Early April 2020 presented a challenging time for many companies, and American Express (Amex) was no exception. Steve Squeri, Amex’s CEO, faced worrisome circumstances as the company experienced a 50% decline in credit card billings, the potential risk of $11.5 billion in loans and credit card debt default, and the devastating impact of Covid-related lockdowns on the travel and entertainment benefits valued by its customers.
Despite the bleak outlook, Squeri was not one to play it safe. He wanted to retain all employees, explore acquisition opportunities, and invest $1 billion in innovative rewards for cardholders stuck at home. Squeri believed in the long-term perspective, recognizing that downturns were often followed by an upswing. He understood the importance of being prepared for the rebound and not missing out on opportunities to advance.
Before taking action, Squeri reached out to Warren Buffett, Amex’s largest shareholder, to discuss the potential losses and gain his support. Squeri informed Buffett that the company might lose $4 per share and expressed his commitment to taking care of colleagues and customers for the long-term benefit of shareholders. Buffett, emphasizing the significance of customer satisfaction and brand preservation, agreed with Squeri’s approach.
Encouraged by Buffett’s endorsement, Squeri forged ahead. Amex introduced rebates on streaming and shipping fees for cardholders, boosting loyalty and encouraging customers to use their cards for online shopping and daily expenses. The company also acquired online banking platform Kabbage at a discounted price, expanding its small business division. These strategic moves, combined with the unexpected growth amid the pandemic, transformed Amex into a higher-growth company.
Prior to the pandemic, Amex aimed for 8 to 10% revenue growth. However, it achieved a remarkable 25% increase in billings as the lockdown restrictions eased. This year, with more favorable conditions, Amex projected another 15 to 17% growth by leveraging its success in attracting younger customers from the millennial and Gen Z demographics, who hold significant growth potential for the company in the long run.
Surprisingly, despite achieving record financial results, Amex’s share price faced a decline on the day of the announcement. Nevertheless, Squeri’s bold leadership has pleasantly surprised observers who previously viewed him primarily as an operations-focused executive. Despite not being the initial choice to succeed the previous CEO, Squeri’s strategic vision and operational expertise have demonstrated his ability to lead and navigate the company through challenges.
Under Squeri’s leadership, Amex’s shares have seen an increase of nearly 80%, and he received a special bonus last year, making him one of the highest-paid CEOs in the S&P 500. However, this also led to concerns among investors, with a non-binding resolution on the company’s pay plan receiving 46% opposition due to perceived misalignment of pay and performance.
Contrary to the perception of a corporate executive, Squeri sees himself as someone who comes from a less privileged background. Growing up as the son of an accountant working multiple jobs, he values treating everyone with respect, as his father did. Squeri’s rise to the top is a testament to hard work and the company’s inclusive approach. As CEO, he prioritizes open communication and listens to the concerns and aspirations of top executives within the company to inform his decision-making process.
Squeri has implemented several changes at Amex, including restructuring rewards and expanding the bonus program. The elimination of business unit ratings and the inclusion of all employees in the incentive program have shifted the focus towards individual performance and overall company results. This change has spurred motivation and a drive to enhance the company’s performance.
Squeri believes that strategic thinking has improved as executives can now concentrate on actions that yield the best outcomes for the entire organization, rather than obsessing over individual unit achievements. By aligning all efforts and working together towards common goals, Amex can maximize the potential of its business model.
Amex’s journey under Squeri’s leadership is a testament to the power of bold decision-making, customer-centricity, and inclusive leadership. By focusing on the long-term and seizing opportunities, Amex has positioned itself for growth and success in the ever-changing landscape of the credit card industry.
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