American Express Fall 2017 Investor Presentation Business, Governance & Executive Compensation Overview American Express Business Model
Assets Capabilities Relationships Trusted Brand Marketing / Sales Diverse Customers Premium Positioning Risk Management Merchants Channels Data Analytics Corporate Clients Closed Loop Data and Information Servicing Business Partners Travel Network Rewards GNS Partners Processing Infrastructure Partnering Expense Leverage
2 Progress on Strategic Plan: From Transition to Growth
We have built momentum across our diverse businesses and we seek to drive long- term growth through our priorities and financial model
Strategic Priorities Financial Growth Drivers
Accelerate Growth Businesses Revenue Growth OpEx Leverage Optimize Investments Capital Strength
Reset Cost Base EPS Growth
3 Strong Year-Over-Year Performance Across Key Financial Metrics Demonstrates Progress on Transition
AXP Worldwide Adjusted Billed Business Growth Loan Growth ($b)3 % Increase/(decrease) vs. Prior year: 10% 14% YoY Growth
8% 8% 8% 8% 7% 7% $70.2 6% $61.8
4% Q3'16 Q3'17
2% Adj. Operating Expenses ($m)4 1% 0% 0% Q3'16 Q4'16 Q1'17 Q2'17 Q3'17
-2% $2,717 4% YoY Decrease -3% -3% -4% $2,608 2 Total (FX-Adj.)1 Adjusted Total Q3'16 Q3'17
1 FX-adjusted information assumes a constant exchange rate between the periods being compared for purposes of currency translation into U.S. dollars (i.e., assumes Q3’17 foreign exchange rates apply to Q3’16 results) 2 Excludes Costco cobrand card billed business (in-store and out-of-store) and billed business on other (non-Costco cobrand) American Express cards at Costco in the U.S. 3 Total Loans reflects Card Member loans and Other loans. 4 Excludes assets impairments, restructuring and other charges. See Appendix C for a reconciliation to Operating Expenses on a GAAP basis. 4 Leadership Transition Following Thorough Succession Planning
Kenneth I. Chenault Stephen J. Squeri
› Elected Chairman and CEO in ›Appointed Chairman and CEO, effective 2001 February 2018 ›Former President/COO › Vice Chairman since 2015 ›Announced plans to retire on Oct. › Former Group President, Global Corporate 18, 2017, effective Feb. 1, 2018 Services Group; part of the AXP team for over 32 years
“It's been a great honor to lead American “Our next chapter will be about building on the Express, and I've treasured every day of my momentum we have generated, with a special focus 37-year career here. It's been a journey that on innovation, expanding our core product offerings, spanned profound changes in the world of enhancing our brand and our customer relationships business, the payments industry and the and partnering with others to stay ahead of the curve global economy.” – Ken Chenault in the evolving payments industry.” – Steve Squeri
5 World Class Board with Deep Expertise
KENNETH CHENAULT CHARLENE BARSHEFSKY JOHN BRENNAN* URSULA BURNS PETER CHERNIN RALPH DE LA VEGA* ANNE LAUVERGEON Chairman & CEO, Senior International Chairman Emeritus and Chairman and Former CEO, Founder and CEO, Chernin Former Vice Chairman, Chairman and CEO, A.L.P. American Express Company partner, WilmerHale Senior Advisor, Vanguard Xerox Corporation Entertainment AT&T Inc. SAS (2013) (2001) (2001) (2017) (2004) (2006) (2016)
ROBERT WALTER MICHAEL LEAVITT* THEODORE LEONSIS RICHARD LEVIN SAMUEL PALMISANO DANIEL VASELLA RONALD WILLIAMS Lead Independent Director Founder and Chairman, Chairman and CEO, CEO, Coursera Former Chairman, Honorary Chairman and Former Chairman and Founder, Former Chairman Leavitt Partners Monumental Sports & (2007) President and CEO, IBM Former Chairman and CEO, Aetna and CEO, Cardinal Health (2016) Entertainment (2010) (2013) CEO, Novartis AG (2007) (2002) (2012)
*3 new directors added since 2016 6 Highly Skilled and Diverse Board
Our Board is composed of experienced leaders with the right skills and business experience to provide sound judgment, critical viewpoints and guidance in an evolving environment
1 Non-Mgmt. Directors CEO Board Expertise and Key Skills 1 Average tenure: 7.5 years Core Business & Senior Management & 4 Operations Leadership 3 3 6 new directors 2 1 since 2012 Government, Legal & Balanced Tenures Balanced <1 1 - 3 4 - 6 7 - 10 10+ Digital, Mobile & Tech YEARS ON BOARD Public Policy
Financial Literacy Global Business
3 of 14 female Financial, Investment Public Company and M&A Governance 4 of 14 minorities
Diverse Board Diverse Audit & Risk Brand & Marketing 2 of 14 reside outside US
1Tenure calculation as of October 30, 2017. Effective February 1, 2017 calculation will move CEO to <1 years 7 CEO Compensation Program Supports Strategic Goals Compensation Program Overview
Base Salary 2017 CEO Target Total Direct Compensation Mix Annual Incentive
Element Plan Measurements Stock Options 7% › Shareholder › Customer Annual Cash Incentive › Strategic & Transformational › Employee Award 30% Performance RSUs Long-Term Incentive 31%
Element 3-Year Plan Measurements Features Base Salary 9% › 3-year vesting Performance RSUs › 3 year average return on equity Portfolio Grants › Payout tied to 3-year performance 23%
› Positive cumulative net income Stock Options › Vests 3 years after grant 10-year term over the vesting period
› Financial Goals Portfolio Grant • 3 Year cumulative EPS › 3-year vesting (Equity) • 3 Year Revenue 91% Performance-Based › Strategic Milestones Compensation
8 2017-2018 Board Focus Areas and Priorities
The Board values shareholder feedback and is considering a number of enhancements to reflect what we heard prior to and following our 2017 Annual Meeting
Feedback Themes 2017-2018 Focus Areas and Priorities
• New CEO target pay of $16.2 million • Quantum of CEO pay • Annual Incentive re-design to reduce discretion • Strategy and compensation program • Compensation program will be aligned with new linkage CEO strategic priorities • Metric selection rigor • Gender pay equity initiatives • Gender pay equity focus • Continued improvements to CD&A in 2018 • Lead Independent Director engagement with • Corporate responsibility and shareholders environmental and social factors • Enhanced disclosure of CSR factors in 2018 proxy
9 Commitment to Board-Level Risk Management
Our emphasis on risk management – along with solid business practices – is how we keep our promise of security, integrity and trust to our customers and other stakeholders
Risk Committee: • Oversight of our enterprise-wide risk management framework, covering key risks including individual credit, institutional credit, market, liquidity, operational, reputational, compliance, model, asset liability and strategic and business risks • Receives regular updates from the Chief Risk Officer on key risks, transactions and exposures Board of Directors: Compensation and Benefits Committee: Monitors our “tone at the top” and risk culture and oversees emerging strategic risks • Works with the Chief Risk Officer to ensure overall and business unit compensation programs appropriately balance risk with business incentives and that business performance is achieved without taking imprudent risk
Audit and Compliance Committee:
• Assists the Board in its oversight responsibilities relating to the integrity of our financial statements and financial reporting process, internal and external auditing • Reviews the effectiveness of our Corporate-wide Compliance Risk Management Program
10 The Service Effect: Corporate Responsibility at American Express
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 Priorities 2016-17 Performance Highlights
Our Service Ethos • Robust commitment to information security and privacy, including efforts to decrease risk A resilient, ethical and successful company that fulfills its of security breaches and fraud incidents concerning customer information service mission • Board monitors strategic risks, including Risk Committee to ensure strong oversight
Serving our People • 85% of employees surveyed said they would recommend AXP as a great place to work High-performing employees who are empowered to make a • Scored 100 percent on the Human Rights Campaign’s Corporate Equality Index, based difference on policies and practices that support LGBTQ inclusion for 2018
Serving our Customers and Partners • Rated as one of Most Trusted Companies for Privacy for the past 10 years Satisfied customers who reward us with their trust and loyalty, • Received highest ranking from J.D. Power in the Credit Card Satisfaction Study in and partners who share our vision for responsible business Australia, Singapore, Hong Kong; Customer satisfaction has increased 24% since 2011
Serving our Communities • Contributed $36 million with over 400 grants and support for over 6,000 organizations Communities with longevity, strengthened through service through employee gift matching
• Reduced carbon footprint by >30% since the 2011 baseline year, exceeding 2016 goal Serving our Environment • Purchased renewable energy certificates to generate 85 percent carbon-free electricity Doing our part to sustain the world’s resources for our U.S. building operations, including our major data center facilities
Source: 2016-2017 Corporate Social Responsibility Report 11 We Value Your Feedback
American Express Upcoming Agenda:
Fall engagement with investors to solicit feedback Building on multi-year program of shareholder engagement
Board and Leadership Meetings Consideration of feedback and potential governance and compensation program changes Annual AXP Investor Day Brief investors on business developments and performance that will inform compensation decisions Spring proxy engagement Update on compensation and governance programs, business and performance, and changes made American Express Annual Meeting May 7, 2018 12 Appendix A: Committed to Strong Governance and Compensation Practices
Corporate Governance Best Practices Compensation Best Practices
Strong lead independent 25% threshold for special Robust goal setting process Double-trigger change-in- director meetings to align CEO and NEO goals control provisions Regular board and Active shareholder with company strategy No employment contracts committee refreshment and engagement and Cash incentives and equity with NEOs a mix of tenures responsiveness to feedback awards subject to Non-management executive Significant share ownership recoupment and forfeiture No payment of dividends or sessions led by lead requirements for senior provisions dividend equivalents on independent director at each executives and directors RSUs granted to NEOs until regular board meeting Annual board and Significant CEO and NEO they vest Board agenda includes committee performance stock ownership multi-day strategy sessions evaluations requirements No excise tax gross-ups upon a change in control Key management and rising Ongoing board succession Prohibit executive officers talent reviewed at an annual planning from hedging company No individual change in talent review board meeting Director access to experts stock control arrangements Annual election of all and advisors, both internal directors and external Program discourages No repricing of options imprudent risk taking without shareholder Majority voting for directors 13 out of 14 directors are approval Proxy access independent
13 Appendix B: Board Has a Rigorous, Data Driven Target Setting Process CBC Closely Monitors Compensation Implementation and Outcomes
The Compensation and Benefits Committee (CBC) employs a robust goal and metric setting process focused on aligning CEO goals with company strategy
. CBC set 2016 goals in the following four areas: – Shareholder: EPS, revenue growth, ROE, revenue growth exit rate – Strategic and transformational: Merchant coverage, Card Member value proposition, lending growth initiatives – Customer: Net promoter scores and international billings growth – Employee: Talent retention, diversity and inclusion
CBC takes seriously its task to balance incentives with sound risk taking and long-term performance focus – AXP is in a highly regulated industry with regulator input considered in program design and performance evaluation CBC and Board of Directors (BOD) reviews benchmarking data to assess the competitiveness of our compensation program – We do not target a specific percentile relative to peers or make pay decisions based on market data alone. CEO and NEO performance, experience/tenure and retention are the primary drivers of pay CBC and BOD evaluate CEO and Company performance using formula-driven outcomes, pre-determined weightings; discretionary payouts based on actual measurable performance and analysis
14 Appendix C: Adjusted Operating Expenses
($ in millions)
Q3’17 Q3’16 Operating Expenses $2,763 $2,761 U.S. Loyalty Coalition and Prepaid Charges (pre-tax)* ($155) Q3’16 Restructuring Charges (pre-tax) ($44)
Adjusted Operating Expenses $2,608 $2,717 YoY% Inc/(Dec) in GAAP Operating Expenses 0% YoY% Inc/(Dec) in Adjusted Operating Expenses (4%)
† Represents salaries and employee benefits, professional services, occupancy and equipment, communications, and other, net.*Includes asset impairments and restructuring and other changes. 15