Robinson to Quit Top American Express Post
In a dramatic display of the growing power of disgruntled shareholders, American Express Chairman James D. Robinson III said Saturday that he will resign the top post at the giant financial services company.
Robinson’s announcement capped a remarkable week in which the heads of two other giant corporations said they were stepping down in response to concerns by shareholders and directors, who increasingly are demanding that top executives take bolder steps to make their companies more competitive and profitable. IBM’s John F. Akers announced his resignation as chief executive, as did Paul E. Lego, the head of Westinghouse Electric Corp.
The resignations followed other major departures late last year, including those of General Motors’ Chairman Robert Stempel and Digital Equipment Co.’s president and founder, Kenneth Olsen.
Robinson’s decision was the latest development in an unfolding boardroom drama over who should run American Express, which has been hurt by competition in the charge card market and by ill-fated efforts to expand into new businesses. Just last week Robinson defeated an attempt by several board members to oust him.
The decision to step down was an apparent response to Wall Street’s clear negative reaction after American Express’ board voted Monday to let Robinson stay on as chairman and appointed his candidate, Harvey Golub, to succeed him as chief executive officer.
Robinson, 57, said in a statement that he chose to resign, effective Feb. 22, because the new arrangement had created “ambiguity” about who was running the company, and he wanted it to be clear that Golub, 53, was in charge.
“In this environment, I think I drew an unnecessary amount of criticism,” Robinson told the Associated Press on Saturday. “But perception is reality, and I decided to deal with it.”
Corporate analysts and American Express executives said Saturday that, in effect, shareholders had overruled the company’s board. Big institutional shareholders voiced anger and disappointment that the board chose not to bring in a new chairman to address the company’s problems.
Shares of the company stock fell sharply last week before closing up 87 cents on Friday to 23 1/4 on the New York Stock Exchange. In 1992, the company earned $461 million, a 45% drop from the previous year.
“Jim Robinson won the formal vote (by the board), but it was an unpopular decision and the owners rejected it,” said John Keefe, a consultant and analyst of financial services companies.
The board is to meet Monday “to discuss the election of a non-executive chairman,” a company statement said.
Michael Useem, a professor at the University of Pennsylvania’s Wharton School of Business and an authority on corporate restructuring, said the housecleaning of executive suites is a sign that institutional shareholders have developed clout in imposing their will on corporate boards that formerly were reluctant to act against management even as their companies’ fortunes deteriorated. “Institutional investors have been gathering momentum for five or six years now, and they’ve really hit their stride,” he said.
On Thursday, representatives of big American Express stockholders, such as Alliance Capital Management, J. P. Morgan Investment Management and Putnam Management, reportedly met with Golub and stated bluntly that they were disappointed that Robinson was remaining on as chairman.
Earlier in the week, two board members who had led the drive to remove Robinson said they were leaving the board as a result of the failed attempt. Raleigh Warner Jr., retired chairman of Mobil Corp., resigned from the board, and Joseph H. Williams said he would not stand for reelection in April.
In addition, in apparent retaliation against former American Express Chairman Howard L. Clark Sr., who had opposed him, Robinson had announced that Clark’s son, Howard L. Clark Jr., was being moved aside as head of American Express’ Shearson Lehman Bros. unit and that Robinson himself was taking direct control.
The exact sequence of events that led to Robinson’s announcement was not clear, and American Express spokesman Lawrence A. Armour said he did not know if Robinson had been consulted first by other directors. But the company said Robinson called Golub Friday night to tell him of the decision, and Armour said the resignation “was at Jim’s own initiative; he wasn’t pushed.”
An executive close to Robinson, who spoke on condition that he not be identified, said: “The stock was weak all week long. There were reports in the press all week long that were less than favorable. At some point Jim said to himself and the others around him, ‘Look, what we thought was going to work isn’t working. Let’s end it.’ ”
Robinson was with American Express for 22 years and has been chairman and chief executive since 1977. He presided over the company during a time of rapid growth, but his vision of a financial services supermarket was largely a failure. The company ended up divesting itself of a large interest in Fireman’s Fund Insurance, and Robinson’s acquisition of Shearson is widely viewed as a mistake.
Robinson, a scion of a prominent Atlanta banking family, worked hard to establish himself as a kind of senior statesman of corporate America. He is co-chairman of the Business Roundtable, an organization of business leaders.
Board members had moved four months ago to get Robinson to step down and began a search for a successor. But he engineered a counter-coup that enabled him to stay on as chairman while Golub, the company’s president, became chief executive.
Analysts said it appeared likely that the board would keep him on and attempt to find a outsider to be chairman. There were reports that a search committee had considered British Airways CEO Sir Colin Marshall, but neither American Express nor Marshall have confirmed this.
Allan Sloan’s column in today’s Business section was written before Robinson’s announcement Saturday.
Troubled Times
Some pivotal events in the recent history of American Express Co., which announced the resignation of Chairman James D. Robinson III:
APRIL, 1990--Investment brokerage unit reports a $915-million quarterly loss, the worst in Wall Street history. A vast reorganization is undertaken.
APRIL, 1991--100 Boston restaurateurs, exasperated with costly fees for accepting the American Express card, organize a “Boston Fee Party” revolt. The insurrection spreads to other merchants who took the card during the 1980s but are bolting because of a broad economic slowdown.
OCTOBER, 1991--Firm reveals financial irregularities and losses at its Optima credit card business. Optima reorganization costs $265 million and the unit lays off 1,700 employees.
APRIL, 1992--American Express says it will slash annual operating costs at the card business by up to $1 billion within three years.
OCTOBER, 1992--The firm reports a $205-million third-quarter loss.
DECEMBER, 1992--Firm discloses that Robinson, 57, told the board in September he intends to retire before turning 60.
JAN. 25, 1993--Firm says Robinson will remain American Express chairman after a successful countercoup against dissident board members. President Harvey Golub takes over as chief executive officer. American Express says earnings plunged 45% in 1992.
JAN. 28--About a dozen institutional shareholders owning 20% of the common stock meet with Golub to express displeasure with Robinson’s retention. The stock falls nearly 13% in the week.
Source: Associated Press
