voting Roadmap

2017 Performance

Our results for 2017 reflect a strong finish to our two-year game plan as we successfully executed against our key priorities laid out for 2016 and 2017:

     
Accelerating revenue growth
Optimizing investments
Resetting our cost base
 

Our performance in 2017 benefits from the investments we have made in a variety of growth opportunities over the last several years, along with the new products and benefits we have added for both consumers and businesses:

Total cards-in-force grew by more than 2.9 million
Worldwide spending on our cards increased by 5 percent to a record $1.1 trillion
Card Member loans rose 12 percent, significantly outpacing the industry
An additional 1.5 million new merchant locations-in-force in the United States
Credit quality stayed strong throughout the year

 

As a result, we were able to raise our earnings expectations over the course of the year and delivered strong returns for our shareholders:

Total revenues rose 4 percent in 2017
Earnings per share (EPS) was $2.97 on a reported basis and $5.87 excluding the impacts of the Tax Cuts and Jobs Act (Tax Act)1, which was in line with the guidance the Company offered in October 2017 (EPS of $5.80 to $5.90) and above the initial guidance from the start of the year (EPS of $5.60 to $5.80)
Return on Equity (ROE) was 13.1 percent (adj. 25.4 percent1)
Total shareholder return (TSR) was 36 percent for 20172
1

Adjusted diluted EPS and adjusted ROE, both excluding the impacts of the Tax Act of $2.6 billion, are non-GAAP measures. The estimated impacts may be refined in the future as additional guidance and interpretations become available. See Annex B for a reconciliation to EPS and ROE on a GAAP basis.

2

TSR is the total return on common shares over a specified period, expressed as a percentage (calculated based on the change in stock price over the relevant measurement period and assuming reinvestment of dividends). Source: Bloomberg (returns compounded daily).

Awarded Total Direct Compensation (TDC) for our CEO for 2017 Performance

The Company delivered strong performance in 2017 and the Compensation and Benefits Committee (CBC) concluded that Mr. Chenault earned the maximum Annual Incentive Award (AIA) (approximately $8.3 million) at 125 percent of target. This amount is paid in Restricted Stock Units (RSUs) instead of cash to provide more emphasis on the Company’s stock performance, and the vesting of these RSUs is deferred until one year after his retirement in 2018. In addition, the CBC awarded Mr. Chenault a Portfolio Grant (PG) of $1.5 million in early 2018. PGs are a portion of long-term incentive compensation tied to three-year performance (in this case 2018-2020). The long-term vesting of this award incentivized the appropriate balance of short/long-term performance during Mr. Chenault’s final year, and aligned his 2017 compensation with the success of the ongoing strategic initiatives that are likely to drive performance in 2018 and beyond. Mr. Chenault did not receive any other long-term incentive award due to his retirement. Mr. Chenault’s compensation for 2017, other than his base salary, consisted of performance-contingent, multi-year awards tied to specific financial and operational goals. See page 62 for more information on Mr. Chenault’s compensation.

8       2018 Proxy Statement


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Proxy Summary and Voting Roadmap     2018 Proxy Statement

With most of Mr. Chenault’s compensation subject to multi-year performance goals, his pay was tied closely to the long-term success of the Company.

Details regarding Mr. Chenault’s TDC is on page 62.

Our Compensation Discussion and Analysis (CD&A) begins on page 50 and our Summary Compensation Table and other related tables and narrative discussion begin on page 74.

ITEMS 4 & 5

Two Shareholder Proposals
(If Properly Presented)

  The Board recommends a vote AGAINST both proposals.

You will have the opportunity to vote on two shareholder
proposals, if they are properly presented at the meeting.
The text of these proposals, the proponents’ statements in support and our responses are set forth beginning on page 89.

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Corporate Governance
at American Express

ITEM 1

Election of Directors
for a Term of One Year

  Our Board recommends a vote FOR the election of the nominees listed on pages 11-17.

Our Board currently has 15 members. Thirteen of our directors are standing for election to hold office until the next annual meeting of shareholders or until their successors are duly elected and qualified. Two of our directors are retiring and not standing for reelection. Our Board has appointed Laureen Seeger, Tangela S. Richter and Kristina V. Fink as proxies to vote your shares on your behalf. The proxies intend to vote for the election of each of the 13 candidates nominated by the Board unless you indicate otherwise on your proxy or voting instruction form or when you vote by telephone or online. Each candidate has consented to being named in this proxy statement and serving as a director, if elected. However, if any nominee is not able to serve, the Board can either nominate a different person or reduce the size of the Board. If the Board nominates another individual, the persons named as proxies may vote for that nominee.

As described on page 96 under Additional Matters, a former employee of the Company, Mr. Peter Lindner, indicated an intention to present himself as a nominee at the meeting. Accordingly, the number of nominees for election at the 2018 meeting will exceed the number of directors to be elected, which will result in a contested election under our Certificate of Incorporation. In a contested election, majority voting is replaced by plurality voting, so that the 13 candidates that receive the greatest number of votes cast for their election as a director will be the persons elected to the Board for the following year. Our Board recommends that you vote your shares for the candidates they have nominated.

Our Director Nominees

Our director nominees have held senior positions as leaders of various large, complex businesses and organizations and in government, demonstrating their ability to develop and execute significant and complex policy and operational objectives at the highest levels. Many of our nominees have been chief executives or chief operating officers of large, global businesses through which they have developed expertise in core business strategy and development, operations, finance, talent management and leadership development, compliance, controls and risk management as well as skills to respond to rapidly evolving business environments and foster innovation and business transformation. In addition, our nominees’ experiences serving on other boards bring valuable knowledge and expertise in the areas of governance, talent management and compensation, financial reporting, risk management and control and compliance. Detailed information about each nominee follows.

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Corporate Governance at American Express     2018 Proxy Statement




CHARLENE BARSHEFSKY     
Senior International Partner, WilmerHale

Director since
2001
Age 67

Since 2001, Ambassador Barshefsky has been Senior International Partner at WilmerHale, a multinational law firm based in Washington, D.C. She advises U.S. and international companies on international business transactions, government relations, market access, and foreign government regulation of business and investment. Prior to joining WilmerHale, Ambassador Barshefsky was the United States Trade Representative (USTR) and a member of President Clinton’s Cabinet from 1997 to 2001, and Acting and Deputy USTR from 1993 to 1996. As the USTR, she served as chief trade negotiator and principal trade policymaker for the United States and, in both roles, negotiated complex market access, regulatory, and investment agreements with virtually every major country in the world. Ambassador Barshefsky is a trustee of the Howard Hughes Medical Institute and a member of the Council on Foreign Relations.

Other Public Directorships
The Estée Lauder Companies Inc.
Intel Corporation
     
Other Directorships in past
five years
Starwood Hotels & Resorts Worldwide, Inc.

Specific qualifications, experience, skills and expertise:

High-level government service
Expertise negotiating with foreign governments
Advisor to firms on doing business in international markets
Broad legal and public policy experience
Public company governance

American Express Committees

Innovation and Technology
(Chair)
Public Responsibility
Risk





JOHN J. BRENNAN     
Chairman Emeritus and Senior Advisor,
The Vanguard Group
 
Director since
2017
Age 63

Mr. Brennan has been chairman emeritus and senior advisor of The Vanguard Group, Inc., a global investment management company, since 2010. Mr. Brennan joined Vanguard in July 1982, was elected Chief Financial Officer in 1985, and President in 1989. He was CEO from 1996 to 2008 and Chairman of the Board from 1998 to 2009. Mr. Brennan is the former Chairman of the Board of Governors of The Financial Industry Regulatory Authority (FINRA), a U.S. financial services industry regulator; Chairman of the Board of Trustees of the University of Notre Dame; Chairman of the Vanguard Charitable Endowment Program; and Founding Trustee of the King Abdullah University of Science and Technology. Mr. Brennan is a former Chairman of the Financial Accounting Foundation, an overseer of financial accounting and reporting standard-setting boards.

Other Public Directorships
General Electric Company
 
     
Other Directorships in past
five years
The Guardian Life Insurance Company of America
Hanover Insurance Group Inc.
LPL Financial Holdings, Inc.

Specific qualifications, experience, skills and expertise:

Core business, operations and management
CFO and financial accounting expertise
Risk and audit oversight
Financial industry operations and regulation
Institutional investor perspective

American Express Committees

Audit and Compliance
Compensation and Benefits
Risk (Chair)


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2018 Proxy Statement      Corporate Governance at American Express




PETER CHERNIN     
Founder and CEO, Chernin Entertainment, LLC and the
Chernin Group LLC
 
Director since
2006
Age 66

From June 2009 to the present, Mr. Chernin has served as Founder and CEO of Chernin Entertainment, LLC, a film and television production company, and The Chernin Group, LLC, which is involved in strategic opportunities in media, technology and entertainment. He is also co-founder of CA Media, L.P., which builds and manages media, technology and entertainment businesses throughout the Asia Pacific region. Mr. Chernin was President, Chief Operating Officer and a director of News Corporation from October 1996 to June 2009, and was Chairman and CEO of the Fox Group, where he oversaw the global operations of the company’s film, television, satellite cable and digital media businesses. At News Corporation, Mr. Chernin led the company’s expansion into the broadband and mobile markets through the creation of Fox Interactive Media, Hulu, Jamba and other digital properties. Mr. Chernin is a Chairman and Co-Founder of Malaria No More, a co-chair of the Board of Visitors of the University of California, Berkeley and a former director of the Harvard AIDS Initiative.

Other Directorships in past
five years
Pandora Media, Inc.
Twitter, Inc.
         

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Experience building global media businesses
Digital business development
Brand and marketing expertise
Public company governance

American Express Committees

Compensation and Benefits
Nominating and Governance
(Chair)





RALPH DE LA VEGA     
Former Vice Chairman of AT&T Inc.
 
Director since
2016
Age 66

Mr. de la Vega was Vice Chairman of AT&T Inc. and CEO of Business Solutions and International, AT&T from February 2016 through December 2016. In this role, Mr. de la Vega led AT&T’s Integrated Business Solutions group (both mobile and IP services), which served more than 3.5 million business customers in 200 countries and territories, and nearly all of the Fortune 1000 firms globally, and AT&T’s Mexican wireless business and DIRECTV Latin America, which was part of AT&T’s 2015 acquisition of DIRECTV. Mr. de la Vega was President and CEO, AT&T Mobile and Business Solutions, from August 2014 to February 2016; President and CEO of AT&T Mobility from 2007 to 2014; and prior thereto, the Chief Operating Officer of Cingular Wireless and President of BellSouth Latin America. Mr. de la Vega is a director of New York Life Insurance Company, where he is chair of the Audit Committee and a member of the Governance and Insurance & Operations Committees. He also serves on the boards of Junior Achievement Worldwide, the Boy Scouts of America and the Latino Donor Collaborative.

Other Public Directorships
Amdocs
 
     
Other Directorships in past
five years
New York Life Insurance Company

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Global business leader
Deep experience in Latin America
Digital and mobile technology expertise
Risk and audit oversight

American Express Committees

Audit and Compliance
Compensation and Benefits
Innovation and Technology


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Corporate Governance at American Express     2018 Proxy Statement




ANNE LAUVERGEON     
Chairman and CEO, A.L.P.
 
Director since
2013
Age 58

Ms. Lauvergeon is Chairman and CEO of A.L.P. a private French advisory company and, since 2014, has been Chairman of Sigfox, a French start-up that operates a cellular network dedicated exclusively to small messages. She is a former Partner and Managing Director of Efficiency Capital, an advisory firm dedicated to funding technology and natural resources investments, where she served from 2012 to April 2014; former CEO of AREVA Group, the leading French energy company, where she served from July 2001 to June 2011; and former Chairman and CEO of AREVA NC (formerly Cogema) where she served from June 1999 to June 2011. Ms. Lauvergeon started her professional career in 1983 in the steel industry and in 1990 she was named Advisor for Economic International Affairs to the French Presidency and Deputy Chief of Staff in 1991. In 1995 she became a Partner of Lazard Frères & Cie, subsequently joining Alcatel Telecom as Senior Executive Vice President in 1997. Ms. Lauvergeon has been a member of the United Nations Global Compact Board, an executive committee member of the World Business Council for Sustainable Development, and involved in various not for profit organizations in France. She has been the Chair of the Innovation 2030 Commission, launched by the President of France to stimulate innovation in France since 2013.

Other Public Directorships
Suez
Koç Holding
     
Other Directorships in past
five years
Avril
Airbus Group

 
Rio Tinto plc
Total S.A.
Vodafone Group Plc.

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Deep business experience in Europe
Government experience
Public policy experience in sustainability
Public company governance

American Express Committees

Audit and Compliance
Public Responsibility





MICHAEL O. LEAVITT     
Founder and Chairman, Leavitt Partners
 
Director since
2015
Age 67

Since 2009, Governor Leavitt has been Founder and Chairman of Leavitt Partners, LLC, a health care consulting firm, and since 2014, he has been Chairman of Leavitt Equity Partners, a private equity fund. Prior to that, Governor Leavitt was the United States Secretary of Health and Human Services from 2005 to 2009; Administrator of the Environmental Protection Agency from 2003 to 2005; and Governor of Utah from 1993 to 2003. Governor Leavitt has extensive management and leadership experience, including serving as the Governor of Utah, appointments to positions with the U.S. government where he oversaw and advised on issues of national concern, and overseeing Leavitt Partners’ work advising clients and making investments in the health care sector.

Other Public Directorships
Medtronic, Inc.
 
     
Other Directorships in past
five years
HealthEquity, Inc.

Specific qualifications, experience, skills and expertise:

Deep government experience
Senior executive and administrative experience
Public policy experience
Regulatory experience
Public company governance

American Express Committees

Audit and Compliance
Public Responsibility (Chair)


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2018 Proxy Statement     Corporate Governance at American Express




THEODORE J. LEONSIS     
Chairman and CEO, Monumental Sports &
Entertainment, LLC
 
Director since
2010
Age 62

Since 2009, Mr. Leonsis has been Chairman and CEO of Monumental Sports & Entertainment, LLC, a sports, entertainment, media and technology company that owns the NBA’s Washington Wizards, NHL’s Washington Capitals, the WNBA’s Washington Mystics, the Capital One Arena in Washington, D.C., Monumental Sports Network, two Arena Football League teams, an interest in Team Liquid and an NBA2K eSports team. Mr. Leonsis has also been Vice Chairman Emeritus of AOL LLC, a leading global ad-supported Web company, since December 2006. Mr. Leonsis held a number of executive positions with AOL from September 1994 to December 2006, most recently as Vice Chairman and President, AOL Audience Business. He is also a filmmaker, an author and a director of several private internet and technology companies and educational institutions. Mr. Leonsis was Chairman of Revolution Money, Inc., which American Express acquired in January 2010. In November 2011, Mr. Leonsis cofounded Revolution Growth II, LP, a “speedup capital” fund to invest in technology-enabled businesses. In 2015, Mr. Leonsis cofounded Revolution Growth III, LP, a similar fund to invest in and build innovative, high-growth businesses.

Other Public Directorships
Groupon, Inc.
  
     
Other Directorships in past
five years
Nutrisystem
Alcatel-Lucent

Specific qualifications, experience, skills and expertise:

Successful innovator and entrepreneur
Core business, operations and management
Expertise in social media and digital trends
Brand and marketing expertise
Public company governance

American Express Committees

Innovation and Technology
Nominating and Governance
Public Responsibility





RICHARD C. LEVIN     
Senior Advisor and Former CEO, Coursera
 
Director since
2007
Age 70

Mr. Levin is a Senior Advisor at Coursera, an educational platform that partners with top universities and organizations worldwide to offer courses online. He was previously the CEO of Coursera from April 2014 to June 2017. Mr. Levin is also President Emeritus of Yale University and was President of Yale from July 1993 to August 2013. He was a Frederick William Beinecke Professor of Economics, a former Chair of Yale’s Economics Department and Dean of Yale’s Graduate School of Arts and Sciences. Mr. Levin also is a trustee of the William and Flora Hewlett Foundation, one of the largest philanthropic organizations in the United States concerned with solving social and environmental problems. He is a member of the National Committee on United States-China Relations, a fellow of the American Academy of Arts and Sciences and the American Philosophical Society. Mr. Levin has served on a number of Presidential Commissions and was appointed by President Obama to serve on the President’s Council of Advisors for Science and Technology.

Other Directorships in past
five years
C-3 Energy
 
     
 
 

Specific qualifications, experience, skills and expertise:

Thought leader in American
higher education
Distinguished economist
Expertise in statistical analysis and modeling
Leader in U.S.-China cooperation
Public policy experience

American Express Committees

Public Responsibility
Risk


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Corporate Governance at American Express     2018 Proxy Statement




SAMUEL J. PALMISANO     
Former Chairman, President and CEO, IBM
 
Director since
2013
Age 66

Mr. Palmisano is former Chairman, President and CEO of IBM, a company that provides business and information technology products and services. Mr. Palmisano joined IBM in 1973. He was elected Senior Vice President and Group Executive of the Personal Systems Group in 1997, Senior Vice President and Group Executive of IBM Global Services in 1998, Senior Vice President and Group Executive of Enterprise Systems in 1999, President and Chief Operating Officer in 2000, CEO in 2002 and Chairman of the Board in 2003. Mr. Palmisano was President and CEO through 2011, Chairman through September 2012 and senior adviser to IBM through December 2012. Mr. Palmisano is Chairman of the Center for Global Enterprises, a private, nonprofit research institution devoted to the study of contemporary corporations, globalization, economic trends and their impact on society. Mr. Palmisano was appointed by President Obama as Vice Chair of the Commission on Enhancing National Cybersecurity, a bipartisan government-industry panel that was charged with providing detailed recommendations to strengthen public and private sector cybersecurity defenses. Mr. Palmisano was also co-chair of an independent task force of the Council on Foreign Relations on cybersecurity.

Other Public Directorships
Exxon Mobil Corporation
     
Other Directorships in past
five years
IBM

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Global business thought leader
Cybersecurity experience
Financial, investment and M&A expertise
Public company governance

American Express Committees

Compensation and Benefits
Nominating and Governance





STEPHEN J. SQUERI     
Chairman and CEO, American Express Company
 
Director since
2018
Age 59

Mr. Squeri has been Chairman and CEO of American Express Company since February 2018. Mr. Squeri is a 32-year veteran of American Express, having joined the company in 1985. He was Vice Chairman of American Express Company from July 2015 to February 2018 and led the Business-to-Business Group from October 2015 to February 2018. Prior to that, he was Group President, Global Corporate Services from November 2011 to October 2015. From October 2009 to November 2011, he was Group President of Global Services. In addition, from May 2005 to October 2009, he served as Executive Vice President and Chief Information Officer for the Company.

Other Directorships in past five years
The Guardian Life Insurance Company of America
J. Crew Group
     
 
 

Specific qualifications, experience, skills and expertise:

Unique perspective as Company CEO
Core business, operations and management
Payments and network industry expertise
Expertise in digital and mobile innovation
Brand and marketing expertise


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DANIEL L. VASELLA     
Honorary Chairman and Former Chairman
and CEO, Novartis AG
 
Director since
2012
Age 64

Dr. Vasella is Honorary Chairman and former Chairman and CEO of Novartis AG, a company that engages in the research, development, manufacture and marketing of health care products worldwide. Dr. Vasella served as Chairman of Novartis from 1999 to February 2013 and as CEO from 1996 to January 2010. From 1992 to 1996, Dr. Vasella held the positions of CEO, Chief Operating Officer, Senior Vice President, Head of Worldwide Development and Head of Corporate Marketing at Sandoz Pharma Ltd. Dr. Vasella is currently working as a coach to senior executives. He is a member of the International Business Leaders Advisory Council for the Mayor of Shanghai, a foreign honorary member of the Academy of Arts and Sciences, a trustee of the Carnegie Endowment for International Peace and a member of several educational institutions.

Other Public Directorships
PepsiCo, Inc.
     
Other Directorships in past
five years
Novartis AG
XBiotech

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Finance, investment and M&A experience
Global business leader
Led a highly regulated business
Public company governance

American Express Committees

Audit and Compliance (Chair)
Nominating and Governance
Risk





RONALD A. WILLIAMS     
Former Chairman and CEO, Aetna, Inc.
 
Director since
2007
Lead Independent Director since 2018
Age 68

Mr. Williams is the former Chairman and CEO of Aetna, Inc., a leading diversified health care benefits company. He was Chairman from October 2006 to April 2011; CEO from February 2006 to November 2010; and President from May 2002 to July 2007. He serves as an operating advisor to Clayton, Dubilier & Rice, LLC. He is a trustee of the Massachusetts Institute of Technology where he is also a member of the Dean’s Advisory Council and Alfred P. Sloan Management Society. He is a trustee of the Committee for Economic Development and Vice Chair of the Board of Trustees of the Conference Board, a global, independent business membership and research association working in the public interest. Prior to joining Aetna, Mr. Williams cofounded several businesses and served in senior management positions at a number of other companies.

Other Public Directorships
The Boeing Company
Johnson & Johnson
     
Other Directorships in past
five years
Envision Healthcare

Specific qualifications, experience, skills and expertise:

Core business, operations and management
Finance, risk management and investment expertise
Led a highly regulated business
Experience innovating through information technology
Public company governance

American Express Committees

Compensation and Benefits (Chair)
Nominating and Governance


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CHRISTOPHER D. YOUNG     
CEO, McAfee, LLC
 
Director since
2018
Age 46

Mr. Young has been CEO of McAfee, LLC, one of the world’s leading independent cybersecurity companies, since April 2017. Mr. Young joined Intel in 2014 and led the initiative to spin out McAfee. Earlier in his career, he led cybersecurity efforts at Cisco, RSA (a division of Dell EMC) and AOL. Mr. Young also led end user computing at VMware and cofounded the company, Cyveillance. Mr. Young serves as a member of the President’s National Security Telecommunications Advisory Committee (NSTAC) and on the board of the non-profit Cyber Threat Alliance. Mr. Young is a former board member of Rapid7, a cybersecurity firm, and formerly served on the Board of Trustees of Princeton University.

Other Public Directorships
Snap Inc.
     
Other Directorships in past
five years
Rapid7

Specific qualifications, experience, skills and expertise:

Cybersecurity expert
Core business, operations and management
Experience in national security and emergency preparedness
Product development and marketing experience
Public company governance

American Express Committees

Innovation and Technology
Risk

Our Retiring Directors

Robert D. Walter and Ursula M. Burns are retiring from our Board at the end of their current terms and, therefore, will not stand for reelection at our annual meeting. We thank them for their service and wish them continued success in the future.

Our Board’s Composition

Our Board Leadership Structure

We believe that strong independent leadership is essential for our Board to perform its primary oversight functions.

Our Board is led by a combination of Mr. Williams, our Lead Independent Director, and Mr. Squeri, Chairman and CEO, supplemented by engaged committee chairs and independent-minded, skilled and committed directors. Our Board believes that this leadership structure improves the Board’s ability to focus on key policy and operational issues and helps the Company operate in the long-term interests of shareholders.

The Board’s succession planning discussions surrounding the recent changes in the Chairman and CEO and Lead Independent Director roles included extensive discussions of the Board’s leadership structure. Through these processes, the Board determined that continuing with the combined Chairman and CEO structure, in combination with a strong Lead Independent Director, provides the best leadership structure for the Company at this time and creates an environment in which the Board can work effectively and appropriately challenge management. Furthermore, a Chairman and CEO with an operational focus who brings valuable insight into the boardroom, will be able to guide thoughtful and incisive discussions about strategy, planning, risk management and operations. Moreover, given the global and complex nature of our business, including the regulatory environment in which we operate, having one clear leader in both the Chairman and CEO roles, with extensive company experience and deep industry expertise, provides critical and effective leadership both internally and externally.

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Our Board Leadership – Strong Lead Independent Director

RONALD A. WILLIAMS
Lead Independent Director

Ronald A. Williams was elected by the independent directors of our Board to serve as Lead Independent Director, effective March 13, 2018. Mr. Williams succeeds Robert D. Walter who has reached our mandatory retirement age and will not stand for reelection at our annual meeting.

Mr. Williams joined our Board in 2007. During his tenure as a Board member, Mr. Williams has established strong working relationships with his fellow directors and garnered their trust and respect. Furthermore, he has demonstrated strong leadership skills, independent thinking and a deep understanding of our business. Mr. Williams is a former member and chair of the Audit and Compliance Committee of the Board and served as the chair of the Risk Committee since its formation as a separate Board committee in 2013 until he was appointed Lead Independent Director. Currently, he serves as chair of the Compensation and Benefits Committee and as a member of the Nominating and Governance Committee.

Mr. Williams was selected to serve as Lead Independent Director as a result of a vigorous vetting process led by the Nominating and Governance Committee which included extensive discussions of potential candidates with all members of the Board to seek input and reach alignment. These robust discussions took into account independent director tenures and committee membership histories along with a potential candidate’s willingness and ability to serve as Lead Independent Director, understanding that the position entails significant responsibility. Potential candidates were also examined against the following ideal Lead Independent Director qualities and skills:


Inspires trust and confidence and has the overwhelming support of all directors;
Able to ask difficult questions and, simultaneously, to work collegially and build consensus;
Able to forge a productive relationship with the Chairman;
Possesses wisdom, excellent judgment and high integrity;
Has held substantial leadership positions for significant periods of time and demonstrates a practical understanding of strategy and risk management, and has the know how to drive change and growth;
Willing and able to allocate the required time to effectively tackle the role and responsibilities of the job and evolve in the role as circumstances change;
Will appropriately represent the directors’ views, present feedback to management and monitor that the feedback is appropriately addressed;
Has a thorough understanding and deep knowledge of the Company’s business and history, go-forward strategy and challenges;
Has been a member of either the Audit and Compliance Committee or Risk Committee of the Company’s Board and understands the most significant risks that the Company faces; and
Is familiar with corporate governance best practices and related procedures.

After much thoughtful deliberation, the independent directors reached unanimous agreement that Mr. Williams has each of the above qualities and skills and will provide strong and effective leadership as the Board’s Lead Independent Director.

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Our Lead Independent Director’s Role and Responsibilities

The Board recognizes that in circumstances like ours where the positions of Chairman and CEO are combined, a strong Lead Independent Director with a clearly defined role and set of responsibilities are paramount for constructive and effective leadership. Therefore, the position of Lead Independent Director at American Express comes with a clear mandate and significant authority and responsibilities which are detailed in our Board-approved Corporate Governance Principles. Our Corporate Governance Principles provide that the Lead Independent Director will:

Preside at all meetings of the Board at which the Chairman is not present, including the executive sessions of the independent directors, and apprise the Chairman of the issues considered and decisions reached at those sessions;
Call additional meetings of independent directors as needed;
Lead the Board in putting forth its expectations for “tone at the top”;
Meet regularly with the Chairman and serve as a liaison between the Chairman and the independent directors;
Facilitate effective and candid communication to optimize Board performance;
Advise the Chairman of the Board’s informational needs and review and approve the types of information sent to the Board and Board meeting agendas;
Review and approve the schedule of Board meetings to assure there is sufficient time for discussion of all agenda items;
Monitor and coordinate with the Chairman on appropriate governance issues and developments; and
Be available as appropriate for consultation and direct communication with major shareholders.

Board Diversity

While we do not have a specific policy on board diversity, our Corporate Governance Principles provide that the Board should be diverse, engaged and independent. When reviewing potential board nominees, the Nominating and Governance Committee considers the diversity of the Board, including gender and race, and does not discriminate on the basis of ethnicity, sexual orientation, culture or nationality. We believe the composition of our Board appropriately reflects a diversity of viewpoints, skills, professional and personal backgrounds and experiences to effectively lead our Company.

Our directors standing for reelection have the following characteristics:

GENDER

2 female

ETHNICITY

3 minorities

GEOGRAPHIC
LOCATION

2 reside outside the U.S.

DIRECTOR
INDEPENDENCE

12 independent

Diversity of Tenure (Non-management Directors)

YEARS AVERAGE TENURE
<1
6.3 YEARS
AVERAGE AGE
63.6 YEARS
1-3
4-6
7-10
>10

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Diversity of Viewpoints and Experience

Experienced leaders with the right skills and business experience to provide sound judgment, critical viewpoints and guidance in an evolving environment.

             
Core Business, Operations
and Management Expertise
Senior Management and
Leadership Skills
Technology and
Cybersecurity Experience

Government, Legal and
Public Policy Experience

Financial, Investment and
M&A Experience

Public Company
Governance Experience

Risk and Audit Oversight
Experience

Brand and Marketing
Expertise

Global Business Experience

Financial Literacy

Ongoing Board Succession Planning

As illustrated in the preceding graphics, our Board is made up of a diverse group of leaders with substantial experience in their respective fields. Ongoing board succession planning along with our mandatory retirement age for directors, assures that the Board continues to maintain an appropriate mix of objectivity, skills and experiences to provide fresh perspectives and effective oversight and guidance to management, while leveraging the institutional knowledge and historical perspective of our longer-tenured directors.

The Nominating and Governance Committee assesses potential candidates based on their history of achievement, the breadth of their business experiences, whether they also bring specific skills or expertise in areas that the committee has identified as desired and whether they possess personal attributes and diverse experiences that will contribute to the effective functioning of the Board.

Attributes of Director Nominees: What we look for

Individuals who have established records of significant accomplishment in leading global businesses and large, complex organizations
Individuals who have achieved prominence in their fields and possess skills or significant experience in areas of strategic importance to our business
Individuals who possess integrity, independence, energy, forthrightness, strong analytical skills and the commitment to devote the necessary time and attention to the Company’s affairs
Individuals who demonstrate they have the ability to challenge and stimulate management and exercise sound judgment
Individuals who demonstrate a willingness to work as part of a team in an atmosphere of trust and candor and a commitment to represent the interests of all shareholders rather than those of a specific constituency

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Process for Identifying and Adding New Directors

The Nominating and Governance Committee identifies and adds new directors using the following process:

Step
Collect Candidate Pool
Independent Search Firms
Independent Director recommendations
Shareholder recommendations
1      
Step Comprehensive Candidate Review
Potential candidates are comprehensively reviewed and the subject of rigorous discussion during Nominating and Governance Committee meetings and Board meetings. The candidates that emerge from this process are interviewed by members of the committee, and other Board members including the Chairman. During these meetings, directors assess candidates on the basis of their skills and experience, their personal attributes and their expected contribution to the current mix of competencies and diversity on the Board. At the same time due diligence is conducted, including soliciting feedback from other directors and persons outside the Company.
2
Step Make Recommendation to the Board
The Nominating and Governance Committee presents qualified candidates to the Board for review and approval.
3
     
Outcome
Seven new directors added since 2012:
Ethnic and gender diversity
Technology and cybersecurity expertise
Non-U.S. directors
Current and former CEOs
Former CFO
Consumer and marketing experience
     
Senior government and regulatory experience
Global business leaders
M&A experience
Financial and investment experience

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The Nominating and Governance Committee uses a professional search firm to help identify, evaluate and conduct due diligence on potential director candidates. Christopher D. Young, who joined the Board in March 2018, was identified as a potential candidate by the search firm. Using a search firm allows the committee to make sure it is conducting a broad search and looking at a diverse pool of potential candidates. The committee also maintains an ongoing list of potential candidates.

The Nominating and Governance Committee considers all shareholder recommendations for director candidates and applies the same standards in considering candidates submitted by shareholders as it does in evaluating all other candidates. Shareholders can recommend candidates by writing to the committee in care of the Company’s Corporate Secretary, whose contact information is on page 32. Shareholders who wish to submit nominees for election at an annual or special meeting of shareholders should follow the procedure described on page 97.

Our Corporate Governance Principles provide that while the Board need not adhere to a fixed number of directors, generally a board of 12-14 directors offers a sufficiently large and diverse group to address the important issues facing the Company and provide a wide range of perspectives while being small enough to encourage personal involvement and discussion. All of our directors are elected annually under a majority voting standard (if the election is uncontested).




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Our Board’s Primary Role and Responsibilities, Structure and Processes

Our Board’s Primary Role and Responsibilities

Our Board bears the responsibility for the oversight of management on behalf of our shareholders in order to ensure long-term value creation. In that regard, the primary responsibilities of our Board include (i) oversight of the Company’s annual business plan and corporate strategy, (ii) ongoing succession planning and (iii) risk management.

How our Board Oversees our Annual Business Plan and Corporate Strategy

Our Board oversees our strategic direction and business activities. At the beginning of each year, our Chief Financial Officer presents our consolidated annual business plan to the Board, and the Board discusses the Company’s results relative to the plan periodically throughout the year. Each year, the Board engages in a two-day offsite strategy meeting with management where it conducts a comprehensive review and discussion of the Company’s strategic goals over the short-, medium- and long-term, as well as management’s plans to achieve such goals. In addition, at least once a year, each of the Global Business Groups presents an in-depth review of their business to the Board.

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How our Board Engages in Ongoing CEO and Key Executive Succession Planning


STEPHEN J. SQUERI
Chairman and CEO

Our Board ensures that we have the right management talent to pursue our strategies successfully.

The entire Board is involved in the critical aspects of the CEO succession planning process, including establishing selection criteria that reflect our business strategies, identifying and evaluating potential internal candidates and making key management succession decisions. Succession is regularly discussed with the CEO as well as without the CEO present in executive sessions of the Board. The Board makes sure that it has adequate opportunities to meet with and assess development plans for potential CEO successors to address identified gaps in skills and attributes. This occurs through various means, including informal meetings, Board dinners, presentations to the Board and committees, attendance at Board meetings and the comprehensive annual talent review. In addition, the Board has developed an emergency CEO succession plan.

We recently announced that the Board appointed Stephen J. Squeri as our CEO and elected him Chairman of the Board, each effective February 1, 2018. Mr. Squeri succeeded Kenneth I. Chenault who retired as Chairman of the Board and CEO on that same date. Mr. Squeri joined us over 32 years ago and has led nearly every part of our business during his tenure, most recently serving as our Vice Chairman since 2015. The Board’s appointment of Mr. Squeri as our next CEO was the result of a robust succession planning process that was underway for over five years. During this process, the Board considered several candidates from inside and outside of the Company and came to the unanimous decision that Mr. Squeri was the right choice to be our next leader as his deep understanding of the Company and the financial services industry provide the Company with a significant edge in defining priorities and leading business transformation. Furthermore, the appointment of Mr. Squeri, an internal candidate, reinforces the Board’s belief in the strength of our leadership team. We are confident in Mr. Squeri’s abilities to lead us into the future and help create sustainable long-term growth for the Company and its shareholders.

The Board also oversees management’s succession planning for other key executive positions. Our Board calendar includes at least one meeting each year at which the Board conducts a detailed talent review including the Company’s talent strategies, leadership pipeline and succession plans for key executive positions.

How our Board Oversees Risk Management

We are committed to Board level risk management. Our Board monitors our “tone at the top” and risk culture and oversees emerging strategic risks. Risk management is overseen by our Board through three Board committees: Risk, Audit and Compliance, and Compensation and Benefits. Each committee consists entirely of independent directors and provides regular reports to the Board regarding matters reviewed at their committee. The committees meet regularly in private sessions with our Chief Risk Officer, the Chief Compliance Officer, the Chief Audit Executive and other senior management with regard to our risk management processes, controls, talent and capabilities.

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Board of Directors

Monitors our “tone at the top” and risk culture and oversees emerging strategic risks. Committee specific oversight areas are set forth below:

 

1 Risk Committee

Provides oversight of our enterprise-wide risk management framework, processes and methodologies. Approves our Enterprise Risk Management (ERM) policy, which covers risk governance, risk oversight and risk appetite, including credit risk, market risk, liquidity risk, operational risk, reputational risk, country risk, model risk, asset-liability management risk and strategic and business risk. Our ERM policy:
Defines the authorized risk limits to control exposures within our risk capacity and risk tolerance, including stressed forward-looking scenarios
Establishes principles for risk taking in the aggregate and for each risk type, and is supported by a comprehensive system for monitoring limits, escalation triggers and assessing control programs
Reviews and concurs in the appointment, replacement, performance and compensation of our Chief Risk Officer
Receives regular updates from the Chief Risk Officer on key risks, transactions and exposures
Receives reports on cybersecurity and related risks at least twice a year
Reviews our risk profile against the tolerances specified in the Risk Appetite Framework, including significant risk exposures, risk trends in our portfolios and major risk concentrations
Provides oversight of management’s execution of capital management, liquidity planning and resolution planning

2 Audit and Compliance Committee

Assists the Board in its oversight responsibilities relating to the integrity of our consolidated financial statements and financial reporting process, internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of our internal audit services function, and the integrity of our systems of internal controls
Provides oversight of our Internal Audit Group
Reviews and concurs in the appointment, replacement, performance and compensation of our Chief Audit Executive and approves Internal Audit’s annual audit plan, charter, policies, budget and overall risk assessment methodology
Receives regular updates on the status of the audit plan and results including significant reports issued by Internal Audit and the status of our corrective actions
Reviews and approves our compliance policies, which includes our Compliance Risk Tolerance Statement
Reviews the effectiveness of our Corporate-wide Compliance Risk Management Program
Appoints, replaces, reviews and evaluates the qualifications of the Company’s independent registered public accounting firm

3 Compensation and Benefits Committee

Works with the Chief Human Resources Officer and the Chief Risk Officer to ensure our overall compensation programs, as well as those covering our business units and risk-taking employees, appropriately balance risk with business incentives and that business performance is achieved without taking imprudent or excessive risk
Our Chief Risk Officer is actively involved in setting goals, including for our business units
Our Chief Risk Officer also reviews the current and forward-looking risk profiles of each business unit and provides input into performance evaluations
Our Chief Risk Officer meets with the committee and attests whether performance goals and results have been achieved without taking imprudent risks
Uses a risk-balanced incentive compensation framework to decide on our bonus pools and the compensation of senior executives

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Board Oversight of Cybersecurity

Our Board receives reports on cybersecurity at least once a year and our Risk Committee receives reports on cybersecurity at least twice a year. Each receives ad hoc updates as needed. We have a very experienced information security team and we actively develop and recruit leadership and specialists from both the government and private sector. We continuously assess the risks and changes in the cyber environment and dynamically adjust our program and investments as required.

Cybersecurity Governance Highlights

We deploy a defense in depth strategy with multiple layers of controls including embedding security into our technology investments.

We invest in threat intelligence and are active participants in industry and government forums to improve sector cybersecurity defense.

We collaborate with our peers in the areas of threat intelligence, vulnerability management and response and drills.

We perform simulations and drills at both a technical and management level.

We incorporate external expertise and reviews in all aspects of our program.

How Management Oversees Risk

Management uses our comprehensive Board approved ERM program to identify, aggregate, monitor and manage risks. The program also defines our risk appetite, governance, culture and capabilities. The implementation and execution of the ERM program is headed by our Chief Risk Officer.

We have several internal risk management committees to oversee risks, including the Enterprise-wide Risk Management Committee (ERMC), chaired by our Chief Risk Officer. The ERMC is the highest-level management committee to oversee all firm-wide risks. It maintains the enterprise-wide risk appetite framework and monitors compliance with limits and escalations defined in it. The ERMC oversees implementation of risk policies across the Company with approval by the appropriate Board committee as detailed above. The ERMC reviews key risk exposures, trends and concentrations, significant compliance matters, economic and capital trends, and provides guidance on the steps to monitor, control and report major risks. The ERMC is responsible for risk governance, risk oversight and risk appetite for all risks, including individual credit risk, institutional credit risk, operational risk, compliance risk, reputational risk, country risk, market risk, asset liability management risk, liquidity risk, model risk and strategic and business risk.

Corporate Governance Framework

We have adopted Corporate Governance Principles that, together with the charters of the six standing committees of the Board (Audit and Compliance, Compensation and Benefits, Innovation and Technology, Nominating and Governance, Public Responsibility and Risk), our Code of Conduct (which constitutes our code of ethics for employees) and the Code of Business Conduct for Directors, provide our governance framework. Key governance policies and processes also include our whistleblower policy, our comprehensive enterprise-wide risk management program, our commitment to transparent financial reporting and our systems of internal checks and balances. Comprehensive management policies, many of which are approved at the board level, guide the Company’s operations.

Our Board, along with management, regularly reviews our Corporate Governance Principles and practices to ensure that they are appropriate and reflect our high standards and blue box values. In reviewing our Corporate Governance Principles and making recommendations, the Nominating and Governance Committee considers the views of shareholders expressed to us in engagement meetings, as well as publicly available discourse on governance.

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You may view the following documents by clicking on the “Corporate Governance” link found on our investor relations webpage at http://ir.americanexpress.com and then selecting “Governance Framework.” You may also access our Investor Relations webpage through our main website at americanexpress.com by clicking on the “About American Express” link, which is located at the bottom of the Company’s homepage. You may also obtain free copies of the following materials by writing to our Company’s Corporate Secretary:

Corporate Governance Principles

Charters for each of the six standing Board committees

Code of Conduct for Employees (which constitutes our code of ethics)

Code of Business Conduct for Members of our Board

Majority Voting Standard for Director Elections

In a non-contested election, directors are elected by a majority of “for” votes cast by shareholders. (A non-contested election is an election where the number of nominees is the same as the number of directors to be elected.) If a director receives a greater number of votes “against” than votes “for” his or her election, the director is required to immediately submit his or her resignation to the Board. The Board, excluding such individual, will decide whether or not to accept such resignation and will promptly disclose and explain its decision in a Form 8-K filed with the Securities and Exchange Commission (SEC).

In a contested election, the director nominees who receive the plurality of votes cast are elected as directors. Under the plurality standard, the number of persons equal to the number of vacancies to be filled who receive more votes than other nominees are elected to the Board, regardless of whether they receive a majority of votes cast. An election is considered contested under our certificate of incorporation if there are more nominees than positions on the Board to be filled at the meeting of shareholders as of the fourteenth day prior to the date on which we file our definitive proxy statement with the SEC.

As described in further detail on page 100, the election of our directors at the Annual Meeting is a contested election and as such the director nominees who receive the plurality of votes cast will be elected as directors.

Proxy Access

A shareholder or group of no more than 20 shareholders that has owned at least three percent of our common shares for at least three years may nominate directors to our Board and include the nominees in our proxy materials to be voted on at our annual shareholder meeting. The maximum number of shareholder nominees that will be included in our proxy materials with respect to any such annual meeting is the greater of (i) two or (ii) 20 percent of directors to be elected. A shareholder who seeks to nominate a director or directors to our Board must provide proper notice to the Company’s Corporate Secretary under the terms of our by-laws.

Executive Sessions

Executive sessions of independent directors, led by our Lead Independent Director, enable the Board to discuss matters such as strategy, CEO and senior management performance and compensation, succession planning and board effectiveness without management present. Our independent directors meet in executive session at each regularly scheduled board meeting. Any director may request additional executive sessions of independent directors. During 2017, our independent directors met in executive session at seven meetings.

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Our Board Evaluation Process

Our Board continually seeks to improve its performance. Our Nominating and Governance Committee oversees the annual evaluation process of the effectiveness of our Board. Conducting a robust annual self-assessment presents the opportunity to examine the Board’s effectiveness and practices and identify areas for improvement. In addition, the Board analyzes and assesses the performance of both the Chairman and the Lead Independent Director, as well as the effectiveness of having a combined Chairman and CEO role. Our Corporate Secretary and General Counsel routinely communicate with our Board members to obtain ongoing feedback.

Our Board evaluations cover the following areas:

Board efficiency and overall effectiveness
Board and committee composition
Satisfaction with the performance of the Chairman
Satisfaction with the performance of the Lead Independent Director
Access to the Lead Independent Director, CEO and other members of senior management
Quality of Board discussions and balance between presentations and discussion
Quality of materials presented to directors
Board and committee information needs
Satisfaction with Board agendas and the frequency and format of meetings and time allocations
Areas where directors want to increase their focus
Board dynamics and culture
Director access to experts and advisors
Satisfaction with the format of the evaluation

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The table below summarizes our Board Evaluation process.

Step      

Annual Board and Committee Evaluations
The process is reviewed annually by the Nominating and Governance Committee.

We currently use a questionnaire that is frequently updated and tailored to address the significant processes that drive board effectiveness.

The questionnaire elicits discussion through open-ended questions.

1

Step

Summary of the Written Evaluations
The Company’s Corporate Secretary summarizes the responses, showing trends since the prior year and including written comments, which are shared with the Board and committee members. Responses are not attributed to specific individuals to promote candor.

2

Step

Board and Committee Review
The Chairman of the Nominating and Governance Committee and each committee chair leads discussions of the Board and each committee, using the responses to the questionnaire as a guide. Committee chairs report on their discussions to the full Board.

As an outcome of the discussions, directors deliver feedback to the Chairman of the Board and suggest changes and areas for improvement.

3

Step

Actions
Examples of changes made in response to this process over the years include:

Formed the Innovation and Technology Committee to enable a deeper focus in this area;
Enhanced the information regularly provided to directors;
Changed the format of board meetings to enable more time for director discussion with and without the CEO present;
Further evolved the format of materials to combat “information overload” and to enable directors to focus on the key data;
Increased informal meetings between directors and key executives;
Provided director training and presentations on emerging risk areas and industry disruptors; and
Added international board members and increased the diversity of the Board.

4
 


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Our Board’s Independence

12/13 DIRECTOR NOMINEES ARE INDEPENDENT

Our Corporate Governance Principles provide that a substantial majority of our directors will meet the criteria for independence required by the New York Stock Exchange (NYSE). A director is considered independent if the Board determines that he or she does not have a material relationship with the Company. In making its annual independence determinations, the Board considers transactions between each director nominee and the Company. Our Board has established guidelines to assist it in determining director independence. These guidelines can be found within our Corporate Governance Principles and cover, among other things, employment and compensatory relationships, relationships with our auditors, customer and business relationships, and contributions to nonprofit organizations.

Based on our guidelines, the Board determined in March 2018 that all of its members in 2017 other than Mr. Chenault, and all of the Board’s director nominees for election at the 2018 annual meeting, other than Mr. Squeri, are independent.

Ambassador Barshefsky is a partner at the law firm of WilmerHale, a multi-national law firm based in Washington, D.C. From time to time and in the ordinary course of its business, WilmerHale provides legal services to American Express that we consider to be de minimus in nature. Ambassador Barshefsky does not provide any such legal services, and she does not receive any compensation from the firm that is generated by or related to our payments to WilmerHale for such services. The Nominating and Governance Committee determined, based on fees paid to the firm over the past three years, that WilmerHale does not perform substantial legal services for the Company on a regular basis. The fees and expenses paid to WilmerHale represented less than one percent of the firm’s annual revenue in each of the past three years and represented less than 0.1 percent of American Express’ revenues in each such year. Further, the Nominating and Governance Committee reviewed the nature of American Express’ engagement of WilmerHale and the services rendered, including the expertise and relevant experience of the firm and the specific partners engaged to work on the matters for which we have engaged the firm, and determined that Ambassador Barshefsky’s service on American Express’ Board should not impair American Express’ ability to engage WilmerHale when American Express determines such engagements to be appropriate and in our best interests. The committee is satisfied that WilmerHale, when engaged for legal work, is chosen by American Express’ legal group on the basis of the directly relevant factors of experience, expertise and efficiency. After considering the foregoing, the committee determined and recommended to the Board that American Express’ professional engagement of WilmerHale does not impair Ambassador Barshefsky’s independence.

Shareholder Engagement

Our Board’s Commitment to Shareholder Engagement

Why We Engage

Our directors and management recognize the benefits that come from robust dialogue with shareholders and we have embraced an active shareholder engagement strategy for many years. We engage with shareholders throughout the year in order to:

Provide visibility and transparency into our business, our performance and our governance and compensation practices
Discuss with our shareholders the issues that are important to them, hear their expectations for us and share our views
Assess emerging issues that may affect our business, inform our decision making, enhance our corporate disclosures and help shape our practices

Since January 2017, we have engaged with investors representing over 51 percent of shares outstanding on corporate governance, executive compensation and related matters. This includes over 29 engagement meetings.

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How We Engage

INVESTOR RELATIONS AND
SENIOR MANAGEMENT
We provide institutional investors with many opportunities to provide feedback to our Board and senior management. We participate in:
Formal events
One-on-one meetings
Group meetings throughout the year
To learn more about our engagement, you may visit our investor relations website at http://ir.americanexpress.com.
     
CORPORATE SECRETARY AND CHIEF
GOVERNANCE OFFICER
We engage with governance representatives of our major shareholders through in-person meetings and conference calls that occur during and outside of the proxy season. Members of the corporate governance, investor relations and executive compensation groups discuss, among other matters, company performance, emerging governance practices generally and specifically with respect to our Company, the reasons behind a shareholder’s voting decisions at prior meetings, our executive compensation practices and our corporate social responsibility practices.
     
BOARD INVOLVEMENT
We make our Lead Independent Director and Compensation Committee Chair available for engagement with large shareholders, including participating in joint corporate governance and investor relations meetings. We deliver feedback to our Board regarding shareholder meetings.
     
OUTCOMES FROM CORPORATE GOVERNANCE ENGAGEMENT
Shareholder feedback is thoughtfully considered and has led to modifications in our governance practices, executive compensation program and disclosures. Some of the actions we have taken in response to shareholder feedback over the last several years include:
Set new CEO pay target at $16.2 million, reduced from $22 million for prior long-tenured CEO
Changed the CEO PG grant to payout in RSUs instead of cash
Enhanced disclosure of annual incentive structure and assessments, including presenting business unit and individual scorecards
Continue to align compensation program with new CEO strategic priorities
Adopted proxy access
Adopted shareholder right to call special meetings
Added performance vesting criteria to our annual restricted stock unit grant
Required our CEO to retain a portion of shares granted until after retirement
Made changes to our executive compensation peer group
Enhanced the process our CBC uses to determine CEO compensation and clarified the CEO’s target and maximum incentive opportunities
Enhanced our website disclosures on political contributions and diversity
Continue to enhance our proxy disclosures
Amended our Corporate Governance Principles to limit the number of public company boards on which our directors may serve
Designed our 2017 Incentive Compensation Plan to reflect evolving shareholder preferences
Updated our Corporate Social Responsibility (CSR) Report and included it on our website
Added directors with financial services, cybersecurity and digital backgrounds

The following page provides additional details regarding our ongoing engagement process.

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Corporate Governance Engagement Cycle

How to Communicate with our Board

You may communicate with the Board or an individual director by letter, email or telephone, directed in care of the Company’s Corporate Secretary, who will forward your communication to the intended recipient. However, at the discretion of the Secretary, unsolicited advertisements or invitations to conferences or promotional material may not be forwarded.

If you wish to communicate a concern about our financial statements, accounting practices or internal controls, please direct your concern to the Chair of the Audit and Compliance Committee. If the concern relates to our governance practices, business ethics or corporate conduct, it should be directed to the Chair of the Nominating and Governance Committee or the Lead Independent Director. Matters relating to executive compensation may be directed to the Chair of the Compensation and Benefits Committee. If you are unsure of the category to which your concern relates, you may communicate it to any one of the independent directors, to the Lead Independent Director or to the Chairman.

Please direct such communications in care of the Corporate Secretary as follows:

TANGELA S. RICHTER

Corporate Secretary and Chief Governance Officer
American Express Company
200 Vesey Street
New York, NY 10285
(212) 640-2000
corporatesecretarysoffice@aexp.com

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Board Committees

Effective March 13, 2018 our Board approved several revisions to the leadership and membership of our standing committees. The current standing committee membership information is listed below. Standing committee membership for 2017 can be found in our 2017 proxy statement filed with the SEC on March 20, 2017. Each member of our standing committees in 2017, including our retiring directors, Mr. Walter and Ms. Burns, was independent and fulfilled the requirements applicable to each committee on which they served.

Board Committee Responsibilities

Audit and Compliance Committee
 

12 MEETINGS
in 2017

DANIEL L. VASELLA (Chair)

 

Members
John J. Brennan
Ralph de la Vega
Anne L. Lauvergeon
Michael O. Leavitt
Daniel L. Vasella (Chair)

Independence
Each member of the committee is independent and financially literate.

Audit Committee Financial Expert
Mr. Brennan meets the requirements as defined by SEC rules.

 

Role and Responsibilities
Assists the Board in its oversight of the integrity of our consolidated financial statements and related financial reporting processes, and internal and external auditing, including the qualifications and the independence of the independent registered public accounting firm, the performance of the Company’s internal audit services function, the integrity of our systems of internal control over financial reporting, and legal and regulatory compliance. See page 48 under Report of the Audit and Compliance Committee for additional information regarding the duties of the Committee with respect to oversight of our financial reporting process
Appoints, replaces, reviews and evaluates the qualifications of the Company’s independent registered public accounting firm
Oversees the process for the receipt, retention and treatment, on a confidential basis, of complaints we receive regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters
Reviews and discusses reports from management regarding significant reported ethics violations under our code of conduct and other corporate governance policies
Meets regularly in executive session with management, including with the Company’s Chief Compliance & Ethics Officer, the Company’s Chief Audit Executive and the Company’s independent registered public accounting firm

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Compensation and Benefits Committee
 

MEETINGS
in 2017

RONALD A.WILLIAMS (Chair)

 

Members
John J. Brennan
Peter Chernin
Ralph de la Vega
Samuel J. Palmisano
Ronald A. Williams (Chair)

Independence
Each member of the committee is independent.

 

Role and Responsibilities
Oversees the compensation of our executive officers and designated key employees
Oversees our employee compensation plans and arrangements and employee benefit plans
Approves an overall compensation philosophy and strategy for the Company and its executive officers, including the selection of performance measures aligned with our business strategy, and the review of our compensation practices so that they do not encourage imprudent risk taking
Evaluates potential conflicts of interest with respect to its advisors
The committee may delegate certain of its responsibilities to one or more of its members or to executive officers or designated senior executives, to the extent permissible under its charter, the Company’s bylaws, the terms of the applicable plans, laws, rules, regulations and listing standards, and subject to any limitations imposed by our Board from time to time.

Compensation and Benefits Committee Interlocks and Insider Participation
Neither any current member of the committee nor any person who served as a member of the committee during the last fiscal year is a former or current officer or employee of the Company or any of its subsidiaries. Neither any current member of the committee nor any person who served as a member of the committee during the last fiscal year has any relationship required to be disclosed under this caption under the rules of the SEC.


Innovation and Technology Committee
 

MEETINGS
in 2017

CHARLENE BARSHEFSKY
(Chair)

 

Members
Charlene Barshefsky (Chair)
Ralph de la Vega
Theodore J. Leonsis
Christopher D. Young

Independence
Each member of the committee is independent.

 

Role and Responsibilities
Assists the Board in its oversight of strategic innovation and technology initiatives
Facilitates the Board’s review, discussion and understanding of our digital and technology strategy, our transformation initiatives and our digital product innovations
Reviews metrics on innovation and digital and technology developments and technology progress

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Nominating and Governance Committee
 

MEETINGS
in 2017

PETER CHERNIN (Chair)

 

Members
Peter Chernin (Chair)
Theodore J. Leonsis
Samuel J. Palmisano
Daniel L. Vasella
Ronald A. Williams

Independence
Each member of the committee is independent.

 

Role and Responsibilities
Considers and recommends candidates for election to the Board
Provides oversight of corporate governance matters at the Company consistent with the long-term best interests of the Company and its shareholders
Advises the Board on director compensation
Oversees the annual performance evaluation process for the Board and Board committees
Advises the Board on corporate governance and Board leadership
Discusses feedback from shareholders regarding governance practices and advises on shareholder engagement practices
Administers the Related Person Transaction Policy
Supports the Board with respect to management succession planning

Public Responsibility Committee
 

MEETINGS
in 2017

MICHAEL O. LEAVITT (Chair)

 

Members
Charlene Barshefsky
Anne L. Lauvergeon
Michael O. Leavitt (Chair)
Theodore J. Leonsis
Richard C. Levin

Independence
Each member of the committee is independent.

 

Role and Responsibilities
Reviews legislation, regulations and policies affecting us, our philanthropic programs, our political action committee, our corporate political contributions and our government relations activities
Reviews legislation, regulations and policies affecting the communities we serve and our environmental and social programs and practices

Political Engagement Activities
We communicate with policymakers on public policy issues important to the Company. In addition to our advocacy efforts, we participate in the political process through the American Express Political Action Committee (AXP PAC) and through corporate political contributions in those jurisdictions where it is permissible to do so. AXP PAC is funded solely by voluntary employee contributions and does not contribute to presidential campaigns. We maintain comprehensive compliance procedures to ensure that our activities are conducted in accordance with all relevant laws, and management regularly reports to the committee regarding its engagement in the public policy arena and its political contributions. Information regarding our Company’s political activities, including U.S. political contributions, may be found at http://about.americanexpress.com/news/pap.aspx.


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Risk Committee
 

MEETINGS
in 2017

JOHN J. BRENNAN (Chair)

 

Members
Charlene Barshefsky
John J. Brennan (Chair)
Richard C. Levin
Daniel L. Vasella
Christopher D. Young

Independence
Each member of the committee is independent.

 

Role and Responsibilities
Assists the Board in its oversight of the Company’s enterprise-wide risk management framework and roles and responsibilities of the three lines of defense, and other risk management policies and procedures established by management to identify, assess, measure and manage key risks facing the Company
Assists the Board in its oversight of management’s execution of capital management, liquidity planning and resolution planning
Meets regularly in executive session with the Company’s Chief Risk Officer

Please see How our Board Oversees Risk Management on page 24 for additional information regarding the activities of the committee.


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Compensation of Directors

The Nominating and Governance Committee reviews director compensation and seeks to compensate our directors in a manner that attracts and retains highly qualified directors and aligns the interests of our directors with those of our long-term shareholders. No changes were made to the Company’s non-management director compensation in 2017.

The following table provides information on the 2017 compensation of non-management directors who served for all or a part of 2017. We reimburse directors for reasonable out-of-pocket expenses attendant to their board service.

Name       Fees Earned or
Paid in Cash
(1)
      Stock
Awards
(2)
      All Other
Compensation
(3)
      Total
Charlene Barshefsky             $ 115,000          $ 165,000             $ 77,082 $ 357,082
John Brennan $ 135,000 $ 165,000 $ 2,296 $ 302,296
Ursula M. Burns $ 125,000 $ 165,000 $ 88,372 $ 378,372
Peter Chernin $ 130,000 $ 165,000 $ 46,672 $ 341,672
Ralph de la Vega $ 120,000 $ 165,000 $ 6,167 $ 291,167
Anne L. Lauvergeon $ 120,000 $ 165,000 $ 20,584 $ 305,584
Michael O. Leavitt $ 120,000 $ 165,000 $ 17,597 $ 302,597
Theodore J. Leonsis $ 115,000 $ 165,000 $ 30,779 $ 310,779
Richard C. Levin $ 120,000 $ 165,000 $ 49,387 $ 334,387
Samuel J. Palmisano $ 110,000 $ 165,000 $ 16,796 $ 291,796
Daniel L. Vasella $ 160,000 $ 165,000 $ 26,294 $ 351,294
Robert D. Walter $ 156,250 $ 165,000 $ 68,158 $ 389,408
Ronald A. Williams $ 155,000 $ 165,000 $ 83,665 $ 403,665
(1)

Annual Retainers. For service in 2017, we paid non-management directors an annual retainer of $95,000 for board service and an additional annual retainer of $20,000 to members of the Audit and Compliance and Risk Committees, $10,000 to members of the CBC and $5,000 to members of the Innovation and Technology, Nominating and Governance, and Public Responsibility Committees. We also paid an annual retainer to the Chair of each of the Board committees as follows: Audit and Compliance, Compensation and Benefits, Nominating and Governance and Risk, $20,000; Innovation and Technology and Public Responsibility, $10,000. We pay no fees for attending meetings, but the annual retainer for board service of $95,000 is reduced by $20,000 if a director does not attend at least 75 percent of his or her aggregate board and committee meetings. Our Lead Independent Director for 2017, Robert D. Walter received an annual retainer of $25,000.

All non-management directors deferred all or a portion of their 2017 retainers into a cash account, a share equivalent unit (SEU) account, or both, under the deferred compensation plan described below in footnote 2.

(2)

Share Equivalent Unit Plan. To align our non-management directors’ annual compensation with shareholder interests, each non-management director is credited with common SEUs upon election or reelection at each annual meeting of shareholders. Each SEU reflects the value of one common share.

Directors receive additional SEUs as dividend equivalents on the units in their accounts. SEUs do not carry voting rights and must be held at least until a director ends his or her service on the Board. Each SEU is payable in cash equal to the then value of one common share at the time of distribution to the director. On May 1, 2017, the date of last year’s annual meeting, each non-management director elected to the Board was credited with SEUs having a value of $165,000, which consisted of 2,109 SEUs, based on the market price of our common shares for the 15 trading days immediately preceding such date. We report in this column the aggregate grant date fair value of these SEUs in accordance with FASB ASC Topic 718, Compensation – Stock Compensation.

Deferred Compensation Plan for Directors. Non-management directors may defer the receipt of up to 100 percent of their annual cash retainer fees into either: (1) a cash account in which amounts deferred will be credited at the rate of 120 percent of the applicable federal long-term rate for December of the prior year or (2) their SEU account. Under either alternative, directors will receive cash payments and will not receive shares upon payout of their deferrals.

The balances in directors’ SEU accounts at December 31, 2017 are set forth in the table below. These amounts represent the aggregate number of SEUs granted under the SEU Plan for all years of service as a director, additional units credited as a result of the reinvestment of dividend equivalents and, for directors who participated in the SEU option under our deferred compensation plan for directors, retainer amounts deferred into their SEU account and dividend equivalents thereon.


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Name Number of
SEUs
C. Barshefsky 60,399
J. Brennan 3,693
U.M. Burns 69,956
P. Chernin 36,964
R. de la Vega 6,162
A.L. Lauvergeon 17,683
M.O. Leavitt 11,528
T.J. Leonsis 25,505
R.C. Levin 32,892
S.J. Palmisano 13,941
D.L. Vasella 22,357
R.D. Walter 53,522
R.A. Williams 60,351
(3)

Insurance. We provide our non-management directors with group term life insurance coverage of $50,000. The group life insurance policy is provided to the directors on a basis generally available to all company employees. This column includes the premium paid for such coverage.

Dividend Equivalents. Dividend equivalents are reinvested in additional units for all directors based upon total SEUs held at the time of company quarterly dividend payment dates. This column includes the fair market value of the dividend equivalents received by the directors during 2017 in these amounts: Amb. Barshefsky $77,035, Mr. Brennan $2,250, Ms. Burns $88,326, Mr. Chernin $46,626, Mr. de la Vega $6,121, Ms. Lauvergeon $20,538, Gov. Leavitt $12,551, Mr. Leonsis $30,733, Mr. Levin $41,341, Mr. Palmisano $16,750, Dr. Vasella $26,248, Mr. Walter $68,112, and Mr. Williams $75,619.

Directors’ Charitable Award Program. We maintain a Directors’ Charitable Award Program for directors elected prior to July 1, 2004. To fund this program, we purchased joint life insurance on the lives of participating directors, including Mr. Chenault. The death benefit of $500,000 funds a donation to a charitable organization that the director recommends. The Company paid no premiums in 2017.

Matching Gift Program. Directors are eligible to participate in the Company’s Matching Gift Program on the same basis as Company employees. Under this program, the American Express Foundation matches gifts to approved charitable organizations up to $8,000 per calendar year. This column includes the amounts matched with respect to calendar year 2017.

Director Stock Ownership

Our Corporate Governance Principles provide that non-management directors are required to obtain a personal holding of shares (directly or through SEUs) with a value of $1 million within five years of joining the Board.

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Director and Officer Liability Insurance

We have an insurance program in place to provide coverage for director and officer liability and for fiduciary liability arising from employee benefit plans we sponsor. The coverage for director and officer liability provides that, subject to the policy terms and conditions, the insurers will: (i) reimburse us when we are legally permitted to indemnify our directors and officers; (ii) pay losses, including settlements, judgments and legal fees, on behalf of our directors and officers when we cannot indemnify them; and (iii) pay our losses resulting from certain securities claims. The fiduciary liability portion of the program covers: us; our employee benefit plans; and the directors, trustees and employees who serve as fiduciaries for our employee benefit plans. Subject to the policy terms and conditions, it covers losses from alleged breaches of fiduciary or administrative duties, as defined in the Employee Retirement Income Security Act of 1974 or similar laws or regulations. A portion of the program is blended with certain other insurances covering the company.

Effective from November 30, 2017 to November 30, 2018, this insurance is provided by a consortium of insurers. ACE American Insurance Company is the lead insurer. XL Specialty Insurance Company, Illinois National Insurance Company, Allied World Assurance Company Ltd., Freedom Specialty Insurance Company, Continental Casualty Company, Everest National Insurance Company, American International Reinsurance Company Ltd., Markel Bermuda Ltd., Berkshire Hathaway Specialty Insurance Company, Starr Indemnity and Liability Company, and QBE Insurance Corporation provide excess coverage. The program also includes supplemental layers dedicated exclusively to providing coverage for directors and officers when we cannot indemnify them. The supplemental layers are provided by XL Specialty Insurance Company, Zurich American Insurance Company, ACE American Insurance Company, Illinois National Insurance Company, Freedom Specialty Insurance Company, Continental Casualty Company, Everest National Insurance Company, U.S. Specialty Insurance Company, Travelers Casualty & Surety Company of America, Starr Indemnity and Liability Company, Allied World Assurance Company Ltd., American International Reinsurance Company Ltd., Chubb Bermuda Insurance Ltd., and certain Lloyd’s of London syndicates. We expect to obtain similar coverage upon expiration of the current program. The annual premium for the program is approximately $4.4 million.

Certain Relationships and Transactions

In the ordinary course of our business, we engage in transactions, arrangements and relationships with many other entities, including financial institutions and professional organizations. Some of our directors, director nominees, executive officers, greater than five percent shareholders, and their immediate family members (each, a Related Person) may be directors, officers, partners, employees or shareholders of these entities. We carry out transactions with these entities on customary terms and, in many instances, these Related Persons may not have knowledge of them. To the Company’s knowledge, since January 1, 2017, no Related Person has had a material interest in any of our ongoing business transactions or relationships except as described below.

Our Related Person Transaction Policy

Our written Related Person Transaction Policy governs company transactions, arrangements and relationships involving more than $120,000 in which a Related Person has a direct or indirect material interest (Related Person Transactions). Under the policy, Related Person Transactions must be approved by the Nominating and Governance Committee. The Committee will only approve a transaction if, after reviewing the relevant facts and circumstances, it determines that the transaction is consistent with the best interests of the Company. In the event we become aware of a Related Person Transaction that was not pre-approved under the policy, the Committee will consider the options available, including ratification, revision or termination of the transaction. The policy does not supersede any other company policy or procedure that may apply to any Related Person Transaction, including our Corporate Governance Principles and codes of conduct.

The Company’s Corporate Secretary is responsible for assisting the Nominating and Governance Committee in carrying out its responsibilities, and management is required to present to the Committee the material facts of any transaction that it believes may require review. In cases where it is impracticable or undesirable to delay a decision on a proposed transaction until the next meeting of the Committee, the Chair of the Committee may review and approve the transaction and then report any approval to the full Committee at its next regularly scheduled meeting. If a matter before the Committee involves a member of the Committee, the member must be recused and may not participate in deliberations or vote on the matter.

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Pre-Approved Categories of Related Person Transactions

The Nominating and Governance Committee has pre-approved the following categories of transactions as being consistent with the best interests of the Company. These categories, which may constitute Related Person Transactions, are:

Executive officer compensation arrangements approved by the Board or the Compensation and Benefits Committee;

Non-employee director compensation approved by the Board or the Nominating and Governance Committee;

Director and officer insurance payments and indemnification payments made in accordance with the Company’s charter or by-laws;

Transactions in the ordinary course of business with entities at which a Related Person is a director, executive officer, employee and/or a less than 10 percent beneficial owner, provided the amounts involved do not exceed the greater of $1 million or 1 percent of the other entity’s annual revenues;

Transactions in which the rates or charges are determined by competitive bids;

Contributions by the Company or the American Express Foundation to a charitable organization at which a Related Person serves as a director, executive officer and/or trustee, provided that the aggregate annual amount of such contributions, excluding contributions under the Company’s gift match program and contributions under the Company’s Directors’ Charitable Award Program, do not exceed the lesser of $1 million or two percent of the organization’s total annual revenues;

Use of the Company’s products and services on terms and conditions similar to those available to other customers or employees generally in similar circumstances or of like credit-worthiness; and

Transactions in which all shareholders receive the same benefits on a pro-rata basis.

Related Party Transactions

Our executive officers and directors may from time to time take out loans from certain of our subsidiaries on the same terms that these subsidiaries offer to the general public. For example, our two U.S. card-issuing banks may extend credit to our directors and executive officers under our charge or lending products. All indebtedness from these transactions is in the ordinary course of our business and is on the same terms, including interest rates and collateral, in effect for comparable transactions with other people. Such indebtedness involves normal risks of collection and does not have features or terms that are unfavorable to our subsidiaries. Our executive officers and directors may also have transactions with us involving other goods and services, such as travel services and investments in deposit products offered by subsidiaries of the Company. These transactions are also in the ordinary course of our business, and we provide them on terms that we offer to our customers generally. Occasionally, we may have employees who are related to our executive officers, directors or director nominees. We compensate these individuals in a manner consistent with our practices that apply to all employees. The adult son of Mr. John Hayes, a former executive officer, is employed by the Company in a non-executive position and received compensation in 2017 of between $151,000 and $224,000. The compensation and other terms of employment of Mr. Hayes’ son are determined on a basis consistent with the Company’s human resources policies.

Certain executive officers, directors and members of their immediate families are directors, employees or have equity interests in companies with whom the Company has entered into ordinary course business relationships from time to time and with whom the Company may enter into additional ordinary course business relationships. These may include ordinary course merchant acceptance relationships pursuant to which these companies accept our charge and credit card products and pay us fees when their customers use these cards, as well as use of the Company’s cards and financial and other products and services, including extensions of credit, on terms and conditions similar to those available to other customers generally. From time to time, we may enter into joint marketing or other relationships with one or more of these companies in the ordinary course that encourage customers to apply for and use our cards. We also may provide ordinary course commercial card and bill payments services or business insights to some of these companies, for which these companies pay fees to us. We may engage in other commercial transactions with these companies, and pay or receive fees in those transactions. We have a number of similar ordinary course relationships with Berkshire Hathaway Inc. and its subsidiaries. We have also purchased insurance and other products from subsidiaries of Berkshire Hathaway Inc. in the ordinary course of business and on arm’s-length terms.

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The Service Effect: Corporate Social Responsibility at American Express

Our Approach

Our approach to CSR is a natural extension of our commitment to doing what is right and our mission to become essential to our customers by providing differentiated products and services to help them achieve their aspirations. The “Service Effect” is shorthand for the positive link we see between CSR performance and business performance. We believe the Service Effect creates value for our shareholders and other stakeholders.

Our commitment extends from creating innovative products to protecting Card Members’ privacy and the security of their data. We deliver value for both our business and our communities by investing financial and human resources in ways that address the social, environmental and economic needs of our communities, customers, colleagues, shareholders and partners.

CSR at American Express

We view service through many lenses. These points of view include:

Delivering exceptional products, services and experiences to our customers;
   
Helping business grow and enabling commerce;
   
Promoting a culture of respect that fosters inclusion and trust;
   
Upholding the highest standard of integrity;
   
Safeguarding our customers’ privacy and data;
   
Making a difference in the communities where we work and live; and
   
Helping preserve treasures of the past for future generations to enjoy.

All of this is underscored by disciplined risk management which ensures we are building a company that will endure as a place that people want to work for, invest in and do business with.

Our CSR Governance Structure

Our executive management holds ultimate responsibility for our CSR progress and success; these leaders review and evaluate key performance indicators and long-term goals related to Environmental and Social Governance (ESG) in their respective business units. At the Board level, the Public Responsibility Committee reviews our CSR program, monitors progress against our goals and provides guidance on our efforts. Day to day, our CSR team works with colleagues throughout the Company to shape our efforts and monitor progress on key ESG issues.

Our Service Ethos

Our vision is to provide the world’s best customer experience every day. Our customers expect exceptional service and we aim to see the world through their eyes, and exceed their expectations—always finding new ways to enrich their lives, make their businesses more successful, and help them achieve their aspirations. We have a broad, diverse and loyal customer base—spanning consumers and businesses of all sizes; partners who issue cards on our network and who work with us to create special products and services; and merchants who welcome our Card Members. We value our strong customer relationships and define ourselves by how well we take care of them.

American Express is the world’s largest card issuer by purchase volume. We process millions of transactions, driving more than $1 trillion in commerce annually. We have approximately 55,000 global colleagues striving to make each customer interaction a positive, secure and convenient experience.

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Serving our Colleagues

We aim to inspire a company culture where differences are embraced and colleagues are enabled to reach their full potential. We advocate for our colleagues’ professional growth so they can be champions for our customers.

Highlights from 2017 include:

87PERCENT 100 PERCENT
of our colleagues who responded in 2017 to our annual employee survey, The Pulse, said they would recommend our Company as a great place to work. score on the 2017 Human Rights Campaign’s Corporate Equality Index, based on our policies and practices that support lesbian, gay, bisexual, transgender and queer (LGBTQ) inclusion.
 
10,000+
online and face-to-face training activities were available to our colleagues, and we launched the American Express Leadership Academy, a curated collection of the best tools, programs and processes in leadership development for all colleagues.
20
  weeks gender-neutral paid parental leave for U.S.-based regular full-time and part-time colleagues. Birth mothers are eligible to receive an additional six to eight weeks of paid leave if medically necessary.
   
96 PERCENT 43 PERCENT
 

of our colleagues had access to at least one Healthy Living program or service in 2017.

 

 

 

of our U.S. colleagues had a flexible work arrangement in 2017.

We hold ourselves to the highest standards of ethics and integrity and have built corporate citizenship into the heart of our company. Examples of our commitment are set forth below:

All of our colleagues receive Enterprise Essential Training to ensure an understanding of the important policies, laws and regulations that govern our industry, guide our company, and protect our colleagues, customers, and brand. Modules include trainings on our Code of Conduct, information security, anti-discrimination and anti-money laundering.
   
We introduced the Amex Ethics Hotline, an independent, confidential and anonymous resource in May 2017. This online and phone-based tool is available anytime in more than 200 languages to Company colleagues, contractors, vendors,suppliers and others to raise concerns about potential ethical or compliance matters.
   
Our emphasis on risk management and governance structure—along with solid business practices—ensures our promise of security, integrity and trust to our key stakeholders. For additional information regarding our Board’s oversight of risk management, see page 24.

Through our business activities, relationships and philanthropic efforts, we put the power of service and great customer experiences into action daily.

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Corporate Governance at American Express       2018 Proxy Statement

Delivering for our Customers and Partners

We have a broad and diverse customer base that spans consumers at different stages of their lives; small and midsize companies, and large corporations; partners who issue cards on our network, and others who work with us to create special products and experiences; and the merchants who welcome our Card Members. We use our relationships, technology and data to better serve our customers and increase commerce opportunities for our partners.

Highlights from 2017 include:

Developing new mobile and digital platforms to meet the changing habits of our global customer base and investing in innovative technologies for more secure connections.
   
We have been rated as one of Ponemon’s Most Trusted Companies for Privacy for the past 10 years.
   
Customer satisfaction has increased 24 percent since 2011 based on Card Member feedback.
   
We support entrepreneurs and more inclusive communities
   
Eight years ago, we started an initiative “Small Business Saturday” to help drive U.S. consumers to shop at small businesses. According to data from the 2017 Small Business Saturday Consumer Insights Survey, an estimated 108 million U.S. consumers reported shopping or dining at local independently owned businesses that day.
   
In 2017, our Center for Community Development underwrote $474 million in loans and investments, resulting in the creation of 3,153 units of affordable housing, driving stronger and more inclusive cities.
   
We enable our Card Members to give back
   

From 2010 to 2017, U.S. Card Members donated over $89 million through our Members GiveSM program by donating dollars on their American Express Cards and redeeming Membership Rewards points to benefit charitable causes.

Caring for our Communities

We aim to make a difference by strengthening the communities where we work and live. Through our philanthropic and civic participation we empower the people and organizations addressing society’s most complex issues. We do this in three ways: 1) empowering social-sector leaders to create sustainable change at a local level by providing leadership training; 2) helping citizen volunteers improve their local communities; and 3) preserving diverse, vibrant historic places. We also fund immediate and long-term relief and recovery efforts to help victims of natural disasters.

Highlights from 2017 include:

Contributed nearly $40 million with more than 550 grants and support for 5,300 colleague-selected organizations through the Company’s gift matching program. Our grants:
   
Supported more than 85 nonprofits that engaged nearly six million volunteers in about 25 million hours of service to serve the needs of local communities.
   
Helped train nearly 20,000 nonprofit and social leaders through online and in-person trainings.
   
Helped preserve 40 historic sites in seven countries, including the U.S., UK, Argentina, France, Mexico, Canada, and China (Hong Kong).

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2018 Proxy Statement     Corporate Governance at American Express

Doing What’s Right for our Environment

We recognize our responsibility to help preserve natural resources for future generations and aim to limit the environmental impact of our business operations. From 2011-2016, we reduced our carbon footprint by more than 30 percent.

Highlights from 2017 include:

We purchased 150,000 MWH of renewable energy certificates, resulting in 100 percent carbon-free electricity in our U.S. data center facilities and our New York City headquarters.
Over 45 percent of our global real estate portfolio was green building certified
 
We provided over
3.9
MILLION DOLLARS
in support of the environment and wildlife through the Company’s gift matching and community service grant program.

     
20,000 employees participated in our Earth Month activities, helping plant 18,000 trees.
       
89PERCENT
of our global managed real estate footprint participated in Earth Hour.
 

We set new science-based targets for absolute, aggregate reductions in greenhouse gas emissions, including:

Carbon neutrality for business travel emissions by 2020;
31 percent reduction in greenhouse gas emissions from 2011 baseline by 2021;
100 percent of electricity procured for U.S. operations from renewable sources by 2040; and
85 percent reduction in greenhouse gas emissions from 2011 baseline by 2040.

External Recognition

Our commitment to being an employer of choice and a responsible company continues to earn us industry awards and recognition. Below is some of the 2016 and 2017 recognition that makes us proud.

 
Fortune World’s Most Admired Companies
Fortune Best Companies to Work For
Fortune 50 Best Companies for Diversity
Human Rights Campaign: corporate equality index, rating American workplaces on LGBT equality (score 100 percent)
FTS4Good Index series since 2004
2017 Fortune Change the World list
CDP score A-
EPA Green Power: Top user of sustainable energy since 2014
Newsweek Green ranking: top U.S. green companies since 2011
 

Learn More About CSR at American Express

Please visit our corporate website at http://about.americanexpress.com/csr to learn how we, together with our customers, colleagues and shareholders, are making a difference in our communities.

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Audit Committee Matters

ITEM  2

Ratification of Appointment
of Independent Registered Public Accounting Firm

  Our Board recommends that you vote FOR the following resolution:

RESOLVED, that the appointment by the Audit and Compliance Committee of the Company’s Board of Directors of PricewaterhouseCoopers LLP, as independent registered public accounting firm for the Company, to audit the accounts of the Company and its subsidiaries for 2018, is hereby ratified and approved.

The Audit and Compliance Committee has sole authority to appoint and replace the Company’s independent registered public accounting firm, which shall report directly to the Committee, and is directly responsible for its compensation and oversight of its work. In February 2018, the Committee reappointed PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for 2018.

We are asking you to ratify this appointment. If shareholders fail to ratify the appointment, the Audit and Compliance Committee will consider it a direction to consider other accounting firms for the subsequent year. One or more representatives of PwC will be present at the meeting, will be given the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.

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2018 Proxy Statement     Audit Committee Matters

Actions Taken by the Audit and Compliance Committee to Support its Recommendation

Areas of Focus       Actions
Audit and Compliance Committee charter requires a detailed review of the independent audit firm including as compared to other firms at least every 10 years PwC has been our independent auditor since 2005. This review, conducted in 2014, assessed PwC’s performance across the following criteria: professional expertise, audit engagement team performance, communications, independence and objectivity, and fees. A wide range of internal stakeholders were surveyed and asked to comment generally, identify areas for recognition and improvement, and indicate how PwC’s performance was trending over time. PwC’s audit fees were benchmarked against other firms based on publicly available data. The positive results of the review resulted in the decision to continue to engage PwC and also identified several areas with opportunity for improvement that were discussed with PwC.
PwC’s objectivity and independence Reviews relationships between PwC and American Express that may reasonably be thought to bear on independence and reviews PwC’s annual affirmation of independence. Recognizing that independence and objectivity can be compromised by an auditor’s provision of non-audit services, the Audit and Compliance Committee has approved a management policy governing the provision of services by PwC.
Quality of PwC’s auditing practices and PwC’s commitment to quality, efficiency and adding value Reviews issues raised by the Public Company Accounting Oversight Board (PCAOB) reports on PwC, PwC’s internal quality control procedures and results of PwC’s most recent quality control reviews, as well as issues raised by recent governmental investigations. Discusses PwC’s quality initiatives and the steps PwC is taking to enhance the quality and efficiency of its audits with the lead engagement partner and with the PwC senior relationship partner assigned to American Express.
PwC’s performance as auditor Discusses and comments on PwC’s audit plan and strategy for the audit, including the objectives, overall scope and structure, the resources provided and available at the firm, and the Audit and Compliance Committee’s expectations. Receives periodic updates from the lead engagement partner on the status of the audit and areas of focus by PwC.
Performance of lead engagement partner The lead engagement partner of PwC is subject to a mandatory five-year rotation period. The Audit and Compliance Committee chair is involved in selecting the lead engagement partner. During the year, the Audit and Compliance Committee chair meets one-on-one with the lead engagement partner to promote a candid dialogue and the Audit and Compliance Committee meets in executive session with the lead engagement partner to discuss the progress of the audit and any audit issues, deliver Audit and Compliance Committee feedback and discuss any other relevant matters.
PwC’s communications with the Audit and Compliance Committee Audit and Compliance Committee gives feedback to the lead engagement partner on the clarity, thoroughness and timeliness of PwC’s communications to the Audit and Compliance Committee.
Terms of the engagement and audit fees Audit and Compliance Committee reviews the engagement letter and approves PwC’s audit and non-audit fees.

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Audit Committee Matters     2018 Proxy Statement

PricewaterhouseCoopers LLP Fees and Services

Fees for 2017 and 2016

The following table sets forth the aggregate fees billed or to be billed by PwC for each of the last two fiscal years (in thousands):

Types of Fees       2017       2016
Audit Fees $ 23,415 $ 22,885
Audit-Related Fees(1) 4,210 3,829
Tax Fees 30 8
All Other Fees 148 110
TOTAL $ 27,803 $ 26,832

(1) PwC performs the audit of the Company’s pension plans for Switzerland and Hong Kong where the fees are paid by the respective plan. These fees are not included in Audit-Related Fees since they were not paid by the Company. The total fees for these two audits in each of 2017 and 2016 were $31K for each year.

In the table above, in accordance with SEC rules, “Audit Fees” consist of fees for professional services rendered for the integrated audit of our consolidated financial statements, review of the interim consolidated financial statements included in quarterly reports, and services provided in connection with statutory and regulatory filings or engagements and other attest services. “Audit-Related Fees” consist of fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements. The services included employee benefit plan audits, internal control reviews, attest services not required by statute or regulation, and consultations on financial accounting and reporting matters not classified as audit. “Tax Fees” consist of fees for professional services rendered for tax compliance and tax consulting services. “All Other Fees” are fees for any services not included in the first three categories.

Policy on Pre-Approval of Services Provided by PricewaterhouseCoopers LLP

The terms of our engagement of PwC are subject to the pre-approval of the Audit and Compliance Committee. All audit and permitted non-audit services require pre-approval by the Audit and Compliance Committee in accordance with pre-approval procedures established by the Audit and Compliance Committee. In accordance with SEC rules, the Audit and Compliance Committee’s pre-approval procedures have two different approaches to pre-approving audit and permitted non-audit services performed by PwC. Proposed services may be pre-approved pursuant to procedures established by the Audit and Compliance Committee that are detailed as to a particular class of service without consideration by the Audit and Compliance Committee of the specific case-by-case services to be performed if the relevant services are predictable and recurring.

We refer to this pre-approval method as “general pre-approval.” If a class of service has not received general pre-approval, the service will require specific pre-approval by the Audit and Compliance Committee before such service is provided by PwC. All services provided by our independent registered public accounting firm have been pre-approved in accordance with these procedures. The procedures require all proposed engagements of PwC for services of any kind to be directed to the Company’s Controller and then submitted for approval to the Audit and Compliance Committee (or, should a time-sensitive need arise, to its Chair) prior to the beginning of any services.

Other Transactions with PricewaterhouseCoopers LLP

We have a number of business relationships with individual member firms of the worldwide PwC organization. Our subsidiaries provide card services to some of these firms and these firms pay fees to our subsidiaries. These services are in the normal course of business, and we provide them pursuant to arrangements that we offer to other similar clients.

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Report of the Audit and Compliance Committee

A role of the Audit and Compliance Committee is to assist the Board in its oversight of the company’s financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting. PwC is responsible for auditing the Company’s financial statements and its internal control over financial reporting, in accordance with the standards of the PCAOB, and expressing opinions as to the conformity of the financial statements with accounting principles generally accepted in the United States and the effectiveness of internal control over financial reporting.

In the performance of its oversight function, the Audit and Compliance Committee has reviewed and discussed with management and PwC the Company’s audited financial statements. The Audit and Compliance Committee also has discussed with PwC the matters required to be discussed by Auditing Standard No. 1301, as adopted by the PCAOB, relating to communications with audit committees. In addition, the Audit and Compliance Committee has received from PwC the written disclosures and letter required by applicable requirements of the PCAOB regarding PwC’s communications with the audit committee concerning independence, has discussed with PwC their independence from the Company and its management, and has considered whether PwC’s provision of non-audit services to the Company is compatible with maintaining the firm’s independence.

The Audit and Compliance Committee discussed with the Company’s Chief Audit Executive and PwC the overall scope and plan for their respective audits. Internal Audit is responsible for preparing an annual audit plan and conducting internal audits under the direction of the Company’s Chief Audit Executive, who is accountable to the Audit and Compliance Committee. The Audit and Compliance Committee met with the Chief Audit Executive, the Controller and PwC, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the company’s financial reporting. In addition, the Audit and Compliance Committee met with the CEO and Chief Financial Officer of the Company to discuss the processes that they have undertaken to evaluate the accuracy and fair presentation of the Company’s financial statements and the effectiveness of the Company’s systems of disclosure controls and procedures and internal control over financial reporting.

Based on the reviews and discussions referred to above, the Audit and Compliance Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the SEC.

AUDIT AND COMPLIANCE COMMITTEE

Daniel L. Vasella, Chair
John J. Brennan
Ralph de la Vega
Anne L. Lauvergeon
Michael O. Leavitt

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Executive Compensation

ITEM 3

Advisory Resolution to Approve Executive
Compensation (Say on Pay)

  The Board recommends a vote FOR this item.

Pursuant to regulations under Schedule 14A of the Securities Exchange Act of 1934, we are asking you to approve, on an advisory basis, the compensation of the Company’s NEOs disclosed in the CD&A, the compensation tables, notes and narrative in this proxy statement.

Our Board believes that the compensation of our executive officers is aligned with performance, is sensitive to our share price, appropriately motivates and retains our executives, and is a competitive advantage in attracting and retaining the high caliber of executive talent necessary to drive our business forward and build sustainable value for our shareholders. We believe our executive compensation program delivers pay which is strongly linked to Company performance over time.

We engage with shareholders throughout the year, including discussing our compensation program and practices, and we also obtain feedback through this annual say on pay vote. Although this advisory vote is non-binding, the results of this vote and the views expressed by our shareholders in these discussions will inform the CBC’s future decisions about our executive compensation.

RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including in the CD&A, compensation tables and narrative discussion, is hereby approved.

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Compensation Discussion and Analysis

Our CD&A describes our executive compensation programs and compensation decisions in 2017 for our NEOs, who for 2017 were:

Name       Title
Kenneth I. Chenault Chairman and CEO*
Stephen J. Squeri Vice Chairman*
Douglas E. Buckminster President, Global Consumer Services**
Jeffrey C. Campbell Executive Vice President and Chief Financial Officer
Laureen E. Seeger Executive Vice President and General Counsel
*

Mr. Squeri succeeded Mr. Chenault as Chairman and CEO on February 1, 2018.

**

Mr. Buckminster was promoted to Group President, Global Consumer Services on February 1, 2018.

Table of Contents

      50       Compensation Discussion and Analysis
51 Executive Summary
54 Executive Compensation Principles and Strategy
55 Elements of Total Direct Compensation
59 The Compensation Process
60 Pay Decisions, Performance and Outcomes for 2017
62 Compensation Analysis and Key Determinations for 2017
69 Other
69 Stock Ownership Guidelines
72 Report of the Compensation and Benefits Committee

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Compensation Discussion and Analysis     2018 Proxy Statement

Executive Summary

Business and Strategic Updates

In 2015, we implemented a two-year game plan to address the challenging economic, competitive and regulatory environment. Our results for 2017 reflect a strong finish to our two-year game plan as we successfully executed against our key priorities of accelerating revenue growth, optimizing our investments and resetting our cost base. Our performance in 2017 reflects benefits from the investments we have made in a variety of growth opportunities over the last several years. Although we continue to see some headwinds in markets around the world and intense competition, we remain focused on delivering differentiated value to our merchants, customers and business partners while delivering returns to our shareholders. Importantly, we built momentum through 2017 with both revenue and billings growth higher in Q4 than any other quarter of 2017. Our EPS for 2017 was $2.97 on a reported basis and our adjusted EPS of $5.871 (excluding the impacts of the Tax Act) came in at the higher end of the increased guidance we gave at the end of the third quarter. This was above the initial guidance from the start of the year (EPS of $5.60 to $5.80). The Compensation and Benefits Committee determined the Company’s performance to be significantly above the target level and assigned a G1 rating (see page 56 for more information on the Company’s rating system) to the Company.

Financial Performance Highlights

Revenues: Total revenues rose 4 percent in 2017, even as compared to the prior year, which included two quarters of revenue from our Costco relationship;

Excluding Costco-related revenues and the impact of foreign exchange, adjusted revenues rose by 8 percent for the full year2

EPS: $2.97 on a reported basis and $5.87 excluding the impacts of the Tax Act, which was at the higher end of the increased guidance we gave at the end of the third quarter (earnings of $5.80 to $5.90 per share for the year) and above the initial guidance from the start of the year (EPS of $5.60 to $5.80).1

ROE: 13.1 percent (adj. 25.4 percent1);

Total cards-in-force grew by more than 2.9 million;

Worldwide spending on our cards increased by 5 percent to a record $1.1 trillion;

Card Member loans rose 12 percent, significantly outpacing the industry; and

An additional 1.5 million new merchant locations-in-force in the United States.

Our overall progress, along with the positive environment for equities, helped us deliver TSR of 36 percent for 2017. This compares favorably to returns of 22 percent for the S&P 500 and S&P Financials, and 21 percent as the median of our peer group (see page 60 for a list of our peers).

1

Adjusted diluted EPS and adjusted ROE, both excluding the impacts of the Tax Act of $2.6 billion, are non-GAAP measures. The estimated impacts may be refined in the future as additional guidance and interpretations become available. See Annex B for a reconciliation to EPS and ROE on a GAAP basis.

2

Adjusted revenues net of interest expense on an FX-adjusted basis, a non-GAAP measure, excludes from prior-year results estimated revenues from Costco in the United States, Costco U.S. cobrand Card Members and other merchants for out-of-store spend on the Costco cobrand card. Management believes revenues net of interest expense excluding estimated Costco-related revenues is useful in evaluating the ongoing operating performance of the Company following the end of the Costco U.S. relationship. See Annex B for a reconciliation to total revenues net of interest expense on a GAAP basis.


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Shareholder Engagement and Responsiveness to 2017 Say on Pay Vote

Our directors and management recognize the benefits that come from robust dialogue with shareholders and we therefore engage with our shareholders on an ongoing basis. We have made a number of executive compensation program updates to align the program with changes at the Company and in response to shareholder feedback. We have provided a chart below with the items shareholders identified and actions the CBC took to ensure that we are responsive. Since January 2017, we have engaged with investors representing over 51 percent of shares outstanding on corporate governance, executive compensation and related matters.

What we Heard       What we Did
Questions about pay quantum
We set a new CEO pay target at $16.2 million, reduced from $22 million for prior long-tenured CEO.
Manage CBC discretion and clarify how it’s applied
We re-designed our annual incentive program to reduce discretion for NEOs and enhanced CD&A disclosure to clarify how the CBC determines bonus payouts
Linkages of strategy to program design
We will continue to align our compensation program with new CEO strategic priorities
Clarifications about pay metrics selection
We enhanced the disclosure of our pay metrics, including targets for annual and long-term programs
Consider changes to peer group
As a part of its periodic review process, the CBC replaced one company in the peer group to more closely align our peer group with the Company’s current business model

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Elements of Executive Compensation

The following table summarizes the key elements of our executive compensation program and demonstrates the program’s focus on annual and long-term incentive compensation that is closely aligned with Company performance and is sensitive to the Company’s stock performance.

Base Salary

Base salaries correspond to experience and job scope and provide competitive fixed pay.

Annual Incentive Award (AIA)3

Performance Measures4

Shareholder (55%)
Customer (15%)
Employee (15%)
Strategic and Long-Term Sign-Posts (15%)

Long-Term Incentive3

2017 Pay Outcomes Summarized: CEO Pay Decisions

The Company delivered strong performance in 2017 and the CBC concluded that Mr. Chenault has earned the maximum AIA (approximately $8.3 million) at 125 percent of target. This amount is paid in RSUs instead of cash to provide more emphasis on the Company’s stock performance, and the vesting of these RSUs is deferred until one year after his retirement in 2018. In addition, the CBC awarded the CEO a PG of $1.5 million in early 2018. PGs are a portion of long-term incentive compensation tied to three-year performance (in this case 2018-2020). In Mr. Chenault’s case, the long-term vesting of this award incentivized the appropriate balance of short/long-term performance during his final year, and aligned his 2017 compensation with the success of the ongoing strategic initiatives that are likely to drive performance in 2018 and beyond. Mr. Chenault did not receive any other long-term incentive award due to his retirement.

Mr. Chenault’s compensation for 2017, other than his base salary, consisted of performance-contingent, multi-year awards tied to specific financial and operational goals. See page 62 for more information on Mr. Chenault’s compensation.

3

Historically, all or a portion of the AIA awarded to our CEO has been paid in a form other than cash and has been deferred. Mr. Chenault’s 2017 AIA was earned based on his 2017 performance, but all of the payout was deferred into RSUs for one year. The PG is subject to achievement of three-year (2018-20) financial and strategic milestones approved by the CBC in Q1 2018, and the PRSUs depend on 2018-20 ROE performance. The SOs vest three years after grant, subject to meeting performance conditions, and are exercisable for ten years. All or a portion of our CEO’s AIA earned for performance years 2010-2015 and 2017 was paid in RSUs with additional one-year vesting subject to positive net income. For most of these RSU awards, 50 percent of the net shares are to be held for one year post retirement.

4

Details of performance measures under each of the below categories can be found on page 56.

5

Average ROE between 23-27 percent provides 100 percent target payout. Details of the applicable payout grid are available on page 58.

6

Subject to positive cumulative net income over the vesting period.


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Compensation Governance Practices

The Company’s executive compensation program is governed independently by the CBC with the advice and support of the Company’s independent compensation consultant as well as the Company’s management team. The following are key characteristics of the Company’s executive compensation practices, which we believe promote good governance and best serve the interests of our shareholders:

Employ robust goal setting process to align CEO and NEO goals with Company strategy
Cash incentives and equity awards subject to recoupment and forfeiture provisions
Clawback provision for cash portion of the CEO’s AIA when AIA is paid in cash
Program discourages imprudent risk taking, including Chief Risk Officer’s review of goals and results to confirm that actual results were achieved within the Company’s risk appetite
Maintain significant NEO stock ownership requirements
Cap on CEO annual incentive compensation payments (125 percent of target)
Cap on NEO AIA payments (187.5 percent of target for extraordinary performance)
Prohibit executive officers from hedging or pledging company stock
Double-trigger change-in-control provisions
No employment contracts with NEOs
No payment of dividends or dividend equivalents on RSUs granted to NEOs until they vest
No excise tax gross-ups upon a change in control
No individual change in control arrangements
No repricing of options

Executive Compensation Principles and Strategy

Our executive pay program is deliberate, consistent and continues to align with our Company’s business strategy.

We align pay with Company performance and support a long-term, high performance business model.
We link most of the pay for senior executives to long-term business strategies and key priorities. The CEO’s pay has added emphasis on performance-based incentives (91 percent of CEO’s target pay for 2017), with a substantial stockholding requirement (see page 69 for details).
We measure performance against challenging markers established before each performance cycle and aligned with our key business priorities.
We discourage imprudent risk taking by avoiding undue emphasis on any one metric or short-term goal.

These principles have served us well for many years, and we have adapted them in response to input from shareholders and regulators, including the Board of Governors of the Federal Reserve System (Federal Reserve).

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Compensation Discussion and Analysis     2018 Proxy Statement

Elements of Total Direct Compensation

Each NEO’s TDC consists of three forms of compensation: base salary, AIA and long-term incentives. The annual and long-term incentives are variable and depend on the achievement of specific performance objectives.

Total Direct Compensation

TDC consists primarily of variable annual and long-term incentive pay. Variable compensation, which makes up most of NEO pay, covers annual and multi-year performance periods and depends on performance against comprehensive measures. Compensation for 2017 consisted of the following elements:

        Pay Component     Rationale         How it is Paid
Base Salary Provides competitive fixed pay to attract employees Paid in cash
Annual Incentive Award Incentivizes achievement of key annual objectives across the Company and specific business units, including progress made towards long-term initiatives

Paid in cash

Historically, all or a portion of the AIA awarded to our CEO has been paid in a form other than cash and has been deferred

Portfolio Grant Incentivizes achievement of specific financial objectives and strategic milestones, measured over a three-year period

Paid in cash

Historically, all or a portion of CEO’s earned amount is deferred into RSUs to further link pay with future performance

Performance RSUs Rewards for achievement of specific financial objectives, measured over a three-year period and links payout to stock price appreciation Paid in shares
Stock Options Aligns executives’ interest with long-term value creation as measured by appreciation in stock price Results in shares delivered upon exercise

Compensation Alignment with Company Performance

The components of our executive compensation program demonstrate alignment with long-term shareholder value creation. CEO compensation is linked to the financial, strategic and operational performance of the Company. Ninety-one percent of the CEO’s compensation is performance-based and on average 88 percent of NEO compensation is performance-based.

2017 CEO Target Total Direct
Compensation Mix
      2017 NEO Target Total Direct
Compensation Mix

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2018 Proxy Statement Compensation Discussion and Analysis

Base Salary

Each NEO received an annual salary in cash. The purpose of the base salary is to provide competitive, fixed annual cash compensation.

AIA Structure and Methodology

The AIA is an annual cash-denominated performance-based component of executive compensation designed to recognize Company performance as well as exceptional individual performance. Performance is measured against measurable goals reviewed and approved by the CBC. The CBC believes each performance metric is a clear driver of annual Company performance and aligns with the Company’s focus on continued long-term value creation.

The AIA is structured to reflect specific and measureable Company, business unit and individual performance goals, including key objectives in the following categories.

    Weighting         Metric
Annual
Incentive
55%
Shareholder (e.g., EPS and Revenue Growth)
15%
Customer (e.g., Net Promoter Score)
15%
Employee (e.g., Diversity and Inclusion Goals)
15%
Strategic and Long-Term Sign-Posts (e.g., Merchant Coverage, Lending Growth)

In response to shareholder feedback for 2017, we simplified our AIA program. It is now a more formulaic program that considers quantitative goals set at the beginning of the fiscal year, along with individual performance, to determine the final payout. The design works as follows for each NEO.

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Compensation Discussion and Analysis     2018 Proxy Statement

Individual Target Amount. At the beginning of the fiscal year, the CBC reviews and sets the target annual incentive amount for executive officers at a level intended to reflect their role and responsibilities. Generally, these targets do not change unless roles, responsibilities, or market circumstances change in such a way that an adjustment would be appropriate.

Performance Multiplier. The performance multiplier is comprised of specific and measureable Company and business components. Company performance is weighted at 70 percent and business unit performance is weighted at 30 percent, other than for the CEO, whose AIA payout is based 100 percent on Company and individual performance and capped at 125 percent of target. The program places higher emphasis (70 percent) on Company performance to reinforce the importance of enterprise level success over individual business unit performance. Early in the year, the CBC approves performance objectives against which performance is assessed and a multiplier is applied at the end of the year. To determine the Company and business unit portions of the multiplier, at the end of the year the CBC considers performance year assessments with input from the CEO on overall Company and business unit performance against these goals, as well as input from the Chief Risk Officer on organizational performance against established risk metrics.

Using these inputs, the CBC approves a Goal (G) rating for both the Company and business unit portions of the multiplier. The weighted sum of the multiplier for each of the Company and business unit performance elements corresponds to an overall performance multiplier used to calculate a payout.

Individual Multiplier. The individual multiplier allows the CBC to modify an award downwards or upwards to consider individual performance, including quality of results, key leadership attributes, compliance with risk and control objectives and other relevant factors.

Long-Term Incentive Award Structure and Calculation

The Long-Term Incentive Award (LTIA) is intended to be formulaic and link compensation to the achievement of long-term financial objectives. LTIA compensation is awarded in three forms: portfolio grant (PG), performance restricted stock units (PRSUs), and stock options. Each of these incentives aligns NEOs’ interests with those of shareholders and establishes retention incentives through multi-year, performance-based vesting periods. The elements of LTIA and their respective features are described in the below table:

Element       Metrics       Features
Portfolio Grant(1)
3-year financial and strategic goals
3-year vesting
Payout tied to 3-year performance
0-125% of target payout range
Performance RSUs
3-year average ROE
3-year vesting period
Payout tied to 3-year performance
0-125% of target payout range
Stock Options
Stock price appreciation(2)
Vests 3 years after grant
10-year term
(1)

Ordinarily paid in cash at the end of the three-year performance period, but the CEO’s earned amount has been paid in RSUs since 2011 including awards earned at the end of 2017

(2)

Subject to positive cumulative net income over the vesting period


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Portfolio Grant

The PG is a form of long-term compensation primarily paid in cash. The size of the grant that is awarded as part of TDC for a given year is determined by performance during the prior fiscal year, with the ultimate earned value of the award based on performance on relevant financial and strategic metrics at the end of the three-year performance cycle. For 2018-2020, the CBC set financial and strategic milestones in the first quarter of 2018 for the three-year performance period ending in 2020. The CBC sets targets for portfolio grants that are intended to be rigorous yet achievable through sustainable long-term performance, as demonstrated by the 2015-2017 grant which paid out below target.

For 2017 (reflecting performance for the 2015-2017 period), all PGs were paid in cash other than for the CEO, whose grant was paid in RSUs to further link CEO compensation to future performance and ultimately shareholder returns. This element of compensation closely aligns executive compensation to the Company’s long-term financial and strategic performance through measurable goals. The Company discloses actual structure and goals only at the end of each performance cycle due to the competitively sensitive nature of the information. See the “Portfolio Grant Awarded in January 2015-Vesting Based on 2015-2017 Performance” section for the discussion of the 2015-2017 PG metrics and pay outcomes.

Performance Restricted Stock Units (PRSUs)

PRSUs are a form of equity compensation dependent on the achievement of specific financial goals and linked to the long-term performance of the Company. This element of compensation closely aligns executives to the Company’s financial performance achievements and stock price appreciation over the long term. PRSUs are earned for the achievement of ROE targets with the actual value based on the stock price at the time of the payout, thus linking the award closely to stock performance. ROE was chosen as the metric because it is an important measure of the financial success of our business and is common in the financial services industry.

At the PRSU grant date, the CBC determines the three-year average ROE target for the grant’s three-year performance cycle. The target is set considering the Company’s operating plan and is intended to incentivize performance that is challenging yet achievable. As detailed in the table below, the percent of the PRSUs that are earned by an NEO can range from 0 percent to 125 percent of target, contingent upon performance:

% Target Shares Granted       3-Year Average ROE
            125 %                       >=30 %          

108.3

% 28 %
100 % 23 – 27 %
95 % 22 %
75 % 20 %
0 % <=5 %

Note: If the three-year ROE is between two points, straight-line interpolation will be applied.

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The Compensation Process

Evaluating Performance: Selecting Metrics, Setting Targets

The CBC reviews and approves comprehensive performance goals annually and remains actively engaged throughout the year to monitor Company strategy and performance toward goals. The following describes the Company’s process for selecting incentive program metrics and setting challenging yet achievable targets that are aligned with the Company’s strategic direction.

Key Steps in Selecting Incentive Metrics and Setting Targets   
 
Our Board reviews the competitive environment and business strategy throughout the year, including regulatory, competitive and technological developments.
The CBC reviews and approves final incentive plan metrics and goals early in each year.
The CBC remains engaged throughout the year, evaluates annual performance and determines final payout amounts based on the achievement of stretch goals.

Peer Group and Benchmarking

Our pay program is designed to reward achievement of financial and strategic goals and to attract, retain and motivate our leaders in a competitive talent market. The CBC periodically examines pay practices and pay data for a group of 20 companies as a source of benchmarking data to better understand the competitiveness of our compensation program and its various elements. While the benchmarking data is used to assess the competitiveness of our compensation program, it is only one of a number of factors used to make final pay decisions.

How We Select the Company’s Peers

In selecting the current peer group, the CBC identified prominent S&P 500 companies, generally with revenue levels similar to ours, and the companies fall into the following categories: (1) financial institutions; (2) iconic global consumer brands; and (3) payments related and technology businesses.

In 2017, as part of its routine review of the Company’s compensation peer group, the CBC evaluated the appropriateness of the peer group and maintained the same categories as mentioned above. The CBC decided to remove Walt Disney from the peer group upon consideration of shareholder feedback, and added the Starbucks Corporation as a comparable peer with similar brand characteristics and revenues. The remainder of the group was unchanged.

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Comparator Group 2017

Financial
Institutions
  Iconic Global
Consumer Brands
Payments Related
& Technology Businesses
Bank of America              Goldman Sachs        Coca-Cola              PepsiCo        Discover              PayPal
BNY Mellon JPMorgan Chase Colgate Palmolive Starbucks MasterCard Cisco
BlackRock Morgan Stanley Nike Visa
Capital One Financial US Bancorp
Citigroup Wells Fargo

Pay Decisions, Performance and Outcomes for 2017

The following section discusses performance against key incentive program metrics as well as the pay decisions and outcomes for each NEO. As a part of the annual pay decision process, the CBC considers overall Company performance as well as performance against specific pre-established enterprise-wide goals, performance relative to our peers and financial markets, and a risk/control and compliance assessment.

Progress on Key Performance Metrics in 2017

Two years ago, we identified three priorities for 2016-17 to transform our business in the face of renewed competition, a shifting regulatory environment, and disruptive technological changes:

Accelerating Revenue Growth
Optimizing Investments
Resetting the cost base

As we executed on this plan, we added new products and benefits for both consumers and businesses, including a refresh of our U.S. Platinum Card. At the same time, we redesigned our marketing, customer service and risk management capabilities with a leaner, more agile technology infrastructure and cutting-edge data science. As a result of these actions, in 2017:

Total cards-in-force grew by more than 2.9 million;
Worldwide spending on our cards increased by 5 percent to a record $1.1 trillion;
Card Member loans rose 12 percent, significantly outpacing the industry; and
An additional 1.5 million new merchant locations-in-force in the United States.

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The Company’s progress is also evidenced by the following:

      2016       2017       Key 2017 Achievements
Revenue
(in billions)
$32.1 $33.5
Total revenues rose 4 percent in 2017, even though the prior year included two quarters of revenue from our Costco relationship.
Excluding Costco-related revenues and the impact of foreign exchange, adjusted revenues rose by 8 percent for the full year7
Fourth quarter Revenue Exit Momentum of 10 percent8
Billings growth in our consumer and commercial businesses, higher net interest income from loan growth, and higher fee income
Total Loans9
(in billions)
$66.7 $76.1
Credit quality stayed strong throughout the year
Economics of lending remain very attractive to us considering the benefits of higher net interest income.
ROE 26.0% 13.1%
(adj. 25.4%)10
Excluding the impacts of the Tax Act, ROE was in line with our historical experience
EPS $5.65
(adj. $5.93)11
$2.97
(adj. $5.87)10
Excluding the impacts of the Tax Act, EPS was $5.87 which was in line with the guidance we offered in October 2017 ($5.80 to $5.90) and above the initial guidance from the start of the year (EPS of $5.60 to $5.80).

The Company’s TSR for 2017 was 36 percent12. Overall the Company’s TSR outperformed the S&P Financials and S&P 500 indices on a one-year basis, but lagged these indices on a three- and five-year basis.

7

Adjusted revenues net of interest expense on an FX-adjusted basis, a non-GAAP measure, excludes from prior-year results estimated revenues from Costco in the United States, Costco U.S. cobrand Card Members and other merchants for out-of-store spend on the Costco cobrand card. Management believes revenues net of interest expense excluding estimated Costco-related revenues is useful in evaluating the ongoing operating performance of the company following the end of the Costco U.S. relationship. See Annex B for a reconciliation to total revenues net of interest expense on a GAAP basis.

8

Fourth quarter Revenue Exit Momentum is our Fourth Quarter 2017 revenue growth over the prior year.

9

Total loans represents Card Member loans and Other Loans.

10

Adjusted diluted EPS and adjusted ROE, both excluding the impacts of the Tax Act of $2.6 billion, are non-GAAP measures. The estimated impacts may be refined in the future as additional guidance and interpretations become available. See Annex B for a reconciliation to EPS and ROE on a GAAP basis.

11

Adjusted diluted EPS, a non-GAAP measure, excludes the $266 million after-tax restructuring charges ($410 million pre-tax) from 2016. See Annex B for a reconciliation to EPS on a GAAP basis.

12

TSR is the total return on common shares over a specified period, expressed as a percentage (calculated based on the change in stock price over the relevant measurement period and assuming reinvestment of dividends). Source: Bloomberg (returns compounded daily).


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Compensation Analysis and Key Determinations for 2017

CEO TDC Decisions for 2017

The Company delivered strong performance in 2017 and the CBC concluded that Mr. Chenault has earned maximum AIA (approximately $8.3 million) at 125 percent of target. This amount is paid in RSUs instead of cash to provide more emphasis on the Company’s stock performance, and the vesting of these RSUs is deferred until one year after his retirement in 2018. In addition, the CBC awarded Mr. Chenault a PG of $1.5 million in early 2018. PG are a portion of long-term incentive compensation tied to three-year performance (in this case 2018-2020). In Mr. Chenault’s case, the long-term vesting of this award incentivized the appropriate balance of short/long-term performance during his final year, and aligned his 2017 compensation with the success of the ongoing strategic initiatives that are likely to drive performance in 2018 and beyond. Mr. Chenault did not receive any other long-term incentive award due to his retirement.

Mr. Chenault’s compensation for 2017, other than his base salary, consisted of performance-contingent, multi-year awards tied to specific financial and operational goals.

In millions:

83 percent of TDC awarded for 2017 is deferred and tied to future Company performance.

Transitional Compensation Related to CEO Succession

Considering Mr. Chenault’s retirement on February 1, 2018, the CBC decided that his 2018 annual incentive for the duration of his service in 2018 until his retirement will also be paid at target in 2019 on a pro-rata basis.

On January 22, 2018, the CBC approved certain arrangements for Mr. Chenault. We have agreed to provide an annual stipend of $300,000 per year to Mr. Chenault for office space with administrative support for use after retirement (consistent with past practice for retiring CEOs) for a period of nine years (the year Mr. Chenault becomes age 75), with an additional one-time set-up payment of $500,000 plus appropriate office hardware on a one-time basis. We have also agreed to provide Mr. Chenault with driver support for security for one year.

On October 18, 2017, following the announcement of Mr. Chenault’s retirement and the decision to appoint Mr. Squeri as CEO, the CBC awarded Mr. Squeri performance-vesting options on October 31, 2017 with a grant date fair value of $4.5 million in connection with his promotion. On the same date, Mr. Buckminster was also granted performance-vesting

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stock options with a grant date fair value of $2.25 million, in connection with the CEO transition. The options will have a term of seven years, an exercise price equal to the closing price on the grant date and vesting subject to (i) a stock price goal of 30 percent above the closing price on the grant date, which must be met for a period of 20 consecutive trading days during the five-year period beginning on the grant date, (ii) a financial goal of positive cumulative GAAP net income for the three-year period and (iii) a three-year service condition. Fifty percent of the net after-tax shares received upon exercise must be held for at least 12 months.

Other NEOs’ Total Direct Compensation Decisions for 2017

The CBCs TDC decisions for the NEOs other than the CEO for performance year 2017 are presented in the table below ($000s)13:

      S. J. Squeri       J.C. Campbell       D.E. Buckminster       L.E. Seeger
Base Salary       $ 1,500            $ 1,000                    $ 750          $ 800
AIA* $ 7,000 $ 4,600 $ 3,350 $ 2,400
PG $ 2,700 $ 1,500 $ 1,300 $ 1,100
PRSUs $ 6,000 $ 2,721 $ 1,787 $ 1,624
SOs $ 1,500 $ 629 $ 413 $ 376
TDC $ 18,700 $ 10,450 $ 7,600 $ 6,300
* To comply with regulatory guidance that at least 50 percent of incentive compensation be deferred, $200,000 of Mr. Buckminster’s 2017 AIA and $850,000 of Mr. Campbell’s 2017 AIA were paid in the form of PRSUs and SOs granted in January 2018. The AIA figures in the above table reflect these adjustments.

A significant portion of the NEOs’ Awarded TDC is tied to future performance of the Company,
including stock price performance14.

AIA Outcomes for 2017

Executives are eligible to receive an AIA based on performance over the prior year against measurable goals that are set at the beginning of the year and approved by the CBC in four key areas: Shareholder, Customer, Employee, and Strategic and Long-Term goals. AIA metrics are measures of Company and executive performance intended to drive the creation of long-term value. The CBC follows a detailed framework to set goals, assess performance and determine each NEO’s AIA payout.

NEO AIA Targets for 2017

At the beginning of the fiscal year, the CBC reviews and sets the target annual incentive amount for executive officers at a level intended to reflect their role and responsibilities. Generally, these targets do not change unless roles, responsibilities, or market circumstances change in such a way that an adjustment would be appropriate. The payout ranges up to 187.5 percent of target for NEOs based on a comparison of annual incentive structures for peer companies and to reflect the Company’s and executive extraordinary performance15.

Earned awards are typically paid out in cash but the CBC can determine to pay awards in RSUs or a combination of the two for the CEO. For example, the CEO’s 2016 AIA was paid in long-term incentives considering progress needed beyond 2016 to reset the Company’s trajectory towards profitable growth and high returns.

13

Due to SEC reporting rules, timing and other differences result in different amounts being allocated in the chart above as compared to the Summary Compensation Table. A reconciliation is shown on page 73.

14

The NEOs’ PRSUs are earned based on three-year average (2018-2020) ROE performance. With respect to equity awarded to Other NEOs (noted above), an equal number of shares were granted in the form of PRSUs and SOs, other than for Mr. Squeri.

15

A 125 percent CEO cap that applied to Mr. Chenault’s AIA was removed in connection with the 2018 CEO transition.


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2017 Performance Outcomes

The CBC assigned a G1 rating to the Company after reviewing actual performance against target performance, for exceptional performance (see page 56 for more information on the Company’s rating system). For all NEOs except the CEO, AIA payouts are based on a Performance Multiplier (measured 70 percent on Company performance and 30 percent on the appropriate business unit performance for each NEO) and an Individual Performance Multiplier. The CEO’s AIA payout is based 100 percent on Company performance as represented in the Company Scorecard shown below.

PERFORMANCE MULTIPLIER – COMPANY

In determining the annual Company portion of the Performance Multiplier, the CBC evaluated the following results against the performance objectives approved for all NEOs by the CBC at the beginning of 2017:

2017 Company Performance Multiplier Scorecard
Financial (55%)        Target        2017 Accomplishments
Revenue Growth (FX-adjusted)*
0% *** 4%
Fourth quarter Revenue Growth (FX-adjusted)*
5% 9%
EPS**
$5.60 $5.87
ROE**
25% 25%
Customer (15%)
Internal metrics to measure customer satisfaction and customer growth
Goals achieved at target levels
Employee (15%)
Talent Retention and Diversity Representation Goals Goals achieved at or above
target levels
Long-term sign posts (15%)
Remove $1 Billion of costs from the expense base
Above Target
Innovation and New Business Progress
Above Target
Acceleration of Merchant Coverage balanced with reducing Discount Rate Erosion
At Target
Evolution of Litigation Strategy
Above Target
Strengthening Card Member Value Proposition
Above Target
Continue to Grow Lending
Above Target
Company Performance Multiplier Score 130% (G1)

Based on strong 2017 performance on key financial, employee and customer dimensions that exceeded targets and along with meaningful progress on the Company’s long-term goals, the Company received a G1 rating that resulted in 130 percent score under the Company portion of the plan.

*

The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against which such results are being compared). Reported revenue growth was 4 percent and 10 percent for fiscal year 2017 and Q4 2017, respectively.

**

Adjusted diluted EPS and adjusted ROE, both excluding the impacts of the Tax Act of $2.6 billion, are non-GAAP measures. The estimated impacts may be refined in the future as additional guidance and interpretations become available. See Annex B for reconciliations to EPS and ROE on a GAAP basis.

***

Each year the CBC considers the Company’s plans, the external environment and any significant business changes when setting compensation related goals. In 2017, the CBC approved a flat FX-adjusted revenue growth target which took into consideration the fact that 2016 included two quarters of revenues related to our Costco relationship that was discontinued at the end of the second quarter in 2016. Costco-related revenues (revenues from Costco in the U.S., Costco U.S. cobrand Card Members and other merchants for out-of-store spend on the Costco cobrand card) were approximately $1.2 billion in 2016. On an adjusted basis, the 2017 revenue target represented a roughly 4 percent increase when excluding 2016 Costco-related revenues (see Annex B for more information). Management believes revenues net of interest expense excluding estimated Costco-related revenues is useful in evaluating the ongoing operating performance of the Company following the end of the Costco U.S. relationship. In addition, the CBC approved a 5 percent fourth quarter revenue growth target for 2017 to underscore the importance of exiting the year with momentum. The fourth quarter revenue growth target also provides a useful GAAP measure of management success considering the fourth quarter of 2016 did not include Costco-related revenue. The CBC applied a similar rationale when approving the $5.60 EPS target for 2017 considering $5.65 GAAP reported EPS for 2016. The CBC concluded that the $5.60 EPS target for 2017 represented an appropriate and challenging increase as compared to 2016 EPS excluding Costco-related earnings.


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CEO 2017 PERFORMANCE AND AIA OUTCOME (MR. CHENAULT, CHAIRMAN AND CEO FOR 2017)

Mr. Chenault’s AIA payout is based on performance against the Company’s scorecard and the resulting Company Performance Multiplier. Given the Company Performance resulting in G1 rating, Mr. Chenault achieved the maximum AIA payout for 2017 as follows ($000s):

Target AIA       Company Performance Multiplier       Actual AIA
$6,625 125% $8,281

The Company’s AIA plan provided 130 percent of target AIA considering actual performance before the CBC’s adjustment to consider individual performance. The CEO’s compensation framework caps AIA payout to 125 percent of target. Therefore, despite exceptional performance, Mr. Chenault’s AIA was capped at 125 percent of target.

For 2017, Mr. Chenault’s AIA payout was awarded entirely in the form of RSUs that are deferred for one year following grant date to provide more emphasis on the Company’s future stock performance. Historically, all or a portion of the AIA awarded to our CEO has been paid in a form other than cash and has been deferred. With most of Mr. Chenault’s compensation subject to multi-year performance goals, his realizable pay is tied closely to the long-term success of the Company after his retirement.

PERFORMANCE MULTIPLIER – BUSINESS UNITS

For all NEOs other than the CEO, the objectives under the Business Unit Performance portion of the Performance Multiplier are weighted at 30 percent and evaluate performance in the areas generally directly under the purview of the executive. NEO scorecards may reflect shared Company goals in order to assess individual contribution toward the achievement of those goals, as applicable to each NEO’s business unit. The following summarizes each NEO’s goals and objectives for 2017 and performance against each goal.

MR. SQUERI, VICE CHAIRMAN, MR. CAMPBELL, EVP AND CHIEF FINANCIAL OFFICER AND MS. SEEGER, EVP AND GENERAL COUNSEL

Mr. Squeri’s, Mr. Campbell’s and Ms. Seeger’s Business Unit Multiplier was determined based on the performance against their respective Business Unit Scorecard metrics. Messrs. Squeri’s and Campbell’s goals were identical to the Company scorecard except for Employee metrics, which reflected the business units for which they were respectively responsible during 2017. Ms. Seeger’s goals were also identical to the Company scorecard except for Employee metrics and Long-Term Sign Posts, which reflected the business unit for which she was responsible during 2017.

Based on 2017 performance, Mr. Squeri, Mr. Campbell and Ms. Seeger each achieved goals above target, resulting in G1 ratings, which correspond to a 130 percent Business Unit performance multiplier.

MR. BUCKMINSTER, PRESIDENT, GLOBAL CONSUMER SERVICES

Mr. Buckminster’s performance on the Business Unit Multiplier was evaluated based on the following results on his 2017 Business Unit Scorecard:

2017 Buckminster Performance Multiplier Scorecard
Financial (55%)       Target       2017 Accomplishments
Revenue Growth (FX-adjusted)*
0% 5%
Fourth Quarter Revenue Growth (FX-adjusted)*
6% 11%
Pre-tax Income ($Millions)
$3,861 $3,896
Customer (15%)
Internal metrics to measure customer satisfaction and customer growth Goals achieved at target
Employee (15%)
Talent Retention and Diversity Representation Goals Goals achieved at or above
target levels
Long-term sign posts (15%)
Acquisition Efficiency
At Target
Continue to Grow Lending
At Target
Card Member Engagement
Above Target
Strengthening Card Member Value Proposition
Above Target
Company Performance Multiplier Score 130% (G1)
*

The foreign currency adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. Dollars (i.e., assumes the foreign exchange rates used to determine results for the current period apply to the corresponding prior year period against which such results are being compared). Reported revenue growth was five percent and 13 percent for fiscal year 2017 and Q4 2017, respectively.


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NEO INDIVIDUAL MULTIPLIER

In addition to Company and Business Unit Performance, the AIA formula contains an Individual Multiplier which allows the CBC to modify an award downwards or upwards to consider measurable factors such as individual performance including, quality of results, key leadership attributes, compliance with risk and control objectives and other relevant factors. The CBC’s decisions are reflected in the table below.

Summary of NEO AIA Decisions and Outcomes for 2017

The following table summarizes the actual AIA earned by each NEO for the 2017 performance year based on the achievement of goals detailed above ($000s).

Name                 Performance Multiplier                
Target
AIA
x Company
(70%)
+ Business
Unit (30%)
x Individual
Multiplier*
Actual
AIA**
K.I. Chenault $6,625 125% (capped at this level based on Company and individual performance) $8,281
S.J. Squeri $4,500 130%         130% $7,000
D.E. Buckminster $2,200 130% 130% CBC Assessment $3,550
J.C. Campbell $3,500 130% 130% $5,450
L.E. Seeger $1,600 130% 130% $2,400
*

The AIA formula contains an Individual Multiplier which allows the CBC to modify an award downwards or upwards.

**

To comply with regulatory guidance that at least 50 percent of incentive compensation be deferred, $200,000 of Mr. Buckminster’s 2017 AIA and $850,000 of Mr. Campbell’s 2017 AIA were paid in the form of RSU’s granted in January 2018. The AIA figures in the above table do not reflect these adjustments.

Long-Term Incentive Compensation Targets and 2017 Outcomes

The LTIA is intended to be formulaic and link compensation to the achievement of long-term objectives. LTIA compensation is awarded in three forms: a PG, PRSUs, and SOs. Each of these forms of incentives aligns NEOs interests with shareholder interests and establishes retention incentives through multi-year, performance-based vesting periods.

Element       2017 Metrics
2015-2017 PG(1)
50% Three-year financial goals
   Three year cumulative EPS (20%)
   Three year relative TSR as compared to S&P 500 (30%)
50% strategic milestones
PRSUs
Three-year average ROE
SOs
Stock price appreciation(2)
(1)

Paid in cash (except for CEO, who had all of his grant deferred and payable in equity)

(2)

Subject to positive cumulative net income over the vesting period

Portfolio Grant Awarded in January 2015 (Vesting Based on 2015-2017 Performance)

The Portfolio Grant (PG) is a program with three-year performance cycles16. Under the program, management is assessed and rewarded for performance against a combination of financial objectives, stock price performance, and for results against specific strategic milestones that indicate success in positioning the Company for the future. For the 2015-2017 PG award, the size of the award was determined based on 2014 performance, with the ultimate value paid in 2018 resulting from performance during the 2015-2017 performance cycle as measured by three-year EPS, relative TSR and achievement of Strategic Milestones.

16

Participants receive zero percent of the award at threshold level, 100 percent of the award at target level, and 125 percent of the award at maximum level. The payout range for achievement of strategic milestones is 0-125 percent and actual payout is based on actual performance against goals as well as the CBC’s judgment.


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Based on its assessment of performance against the targeted metrics as described in the following sections, the CBC determined that performance underachieved objectives and set the payout for the 2015-2017 cycle at 79 percent of the target award.

Three-Year Cumulative EPS (20 Percent of Portfolio Grant)

The target goal established at the beginning of the three-year cycle was cumulative earnings of $17.36 per share, a level of earnings consistent with the Company’s business plan and management expectations at the start of the performance period. No payout would be earned on this factor for performance below $10.84 per share, or 62 percent of the target goal. The maximum payout, 125 percent of target, was set at $20.27 per share, or 117 percent of the target goal.

On a GAAP basis, cumulative earnings were $13.67 per share; however, the CBC deemed it appropriate to consider adjusted financials when determining the payout for this factor to exclude the 2017 charges related to the Tax Act as well as impairment and restructuring charges in 2016 and 2015. On an adjusted basis, the Company earned $17.18 per share over the time period, which would correspond to a 98.5 percent payout against target for this factor. Refer to Annex B for reconciliation.

Results Needed for Potential Payout        Three-Year Outcome        2017 Achievement
Three-year EPS        % Earned
$20.27 125%
$17.36 100% $17.18(1) 98.5%
$14.45 75%
$10.84 0%
(1)

EPS includes: 2015 $5.38 (adj.), 2016 $5.93 (adj.), and 2017 $5.87 (adj.); 2015, 2016, and 2017 EPS adjusted for a charge in Enterprise Growth, restructuring charges, and the impacts related to the Tax Act, respectively. See Annex B for a reconciliation to EPS on a GAAP basis.

Note: If the three-year EPS is between two points, straight-line interpolation will be applied.

Three-Year Relative TSR (30 Percent of Portfolio Grant)

Results Needed for Potential Payout        Three-Year Outcome        2017 Achievement
Relative TSR        % Earned
+5% 125%
0% 100% -7.53% 37.3%
-3% 75%
-9% 25%

This portion of the PG would pay at 100 percent if the Company’s TSR was equal to the S&P 500 and scaled down to no payout if TSR lagged the index by more than 9 percent. The maximum payout (125 percent) would be achieved if the Company’s TSR outperformed the index by 5 percent or more.

Actual performance over the period lagged the index by 7.53 percent, which corresponds to a 37.3 percent payout.

Note: If the 3-year EPS is between two points, straight-line interpolation will be applied.

Progress on Strategic Milestones (50 Percent of Portfolio Grant)

The strategic milestones established for this grant covered a range of initiatives, including customer and revenue-generating initiatives. The range of payouts for achievement against strategic milestones, as with the other elements, is from zero to 125 percent of target. The CBC uses judgment to score performance against these goals.

The CBC noted considerable success in terms of capturing a portion of the spending and borrowing of former Costco cobrand Card Members, expanding profitable lending, growing international revenues, and controlling operating expenses. However, performance was below-target on expanding global active merchant locations and driving Loyalty Partner revenue. As a result, the CBC determined that overall management met expectations in its strategic accomplishments and scored these goals at 95.8 percent of target.


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Strategic Milestones         Three-Year Outcome
1 Capture a portion of the spending and borrowing of former Costco cobrand Card Members
2 Increase global active merchant locations in force
3 Expand profitable lending while effectively managing loss rates CBC concluded that most but not all milestones were scored at or above the target level.
4 Grow international revenue
5 Grow Loyalty Partner revenue
6 Control cost base

Final Scoring for 2015-2017 Portfolio Grant

Based on the above discussions of actual performance against goals, the CBC concluded that the award should pay out at 79 percent of its targeted amount.

Performance Measure         Weight x Achievement Score = Weighted Average
Score
EPS 20%         98.5         19.7%
Relative TSR 30% 37.3 11.2%
Strategic Milestones 50% 95.8 48.0%
Payout: 79%

Over the last three years, the PG program (including the 2015-2017 program) has paid out below its targeted amount, reinforcing our rigor of goals and stretch targets.

The CEO and other NEOs’ PG 2015-17 grants resulted in the following payouts ($000s):

        PG 2015-17
Grant
Amount
        PG 2015-17
(Q1 2018)
Payout
K.I. Chenault(1)       $  5,125       $  4,049
S.J. Squeri $ 1,325 $ 1,047
D.E. Buckminster $ 900 $ 711
J.C. Campbell $ 1,500 $ 1,185
L.E. Seeger $ 1,100 $ 869
(1)

Note: Mr. Chenault’s payment of $4,048,750 was in the form of RSUs granted in January 2018 with one year delayed delivery.

Performance RSUs Awarded in January 2015-Vesting Based on 2015-2017 Performance

Performance RSUs were awarded in January 2015 for the three-year performance period ending December 2017. The awards vest based on the Company’s three-year average ROE performance.

Metric Results Needed for Potential Payout Three-Year Outcome 2015-2017
Achievement
        Three-Year Average ROE         % Target Shares Granted                                                                  
>=30% 125% 25.1% (average)
28% 108.3% Year ROE
Three year average ROE 23 – 27% 100% 2017 25.4%17 100%
22% 95% 2016 26.0%  
20% 75% 2015 24.0%  
<=5% 0%
17

2017 ROE excluding the impacts from the Tax Act of $2.6 billion. On a GAAP basis, ROE was 13.1 percent; however, the CBC deemed it appropriate to consider adjusted financials when determining the payout for this factor to exclude the 2017 charges related to the Tax Act. See Annex B for a reconciliation to ROE on a GAAP basis.


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This resulted in the vesting of the following shares for the CEO and other NEOs:

      Target Number
of Shares
      Shares
Vested
K.I. Chenault 87,777 87,777
S.J. Squeri 27,777 27,777
D.E. Buckminster 13,111 13,111
J.C. Campbell 25,777 25,777
L. E. Seeger 17,777 17,777

Other

Pay Ratio

Our CEO to median compensated employee pay ratio is 327:1, with the Summary Compensation Table number for Mr. Chenault being $18,611,373 and the equivalent number for the identified median employee being $56,873.

To calculate our median compensated employee, we reviewed our worldwide employee population, consisting of 19,864 U.S. employees and 33,985 non-U.S. employees, and examined the 2017 total compensation for all employees, excluding our CEO, who were employed by us as of November 30, 2017. As our non-U.S. employees exceed 5 percent of our total U.S. and non-U.S. employees, we applied the de minimis exception to exclude all non-U.S. employees in certain jurisdictions that were not representative of our worldwide employee base across various job levels.* As a result, our median compensated employee calculation includes all permanent Company employees, whether full-time or part-time, consisting of 19,864 U.S. employees and 32,058 non-U.S. employees (an aggregate of 96.4 percent U.S. employees and non-U.S. employees), and excludes 1,927 non-U.S. employees (an aggregate of 3.6 percent non-U.S. employees) from the calculation (Median Compensated Employee). Selected for purposes of the pay ratio calculation was an U.S. based employee. This employee was selected as their compensation was in line with the median compensation of the target population explained above.

To calculate the annual total compensation for our Median Compensated Employee, we used the same methodology as set forth in the 2017 Summary Compensation Table in this proxy statement. We did not make any assumptions, adjustments, or estimates with respect to total compensation. However, we annualized the base salary compensation for full-time employees that were newly hired in 2017. We believe the use of annual total compensation for all employees is a consistently applied compensation measure as it includes all key elements of employee pay (base salary, short-term incentive awards and long-term incentive awards) paid to most of our employees.

* Approximate excluded employee count by each country follows: Austria (50), Belgium (1), Brazil (24), Channel Islands (8), Chile (12), China (108), Czech Republic (22), Denmark (2), Finland (2), Germany (477), Hungary (11), Indonesia (4), Ireland (3), Korea (23), Malaysia (1,004), New Zealand (63), Norway (2), Poland (36), Russia (63), Switzerland (8) and Turkey (4).

Stock Ownership Guidelines

Our current stock ownership guidelines require the CEO and our other NEOs to own and maintain a substantial stake in the Company. The CEO and our other NEOs are required to accumulate shares (i.e., shares owned outright, excluding unvested/unearned shares and unexercised stock options) with a value equivalent to a target multiple of their base salary, and to retain 50 percent of the net after-tax shares received upon vesting or exercise of their equity awards until guidelines are met. This is a change from our prior stock ownership guidelines which required the CEO and other NEOs to accumulate a target number of shares (500,000 for CEO, 25,000 or 75,000 for all other NEOs). The CBC made this change to better align the Company with market best practices and its peers. The specific requirements are as follows:

Officer       Multiple of Base Salary
CEO 10 x
All Other NEOS   3 x
All of our NEOs own more than the target number of shares.

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Tax Treatment

Tax rules generally limit the deductibility of compensation paid to our NEOs to $1 million per year. Prior to the Tax Act, “performance-based” compensation was excepted from this limit, and so the Company generally structured its incentive compensation arrangements in a manner that was intended to comply with these tax rules. However, the CBC has always maintained the flexibility to pay nondeductible incentive compensation.

Discouraging Imprudent Risk Taking

Our executive compensation program is structured to provide a balance of cash and stock; annual, medium-term and long-term incentives; and financial, strategic and stock performance measures over various time periods. It is designed to encourage the proper level of risk taking consistent with our business model and strategies. Our business and risk profile is different from other financial services firms; for example, we do not generally trade securities, derivatives, mortgages or other financial instruments other than for hedging our risks. Our executive compensation program is designed to be consistent with the Federal Reserve principles for safety and soundness.

The following policies and procedures help discourage imprudent risk taking:

Annual risk goals: Our Chief Risk Officer reviews business unit and NEO goals in relation to the Company’s risk appetite and sets certain annual risk goals for the Company at the beginning of each year.

Monitoring of risk: We monitor return on economic capital, credit risk metrics and performance against our risk appetite metrics, and we assign control and compliance ratings to each business unit and staff group as part of our annual assessment of performance.

Adjustment of compensation: At year-end, our Chief Risk Officer meets with the CBC and certifies that actual results were achieved with proper risk governance and oversight, and that the Company executed a broad range of programs that help to avoid imprudent risk taking. Larger losses are analyzed as part of the year-end process, and the Chief Risk Officer issues a year-end memorandum describing changes in the risk profile of the Company. If deemed necessary, risk adjustments are made to company and business unit annual incentive funding levels as well as to individual incentive awards.

Cross-section of metrics: We assess performance against a cross-section of key metrics over multiple time frames to discourage undue focus on short-term results or on any one metric and to reinforce risk balancing in performance measurement. Our incentive plans are not overly leveraged (i.e., there is a cap on the maximum payout).

Deferred incentive compensation: At least 50 percent of incentive compensation for executive officers is deferred for at least three years with performance-based vesting.

Performance-based vesting: PRSUs are used in place of time-based RSUs for the Company’s senior employees.

Stock ownership and holding requirements: We have robust stock ownership requirements for our CEO and other NEOs (as described above)

Clawback Policies

We seek to recover, to the extent practicable, performance-based compensation from any executive officer and certain other members of senior management in the following circumstances:

The payment of such compensation was based on the achievement of financial results that were subsequently the subject of a financial restatement; and

In the view of our Board, the employee engaged in fraud or misconduct that caused or partially caused the need for the restatement, and a smaller amount would have been paid to the employee based upon the restated financial results.

In addition, the cash portion of the CEO’s AIA is subject to clawback at the discretion of the CBC if the Company does not achieve acceptable performance in the following year. Our clawback policy is significantly more robust than required by law.

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The Company also maintains a detrimental conduct policy covering approximately 500 employees, including the CEO. This policy requires an executive to forfeit unvested awards and to repay the proceeds from some or all of his or her compensation issued under our incentive compensation program in the event the executive engages in conduct that is detrimental to the Company.

Hedging and Pledging Restrictions

Executive officers may not hedge company shares (e.g., no short sales, forwards, options or collars) or pledge shares.

Perquisites

We provide limited perquisites to support our objective to attract and retain talent for key positions, as well as to address security concerns. We also provide an annual cash perquisite allowance of $35,000 for executive officers of the Company.

Award Timing

Consistent with past practice, annual cycle LTIA awards were granted to NEOs in January after the regularly scheduled January CBC meeting. Our off-cycle LTIA awards (for new hires, mid-year promotions, retention grants, etc.) are granted on pre-established grant dates.

Role of the Independent Compensation Consultant

The CBC endeavors to follow good governance practices and is composed solely of independent directors. The CBC is responsible for our executive officer compensation decisions. It has retained Semler Brossy Consulting Group (Semler Brossy) as its independent compensation consultant. It held four meetings over the course of 2017, all of which ended with executive sessions without management present. During 2017, Semler Brossy attended CBC meetings, including executive sessions, and provided compensation advice independent of the Company’s management. The CBC assessed the independence of Semler Brossy pursuant to SEC rules and concluded that their work did not raise any conflicts of interest.

Post-Employment Compensation

Retirement Benefits

NEOs receive retirement benefits through the following plans:

Retirement Savings Plan (RSP): A qualified 401(k) savings plan available to all eligible employees.
Retirement Restoration Plan (RRP): A nonqualified savings plan that makes up for 401(k) benefits that would otherwise be lost as a result of U.S. tax limits.
Deferred Compensation: Allows NEOs to defer a portion of their base salary and AIA payout. The annual deferral limit is equal to one times their base salary.

All retirement benefits are more fully described under Retirement Plan Benefits on page 81 and under Nonqualified Deferred Compensation on pages 82 and 83.

Severance: Senior Executive Severance Policy

The CBC must pre-approve severance for an executive officer. Under the Senior Executive Severance Policy, NEOs who are terminated involuntarily (except in cases of misconduct) receive cash severance benefits equal to two years of base salary and AIA and also receive a pro rata AIA payment for the year of termination. LTIAs continue to vest and certain benefits continue during the severance period, unless the executive begins full-time, outside employment. U.S.-based NEOs who are age 65 or older are not eligible for severance unless the CBC specifically approves severance for such an executive.

To protect shareholders and our business model, executives are required to comply with non-compete, non-solicitation, confidentiality and non-denigration provisions during the period of time they are receiving severance. Our uniform severance policy helps to avoid special treatment and provides an important enforcement mechanism for these protections.

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Change in Control Benefits

The Company provides change in control benefits to encourage executives to consider the best interests of shareholders by stabilizing any concerns about their own personal financial well-being in the face of a potential CIC of the Company. Detailed information is provided under Potential Payments Upon Termination or Change in Control (CIC) on pages 84-87.

A Commitment to Diversity and Inclusion

Our commitment to diversity and inclusivity is one of our Company’s greatest strengths. It is vital to our success that we recruit and retain the best talent and that our workforce is representative of the customers and communities we serve. Likewise, we believe the best way to serve our customers is by providing best-in-class support to the employees who serve them. We make it welcoming, purposeful and rewarding to be part of the American Express organization. That means fostering a diverse and inclusive culture and enabling our employees to achieve their professional and personal goals. Our high employee satisfaction ratings and employer of choice awards show that we are making a positive impact for our people. Today, we continue to evolve and grow our diversity and inclusion programs and initiatives. When we recruit and develop talent at all levels, we seek passionate, driven people from all walks of life, and hold senior executives accountable for ensuring diversity through the inclusion of diversity goals in our business scorecard. We believe including specific and measurable metrics that address retention and diversity in our pay program is key to the short- and long-term success of the Company. We aspire to develop a diverse talent pool and to foster an inclusive workplace culture where differences are valued and expressed freely—and all our employees have the support they need to take risks, learn and collaborate. As such, we continue to evolve and enhance our diversity and inclusion focus and leading best practices.

Report of the Compensation and Benefits Committee

The CBC has reviewed and discussed the CD&A with management. Based on such review and discussion, it recommended to the Board, and the Board approved, the inclusion of the CD&A in this proxy statement.

Compensation and Benefits Committee*

Robert D. Walter, Chairman
Ursula M. Burns
Peter Chernin
Samuel J. Palmisano
Ronald A. Williams

(*Reflects 2017 CBC membership)

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Note Regarding 2017 TDC Decisions and Summary Compensation Table

It is important to recognize that the way the CBC presents TDC is different from the SEC-required disclosure in the Summary Compensation Table and is not a substitute for the information in that table.

In summary, the main difference between the Summary Compensation Table and TDC is the timing of disclosure related to equity awards. The chart below details this methodology.

Summary Compensation Table* TDC

Concept and Purpose

Uses SEC methodology, which includes a mix of both cash compensation actually earned during 2017 and estimated value of equity granted in 2017

SEC-mandated compensation disclosure

Includes only pay that is awarded based on 2017 performance—reflects the CBC’s January 2018 compensation decisions based on 2017 performance

Calculated as a sum of:

Base Salary

Base salary paid in 2017
Base salary set for 2018

Annual bonus

Annual cash bonus earned for 2017 performance
Total annual bonus awarded for 2017 performance—regardless of form of payment (i.e., cash or equity)

Portfolio Grant award

Value of PG earned for 2015- 2017 (if paid in cash)
Value of PG 2018-2020 granted for performance year ending 2017

Equity awards

Accounting value of equity awards (Stock Options and RSUs) granted in 2017
Grant date value of equity awards (Stock Options and RSUs) granted in January 2018 for performance year ending 2017
* The SEC rules also require disclosure of additional elements of compensation beyond the ones mentioned in this table, such as future pay opportunities for pension benefits, above market interest rate on deferred compensation and all other compensation.

Glossary of Key Compensation Terms

NEOs

Named Executive Officers: refers collectively to the Executive Officers referenced herein and includes Messrs. Chenault, Squeri, Campbell and Buckminster and Ms. Seeger

TDC Total Direct Compensation: the sum of base salary, Annual Incentive Awards (AIA) and Long-Term Incentive Awards (LTIA)
AIA

Annual Incentive Award: the Company’s annual incentive program that measures Shareholder, Customer, Employee and long-term signpost goals over a one-year period

LTIA

Long-Term Incentive Award: the combination of cash- and equity-based long-term incentives that align with long-term business objectives and shareholder value creation; includes Portfolio Grants (PG), Restricted Stock Units (RSUs) and Stock Options (SOs)

PG

Portfolio Grant: cash-denominated, performance-based long-term incentive that measures financial performance and the achievement of strategic milestones, all measured over a three-year period

RSUs

Restricted Stock Units: share-denominated long-term incentives. PRSUs refer to performance-based restricted stock units that are conditioned on ROE performance over a three-year period (also subject to service vesting)

SOs

Stock Options: share-denominated long-term incentive that has value only if the Company’s share price appreciates above the grant price


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Summary Compensation Table

The following Summary Compensation Table summarizes the compensation of our NEOs for the year ended December 31, 2017, using the SEC-required disclosure rules. It is important to recognize that 2017 TDC determined by the CBC is different than the amounts disclosed below using the SEC-required disclosure rules. See page 73 for key differences between the Summary Compensation Table and TDC awarded by the CBC for 2017.

Name and Principal Position Year Salary Bonus(1) Stock
Awards(2)
Option
Awards(2)

Non-equity
 Incentive Plan
Compensation(3)

Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings(4)
All Other
Compensation(5)
Total
K.I. Chenault 2017 $ 2,038,462 $ 0 $ 12,209,937 $ 3,200,989          $ 0          $ 498,949             $ 663,036 $ 18,611,373
Chairman and 2016 $ 2,000,000 $ 0 $ 12,809,527 $ 1,573,150 $ 0 $ 518,804 $ 562,158 $ 17,463,639
Chief Executive Officer* 2015 $ 2,000,000 $ 0 $ 16,339,045 $ 2,563,088 $ 0 $ 300,525 $ 785,433 $ 21,988,091
S.J. Squeri 2017 $ 1,375,962 $ 7,000,000 $ 3,765,808 $ 5,384,176 $ 1,046,750 $ 60,075 $ 520,893 $ 19,153,664
Vice Chairman* 2016 $ 1,350,000 $ 5,100,000 $ 3,763,308 $ 886,690 $ 795,000 $ 50,006 $ 386,262 $ 12,331,266
2015 $ 1,301,154 $ 2,750,000 $ 8,563,819 $ 811,088 $ 771,150 $ 0 $ 359,965 $ 14,557,176
J.C. Campbell 2017 $ 1,019,231 $ 4,600,000 $ 2,024,562 $ 475,352 $ 1,185,000 $ 0 $ 312,122 $ 9,616,267
Executive Vice President 2016 $ 1,000,000 $ 3,925,000 $ 2,023,235 $ 476,703 $ 900,000 $ 0 $ 230,988 $ 8,555,926
and Chief Financial 2015 $ 1,000,000 $ 4,850,000 $ 2,147,224 $ 752,688 $ 873,000 $ 0 $ 222,403 $ 9,845,315
Officer
D.E. Buckminster 2017 $ 754,808 $ 3,350,000 $ 1,619,681 $ 2,630,276 $ 711,000 $ 46,428 $ 321,717 $ 9,433,910
President, Global** 2016 $ 700,000 $ 2,200,000 $ 1,294,890 $ 305,095 $ 540,000 $ 37,529 $ 246,427 $ 5,323,941
Consumer Services 2015 $ 616,538 $ 1,650,000 $ 1,092,146 $ 382,841 $ 523,800 $ 0 $ 194,096 $ 4,459,421
L.E. Seeger 2017 $ 815,385 $ 5,034,000 $ 1,619,681 $ 380,289 $ 869,000 $ 0 $ 265,679 $ 8,984,034
Executive Vice President 2016 $ 800,000 $ 4,733,000 $ 1,618,599 $ 381,365 $ 660,000 $ 0 $ 200,109 $ 8,393,073
and General Counsel 2015 $ 800,000 $ 3,858,000 $ 1,480,824 $ 519,088 $ 640,200 $ 0 $ 157,631 $ 7,455,743

*

Mr. Squeri succeeded Mr. Chenault as Chairman and CEO on February 1, 2018.

**

Mr. Buckminster was appointed Group President, Global Consumer Services on February 1, 2018.

(1)

The amounts in this column reflect AIA cash payments for annual performance. For Mr. Chenault, his entire 2017 AIA of $8,281,250 was paid in the form of RSUs granted in January 2018 that are deferred for one year. For Ms. Seeger, the 2017 amount also includes installments of a sign-on cash payment of $2,634,000 made in accordance with her employment offer letter to replace a portion of long-term incentives forfeited at her prior employer as a result of joining the Company.

(2)

Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718, Compensation – Stock Compensation. Additional details on accounting for stock-based compensation can be found in Note 11, Stock Plans, to our Consolidated Financial Statements contained in our 2017 Annual Report on Form 10-K.

A significant portion of Mr. Chenault’s TDC is delivered in the form of equity that is deferred. The table below provides detail on the RSUs included in the stock awards column:

          2017           2016           2015
Annual RSU award granted in January for performance in the
prior year***
$ 6,109,000 $ 5,851,825 $ 7,311,824
Portion of AIA awarded in RSUs in January for performance in the
prior year***
$ 3,025,959 $ 3,974,964 $ 3,599,893
Payment of PG award in the form of RSUs. Amount in column reflects
the RSUs granted in January with respect to PG awards whose
performance periods ended the prior year
$ 3,074,978 $ 2,982,738 $ 5,427,328
TOTAL $ 12,209,937 $ 12,809,527 $ 16,339,045
***

For example, 2017 amount shows RSUs awarded in January 2017 for 2016 performance.


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With respect to the RSU awards for Mr. Chenault, the amount in the Stock Awards column of the Summary Compensation Table reflects the aggregate value of all of the awards set forth in the table above, including the target value of his annual RSU award, assuming that target performance is achieved against the average ROE target during the three-year performance period ($6,109,000). For all other executives, the amount in the Stock Awards column of the Summary Compensation Table reflects only the target value of their annual RSU awards, assuming that target performance is achieved against the average ROE target during the three-year performance period.

For each executive’s annual PRSUs award, the maximum value as of the grant date, assuming the highest level of performance will be achieved, is as follows: Messrs. Chenault ($7,636,250), Squeri ($4,707,202), Campbell ($2,530,645) and Buckminster ($2,024,562) and Ms. Seeger ($2,024,562).

Option Awards include performance-vesting options granted on October 31, 2017 to Mr. Squeri with a grant date fair value of $4,500,000 in connection with his promotion and to Mr. Buckminster, with a grant date fair value of $2,250,000, in connection with the CEO transition.

(3)

The 2017 amounts in this column reflect the cash payment made to the NEO in respect of a payout under the PG 2015-17 awards granted in 2015, in accordance with award terms. For Mr. Chenault, the 2017 amount excludes payment of $4,048,750 which was made in the form of RSUs granted in January 2018 that are deferred for one year.

(4)

The amounts in this column reflect the actuarial increase or decrease in the present value of the NEOs’ benefits under all defined benefit pension plans established by the Company. The amounts reflect the impact of changes in interest rates and the NEOs’ changes in age during the year which are used to measure the present value. When interest rates fall, as they did during 2017, the present value of this benefit will increase, but this increase does not represent any additional benefit to the executive.

(5)

See the All Other Compensation Table below for additional information.

All Other Compensation

Name Year Perquisites
and
Other
Personal
Benefits(1)
Tax Payments/
Reimbursements(2)
Company
Contributions
to Defined
Contribution
Plans(3)

Executive Life
Insurance(4)

Total
K.I. Chenault       2017           $ 298,717 $ N/A              $ 356,731                    $ 7,588       $ 663,036
2016 $ 285,310 $ N/A $ 270,000 $ 6,848 $ 562,158
2015 $ 259,358 $ N/A $ 520,000 $ 6,075 $ 785,433
S.J. Squeri 2017 $ 101,831 $ N/A $ 415,709 $ 3,353 $ 520,893
2016 $ 79,472 $ N/A $ 303,750 $ 3,040 $ 386,262
2015 $ 82,973 $ N/A $ 274,249 $ 2,743 $ 359,965
J.C. Campbell 2017 $ 72,170 $ N/A $ 232,212 $ 7,740 $ 312,122
2016 $ 73,248 $ N/A $ 150,000 $ 7,740 $ 230,988
2015 $ 74,663 $ N/A $ 140,000 $ 7,740 $ 222,403
D.E. Buckminster 2017 $ 96,944 $ N/A $ 221,858 $ 2,915 $ 321,717
2016 $ 86,303 $ N/A $ 157,500 $ 2,624 $ 246,427
2015 $ 60,909 $ N/A $ 130,778 $ 2,409 $ 194,096
L.E. Seeger 2017 $ 72,170 $ N/A $ 185,769 $ 7,740 $ 265,679
2016 $ 72,369 $ N/A $ 120,000 $ 7,740 $ 200,109
2015 $ 43,645 $ N/A $ 109,846 $ 4,140 $ 157,631

(1)

See the Perquisites and Other Personal Benefits table below for additional information regarding the components of this column.

(2)

For Mr. Buckminster, who was on international assignment in London until June 2014, trailing tax equalization payments or reimbursements have been made and recorded following the termination of his assignment in 2014 in order to address any foreign tax obligations relating to income received, awarded or earned during his assignment. In 2017, Mr. Buckminster received a net foreign tax credit of approximately $78,714 relating to payments made by the Company on his behalf in previous years. This amount was returned to the Company and is not reflected in the table above.

(3)

This column reflects Company contributions to the NEOs’ accounts under the Company’s RSP and the RRP-RSP Related Account. See pages 81-83 for a further description of the RSP and the RRP-RSP Related Account.

(4)

This column reflects income imputed to the NEO under the Company’s executive life insurance program.


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Perquisites and Other Personal Benefits

Name        Year        Local and
Other
Travel
Benefits(1)
       Personal
Use of
Company
Aircraft(2)
       Flexible
Perquisite
Allowance(3)
       Home
Security
System(4)
       Security
During
Personal
Trips(4)
       International
Assignment(5)
       Other
Benefits(6)
       Total
K.I. Chenault 2017      $ 21,391    $ 184,555          $ 35,000    $ 30,319 $ 19,510 N/A      $ 7,942 $ 298,717
2016 $ 19,731 $ 152,538 $ 35,000 $ 48,715 $ 15,111 N/A $ 14,215 $ 285,310
2015 $ 13,089 $ 145,611 $ 35,000 $ 30,570 $ 23,234 N/A $ 11,854 $ 259,358
S.J. Squeri 2017 $ 30,000 $ 20,354 $ 35,000 N/A N/A N/A $ 16,477 $ 101,831
2016 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 14,472 $ 79,472
2015 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 17,973 $ 82,973
J.C. Campbell 2017 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 7,170 $ 72,170
2016 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 8,248 $ 73,248
2015 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 9,663 $ 74,663
D.E. Buckminster 2017 $ 30,000 $ 0 $ 35,000 N/A N/A            $ 31,225 $ 719 $ 96,944
2016 $ 30,000 $ 0 $ 35,000 N/A N/A $ 19,608 $ 1,695 $ 86,303
2015 $ 0 $ 0 $ 35,000 N/A N/A $ 24,021 $ 1,888 $ 60,909
L.E. Seeger 2017 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 7,170 $ 72,170
2016 $ 30,000 $ 0 $ 35,000 N/A N/A N/A $ 7,369 $ 72,369
2015 $ 0 $ 0 $ 35,000 N/A N/A N/A $ 8,645 $ 43,645
(1)

For 2017, local and other travel benefits include local travel allowance for NEOs other than Mr. Chenault. For Mr. Chenault, the Company’s security policy requires him to use for all travel purposes, to the maximum extent practicable, the automobiles and aircraft provided by the Company to executives for business travel. The calculation of the incremental cost for personal use of Company-owned automobiles and aircraft is based on the variable cost to the Company of operating the automobiles and aircraft and includes, among other things, fuel costs, maintenance costs and, in the case of aircraft, the cost of trip-related crew hotels and meals, and landing and ground handling fees. The calculation does not include fixed costs that would have been incurred regardless of whether there was any personal use of the automobiles or aircraft (e.g., purchase costs and depreciation, driver and flight crew fixed salaries and benefits, insurance costs, etc.).

(2)

Effective January 1, 2010, the Company required reimbursement by Mr. Chenault for incremental costs in excess of $200,000 per year for travel on Company aircraft that is deemed by the SEC to be personal use, including use to travel to outside board meetings. Mr. Squeri’s 2017 amounts are in connection with personal travel in accordance with appropriate approvals.

(3)

The amount in this column reflects the perquisite allowance paid to the NEOs.

(4)

The amounts in these columns include costs associated with home security and security during personal trips for Mr. Chenault.

(5)

The amounts shown include expatriate services in connection with Mr. Buckminster’s repatriation to the United States, due to his international assignments. The services provided to Mr. Buckminster are provided to all employees on international assignment.

(6)

This column reflects the aggregate amount of other perquisites and personal benefits provided, none of which individually exceeded the greater of $25,000 or 10 percent of the total amount of all perquisites and other personal benefits reported for the NEO. These other benefits consist of office parking, reimbursement for certain information technology services, and, on occasion, use of the Company’s tickets for sporting and entertainment events for personal rather than business purposes. We incur no incremental cost for the provision of such additional benefits.


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Grants of Plan-Based Awards

The following table provides information on Incentive awards granted to each of our NEOs in 2017 under the 2016 Incentive Compensation Plan.

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(2)
Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
Exercise
Price or
Base Price
of Option
Grant
Date Fair
Value of
Stock
and
Option
Name Award
Type(1)
Grant
Date
Approval
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Awards
($/Sh)(3)
Awards
($)(4)
K.I. Chenault    PG 2017-19    1/24/2017    1/23/2017    $0    $ 7,664,000    $ 9,580,000               
SO 1/24/2017 1/23/2017 176,072         $ 77.43 $ 3,200,989
RSU 1/24/2017 1/23/2017 39,713 $ 3,074,978
PRSU 1/24/2017 1/23/2017 0 117,977 147,471 $ 9,134,959
S.J. Squeri AIA 1/23/2017 $0 $ 4,500,000 $ 8,437,500
PG 2017-19 1/24/2017 1/23/2017 $0 $ 1,500,000 $ 1,875,000
SO 1/24/2017 1/23/2017 48,635 $ 77.43 $ 884,184
PSO 10/31/2017 10/18/2017 234,619 $ 95.52 $ 4,499,992
PRSU 1/24/2017 1/23/2017 0 48,635 60,793 $ 3,765,808
J.C. Campbell AIA 1/23/2017 $0 $ 3,500,000 $ 6,562,500
PG 2017-19 1/24/2017 1/23/2017 $0 $ 1,500,000 $ 1,875,000
SO 1/24/2017 1/23/2017 26,147 $ 77.43 $ 475,352
PRSU 1/24/2017 1/23/2017 0 26,147 32,683 $ 2,024,562
D.E. Buckminster AIA 1/23/2017 $0 $ 2,200,000 $ 4,125,000
PG 2017-19 1/24/2017 1/23/2017 $0 $ 1,300,000 $ 1,625,000
SO 1/24/2017 1/23/2017 20,918 $ 77.43 $ 380,289
PSO 10/31/2017 10/18/2017 117,309 $ 95.52 $ 2,249,987
PRSU 1/24/2017 1/23/2017 0 20,918 26,147 $ 1,619,681
L.E. Seeger AIA 1/23/2017 $0 $ 1,600,000 $ 3,000,000
PG 2017-19 1/24/2017 1/23/2017 $0 $ 1,100,000 $ 1,375,000
SO 1/24/2017 1/23/2017 20,918 $ 77.43 $ 380,289
PRSU 1/24/2017 1/23/2017 0 20,918 26,147 $ 1,619,681
(1)

AIA. The AIA is an annual cash-denominated performance-based component of executive compensation to recognize Company performance as well as exceptional individual performance. Performance is measured against measurable goals reviewed and approved by the CBC. The actual amounts paid are based on our 2017 performance reported above in the Bonus column in the Summary Compensation Table. Additional information regarding how the payout amounts for these awards are determined is on pages 63-66.

PG. These awards link compensation to our financial and strategic performance over a three-year period. The Company discloses the specific performance metric goals as well as the performance outcomes of each PG award at the end of the performance period so that shareholders can assess the appropriateness thereof. The Company does not disclose the goals at the time of grant due to competitive sensitivity. The potential award payout is determined based on a table of possible performance and earned payout levels, including a cap on the overall earned payout level. The actual payout could be higher or lower than the notional target value based on performance.

SO. The SOs have a ten-year term and 100 percent of these shares become exercisable on the third anniversary of the grant date, subject to the Company achieving positive Cumulative Net Income over the vesting period.

PSO. These PSOs will have a term of seven years and vesting subject to (i) a stock price goal of 30 percent above the closing price on the grant date, which must be met for a period of 20 consecutive trading days during the five-year period beginning on the grant date, (ii) a financial goal of positive cumulative GAAP Net Income for the three-year period and (iii) a three-year service condition. Fifty percent of the net after-tax shares received upon exercise must be held for at least 12 months.


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2018 Proxy Statement     Compensation Discussion and Analysis

PRSU. Except as specified otherwise, RSU awards will be granted with performance-based awards vesting on the third anniversary of the grant date in an amount determined based on performance against the average ROE target during the three-year performance period.

The 39,713 RSUs granted to Mr. Chenault are in connection with his PG 2014-16 payout and will vest on the first anniversary of the grant date subject to the performance hurdle of positive Cumulative Net Income over the vesting period. One half of these RSUs are payable in cash and the other half are payable in shares (net shares must be held until one year after retirement). Dividend equivalents on RSUs will accrue but will not be paid unless and until the underlying shares vest.

(2)

The amounts shown under these columns represent potential aggregate threshold, target and maximum payouts for achievement of threshold, target and maximum performance levels for awards granted. The “threshold” payout is zero, since it represents the level of performance for which no award would be earned. The “target” payout is equal to 100 percent of the NEO’s grant value and represents the amount that may be paid for achieving the target level of performance across all performance goals. The “maximum” payout (125 percent for PG and 187.5 percent for AIA) represents the amount that may be paid for achieving or exceeding the maximum level of performance across all performance goals, subject to an overall cap on the payout amount.

(3)

The exercise price of the SOs is the closing price of the Company’s common shares on the NYSE on the grant date.

(4)

Represents the aggregate grant date fair value of the awards pursuant to FASB ASC Topic 718, Compensation – Stock Compensation. Additional details on accounting assumptions for stock-based compensation are referenced in footnote 2 of the Summary Compensation Table.

All awards are subject to continuous employment with the Company (unless specified otherwise), except awards may vest upon death, disability termination, retirement or, in certain circumstances, in connection with a change in control of the Company, as described in the Potential Payments Upon Termination or CIC Table.


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Compensation Discussion and Analysis     2018 Proxy Statement

Outstanding Equity Awards at Fiscal Year-End 2017

The following table shows the number of shares outstanding for our NEOs on December 31, 2017.