2 Executives to Run American Express Jointly : Finance: President Harvey Golub joins CEO James D. Robinson III in an “office of the chairman.”
American Express Co., beset by strategic mistakes in recent years, moved toward a power-sharing arrangement in its highest office Monday with the creation of a two-person “office of the chairman.”
The office will consist of James D. Robinson III, 55, as chairman and chief executive, and Harvey Golub, 52, as president. Golub, who became vice chairman in September, will continue to report to Robinson, who is relinquishing the president’s post.
The management change came as the company reported a 20% drop in second-quarter earnings. The decline reflected a $37-million loss at the Shearson Lehman Bros. unit, largely from the writeoff of Shearson’s stake in First Capital Holdings, the Los Angeles-based life insurer.
American Express officials said the change did not reduce the authority of Robinson, who has been under criticism for a series of costly missteps. Analysts said the move was aimed at reassuring investors that major corporate decisions would now be reviewed by at least two executives.
The shake-up means that all senior corporate executives and the heads of all American Express’ main subsidiaries will report to Robinson and Golub jointly. Previously, they reported solely to Robinson.
Golub, a former management consultant with McKinsey & Co., has been highly regarded at American Express since he became chief executive of the IDS Financial Services unit in 1984. That unit, which sells investment products and gives advice to middle-income clients, has had consistently strong earnings growth. Since he was elected to American Express’ board, he has taken on several important companywide tasks, including oversight of troubled Shearson.
Golub will continue as chairman of IDS. Jeffrey E. Stiefler, the former IDS president, will succeed Golub as the unit’s chief executive.
In an interview, Golub said the change was formal recognition of an arrangement that had developed in recent months. It was not a diminution of Robinson’s power, he said. “Jim is and will continue to be CEO,” he said. “That’s a responsibility that can’t be delegated.”
Analysts, however, said the move ensures that at least two people will review major corporate decisions. “It gives the market confidence that a couple of people are reviewing all the major decisions,” said a Wall Street analyst who asked not to be identified.
The company has suffered from several strategic blunders, including the ill-fated acquisition of the E. F. Hutton brokerage in 1988 and difficulty turning Shearson around after recent huge losses.
On Monday, American Express reported that its income dropped to $256 million in the second quarter ended June 30 from $320 million in the same period last year. Revenue increased to $6.36 billion from $6.06 billion in the 1990 second quarter.
Most of the decline in profit was because of the company’s previously announced decision to take a $144-million writeoff on Shearson’s stake in First Capital, whose main unit was seized by the state insurance commissioner because of heavy losses from junk bonds.
Shearson’s also took a charge related to scaling back the international banking activities of its Boston Co. unit. Shearson had a profit from operations--such as securities trading, underwriting and investment banking--of $93 million.
