COMPENSATION OF DIRECTORS
Fees and Expenses
In 2000, 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; and
- 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 their 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 3,000-share
stock option grant to each non-employee Director on the date of the
Annual Meeting of Shareholders. In 2000 we made this grant to each of
our 11 non-employee Directors elected on that day, nine of whom are
also current nominees. The 2000 grant has these features:
- The exercise price is $48.85 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.
Directors' Stock Plan. We make an annual grant of 600 common
shares to each non-employee Director for service in the prior year. In
two instances we will grant fewer than 600 shares: (1) we will grant
450 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
300 shares to any Director who joined the Board after July 1 of the
prior year. In 2000 we granted 600 common shares to nine Directors
and 450 shares to two Directors who attended less than 75 percent of
all Board and Committee meetings.
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. Five Directors currently participate in the plan. On page 11
we show the number of common share equivalent units we have credited
thus far to the Directors who invest in the stock account.
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.
Seven 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 2000 six current Directors
purchased this additional insurance.
Directors' Charitable Award Program
One way 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. Jordan has been of counsel to the law firm of Akin, Gump,
Strauss, Hauer & Feld, L.L.P. since January 2000. The firm provided
legal services to us in 2000 and is providing services to us in 2001 at
customary rates.
