American Express Co. (NYSE: AXP) announced it will lay off 5,400 people, due in part to a slowdown in its travel business. The firm will take a fourth-quarter charge. As far as the public can tell, management did not share any of the pain. CEO Kenneth Chenault made $23 million in 2011. There were no indications as the restructuring was announced that he did less well financially in 2012, or would do less well in 2013.
Net income for the fourth quarter was $637 million, or $0.56 per share, which was a disappointment. Chenault, ever an optimist, put a brave face on:
Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth.
One of Amex’s most critical problems, it admitted, is the migration of travel planning to mobile devices. Chenault should have seen this coming. The trend began years ago. Amex did buy online fraud detection firm Accertify. Amex also has created partnerships with retail content sites and e-commerce operations, which include Foursquare.
None of these new initiatives have been enough to allow Amex to increase its online travel business as rapidly as it wishes — at least if its downsizing plan is taken into account.
The CEO of a public company needs to take a great deal of the blame for strategic missteps. Chenault did not acknowledge any flaws in his leadership or his ability to plan for a future in which e-commerce will rule much of the retail sales world. He and his aides missed a critical turn in the road. Essentially, 5,400 people have paid for that.
Boards of directors continue to take very little action when CEOs do something wrong, unless that something is perceived as a moral lapse, as was true with Mark Hurd of Hewlett-Packard Co. (NYSE: HPQ) and Best Buy Co. Inc.’s (NYSE: BBY) CEO Brian Dunn. Chenault is a better man than either of them. But he still has trouble running his company.