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COMPENSATION OF DIRECTORS

Fees and Expenses
In 1999, we paid each non-employee Director compensation for Board service as follows:

  • An annual retainer of $64,000, which we reduce by $16,000 if the Director does not attend at least 75 percent of our Board meetings and meetings of the committees on which the Director serves.
  • An annual retainer of $10,000 for a Director who is a committee chairperson.
  • Customary reimbursement of expenses for attending Board, committee and shareholder meetings.

We do not pay Directors who are also our employees any additional compensation for serving as a Director.

Stock Plans
We have two stock-related plans for our non-employee Directors that link a portion of Directors’ compensation to our share price performance. These plans are the Directors’ Stock Option Plan and the Directors’ Stock Plan.

Directors’ Stock Option Plan. We make an annual 1,000 share stock option grant to each non-employee Director on the date of the Annual Meeting of Shareholders. In 1999 we made this grant to each of our 12 non-employee Directors elected on that day, 11 of whom are also current nominees. The 1999 grant has these features:

  • The exercise price is $134.72 per share, which was the market price of our common shares on the date we made the grant.
  • Directors may exercise the option for up to ten years.
  • Directors may exercise one-third of the grant after one year, two-thirds after two years and the full grant after three years.
  • Directors may transfer the option to family members so long as the Director remains responsible for the payment of taxes when the transferee exercises the option.

We are asking shareholders to vote on a proposed amendment to this plan that would change the number of stock option shares we grant annually to reflect stock splits and other capital adjustments. Please see Item 3.

Directors’ Stock Plan. We make an annual grant of 200 common shares to each non-employee Director for service in the prior year. In two instances we will grant fewer than 200 shares: (1) we will grant 150 shares to any Director who attends less than 75 percent of all Board and committee meetings in the prior year and (2) we will grant 100 shares to any Director who joined the Board after July 1 of the prior year. In 1999 we granted 200 common shares to each nonemployee Director.

If the shareholders approve the proposed amendment to our Restated Certificate of Incorporation and the 3-for-1 stock split becomes effective, the Board expects to change this annual grant to 600 shares, except the grant will be changed to 450 shares for any Director who attends less than 75 percent of all Board and committee meetings in the prior year and 300 shares for any Director who joins the Board after July 1 of the prior year.

Deferred Compensation Plan
Non-employee Directors may elect to defer the receipt of their cash compensation until a later date. Participating Directors may invest their deferred amounts in two ways: (1) in a cash account that earns interest based on our return on equity or (2) in a stock account that we value according to the performance of our common shares, including reinvested dividends. On page 10 we show the number of common share equivalent units we have credited thus far to the eight Directors who participate in this plan.

Retirement Benefits
We offer no retirement benefits to non-employee Directors who were elected after March 31, 1996. However, we pay a retirement benefit to Directors who (1) began their Board service on or before March 31, 1996, (2) have served on our Board for at least five years and (3) have never been our employees. The retirement benefit consists of a payment of $30,000 per year for each year a Director served on the Board. We will not make payments past a Director’s death. We may provide retirement benefits to Directors who do not qualify under this plan, but have never done so and have no plans to change this practice. Nine of the current Directors are eligible to receive retirement benefits.

Insurance
We provide our non-employee Directors with group term life insurance coverage of $50,000 and accidental death and dismemberment insurance coverage of $300,000. Directors may purchase $50,000 of additional group term life insurance. In 1999 six Directors purchased this additional insurance.

Directors’ Charitable Award Program
One way that we promote charitable giving is through our Directors’ Charitable Award Program. Under this program we purchase life insurance on the lives of participating Directors and advisors to the Board. We will receive a $1,000,000 benefit upon the death of a Director and $500,000 upon the death of an advisor. We expect to donate one-half of the benefit to the American Express Foundation for charitable purposes and one-half directly to the charitable organization that the Director or advisor recommends. The program does not provide any financial benefit to Directors or advisors and we bear only nominal cost in running it. In addition, our donation of the death benefits to the Foundation helps meet the Foundation’s funding needs.

Other Arrangements
Mr. Duncan served as Director and Chairman of the Audit Committee of American Express Bank Ltd. until April 1999. In 1999 the Bank paid him a retainer of $12,500, $2,000 for attending board meetings, a retainer of $2,500 for serving as chairman of the Bank’s Audit Committee and $1,500 for attending the Bank’s Audit Committee meetings.

Mr. Akerson served as Director and member of the Audit Committee of American Express Bank Ltd. from May 1999 until January 2000. For this service the Bank paid Mr. Akerson a retainer of $18,750, $4,000 for attending board meetings, a retainer of $2,625 for serving as a member of the Bank’s Audit Committee and $2,250 for attending the Bank’s Audit Committee meetings.

Mr. Jordan was a senior partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P. until January 2000. At that time he became of counsel to the firm. The firm provided legal services to us in 1999 and is providing services to us in 2000 at customary rates.

In 1999 we introduced the American Express® Centurion Card and issued a Card to each non-employee Director. We waived the $1,000 annual fee for the first year.

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