Amex Board Picks Golub as Chief Executive, Robinson to Remain as Chairman
NEW YORK (AP) _ Ending weeks of turmoil, struggling American Express Co. said Monday that James D. Robinson III would remain indefinitely as chairman while relinquishing day-to-day management after 15 years atop the financial services conglomerate.
American Express promoted Harvey Golub to chief executive, succeeding Robinson in that post, in an apparent compromise by a board divided over appointing the blunt-spoken Golub to lead a company with an image crafted largely on status.
The company also said Robinson would take over its Shearson Lehman Brothers unit with a likely goal of spinning off the brokerage as a separate publicly held company.
In perhaps the day’s most surprising move, Howard L. Clark Jr., Shearson’s former chairman and chief executive, was demoted to vice chairman of the brokerage. Clark’s father is a former American Express chairman who opposed Golub’s ascension.
The company did not specify how long Robinson, 57, would remain as American Express chairman or what plans it would draft to replace him.
Golub, 53, will continue as chairman and chief executive of American Express’ flagship Travel Related Services unit, which he has revived since being promoted by Robinson 17 months ago. His appointment as chief executive of American Express is effective Feb. 1.
Reflecting its troubles, American Express announced meager earnings of $82 million, or 15 cents per share, in the fourth quarter, a 65 percent drop from a year earlier. For the full year, it made $461 million, or 88 cents per share, a 42 percent decline.
The 19-member board, long viewed as loyal to Robinson, had been split over whether to promote his hand-picked choice or pick an outsider. Instead, it adopted a position that temporarily resolves the leadership question and quells the concerns of Wall Street analysts who had favored Golub.
Critically, it keeps Golub at the helm of Travel Related Services - which includes the familiar green, gold and platinum cards, and the travelers check business - as it seeks to recover amid increasing competition and a string of problems.
″Better to have a less dramatic outcome than one that would really upset the company and undo some of the very constructive changes that they have put in place,″ said John Keefe, an independent brokerage industry consultant.
But the stock market - which last month hailed the announcement that Robinson was retiring - reacted unfavorably to news he would stay. American Express closed down 50 cents at $25.12 1/2 on the New York Stock Exchange. It had been up $1 before the announcement.
″Harvey Golub was the unanimous and enthusiastic choice, individually and collectively, of our search committee and the full board,″ Richard Furlaud, a former Bristol-Meyers-Squibb Co. president who was on the five-member search panel, said in a statement.
″We believe that Harvey combines outstanding leadership skills, a long record of achievement, understanding of the company’s strategic needs and ability to execute a vision for the business,″ he said.
But failing to appoint Golub to both positions keeps alive questions about his suitability for the top job. The appointment amounts to less than a full endorsement, leaving open the possibility he could be promoted when Robinson finally does retire.
The succession controversy began last month when it was disclosed that Robinson had told the board in September he planned to retire before age 60 and the board asked him to begin an immediate search.
Robinson pushed Golub, but encountered opposition among several board members, who felt him unfit for the job despite his record at Travel Related Services and as head of the company’s IDS Financial Services unit from 1984 until July 1991. The announcement came as American Express tries to recover from a rash of problems - weak earnings, restructurings at TRS and Shearson Lehman, increased competition in the card business, credit losses at its Optima credit card, anger among card merchants and a confused advertising strategy.
Golub has shaken up management and begun turning around TRS, which took a $342 million restructuring charge in the third quarter to pay for 4,800 job cuts. Operating earnings rose at TRS for 1992.
Golub initiated a $1 billion cost-cutting campaign at TRS. He also cut fees for some American Express card merchants, allowed the card to be used at Kmart stores, and lowered interest rates for good Optima customers.
Robinson views Shearson as unfinished business. He will move his main office to a Shearson floor in American Express’ lower Manhattan tower, and his priority - considered inevitable since American Express spent close to $1 billion in 1990 to restructure the firm - will be to make it fit enough to stand alone.
Golub cuts a different figure than the Atlanta-bred socialite Robinson. Burly and chain-smoking, the Brooklyn-born Golub flunked out of Cornell before completing a degree at New York University.
He joined American Express in 1983 from the consulting firm McKinsey & Co. In 1984, he was made chairman of Minneapolis-based IDS Financial Services, which became one of American Express’ best performing units.
But in modest Minnesota, Golub was criticized for building a 15,000-square- foot house with a full-sized movie screen and a four-car garage with car wash. The excess also raised eyebrows among some American Express executives in New York.
Also, IDS was sued in 1989 by 32 employees for age discrimination. A lawyer blamed Golub personally for firing older managers in favor of younger ones. American Express denied discrimination but settled the case for $35 million.
In 1990, Robinson made Golub an American Express vice chairman. In July 1991, he was promoted to president reporting directly to Robinson. Three months later, Golub was named chairman and chief executive of TRS.