Chenault, Kenneth I. 1952–
Kenneth I. Chenault 1952–
Business executive
Green, Gold, Platinum, and More
As president of American Express (Am Ex) Consumer Card Group, USA, Kenneth I. Chenault occupies one of the most prestigious positions in the world of American business. American Express is a widely diversified company with holdings in the areas of finance, brokerage, real estate, and travel services; but its strongest and most profitable unit has always been the famous American Express charge card, and it is Kenneth Chenault’s job to see that that tradition continues into the twenty-first century. A graduate of Harvard Law School, Chenault has enjoyed a remarkably rapid ascent of the corporate ladder at American Express, where he was named president of the Consumer Card Group when only 38 years old.
Chenault was born in 1952 in Hempstead, New York, an affluent suburb of New York City. His father, Hortenius Chenault, was a dentist and his mother, Anne, a dental hygienist. From the time Kenneth was a small child, his parents encouraged him to excel in intellectual as well as athletic pursuits. As a boy, Chenault eagerly read the biographies of great men, both black and white, and he grew up with similar expectations for himself. While attending a highly regarded private school in Garden City, New York, Chenault excelled academically and was elected president of his class in high school. He then enrolled at Bowdoin College in Maine, one of the country’s finest liberal arts institutions, and from there went on to Harvard Law School, where he earned his degree in 1976.
As a recent graduate of Harvard, Chenault had his choice of many employment opportunities and at first followed the expected path by joining the New York corporate law firm of Rogers & Wells. It was not long, however, before he was tempted by the theory and practice of business, and in the late 1970s Chenault accepted a position at the Boston-based business consulting firm of Bain and Company. There he was involved in the research and design of business strategies for some of the largest corporations in the country, thus acquiring an extensive knowledge of all aspects of the business world while also making important contacts with business executives. During his tenure at Bain and Company, Chenault apparently decided that he was more interested in the business of business than in the abstract complexities of business law, and in 1981, when he was offered a job at American Express, he accepted the challenge and began a new career at the company’s headquarters in New York City.
At a Glance…
Born in 1952 in Hempstead, NY; son of Hortenius (a dentist) and Anne (a dental hygenist) Chenault; married; wife’s name, Kathryn (a lawyer and director of foundation programs for the United Negro College Fund); children: Kenneth, Jr. Education: Bowdoin College, B.A., c. 1973; Harvard Law School, J.D., 1976.
Attorney, Rogers & Wells, New York City; consultant, Bain & Company, Boston, MA; American Express Company, New York City, 1981—, vice-president of marketing for merchandise services division, 1983, general manager of merchandise services division and senior vice-president of American Express Travel-Related Services Company, 1984-87, executive vice-president and general manager for American Express Platinum/Gold division, 1988, president of American Express Consumer Card Group, USA, 1989—.
Addresses: Office —Office of the President, American Express Consumer Card Group, USA, American Express Tower C, New York, NY 10285-0001.
American Express has been a leading financial and travel services business for more than a hundred years, with a well-established reputation as one of the classiest and most profitable companies in the world. From its origin as an express freight service for banks and other dealers in valuables, American Express evolved into the world’s travel companion, providing traveler’s checks and international banking services for its customers around the globe.
Am Ex’s 1958 introduction of the famous “green card,” a charge card for the well-heeled traveler, greatly extended the reach of the company’s business and set the scene for later forays into a range of financial services. When Kenneth Chenault took a position with American Express in 1981, it had just completed the most significant expansion in corporate history with the acquisition of the New York brokerage house of Shearson Loeb Rhoades, Inc. Chenault joined American Express at a more favorable moment in the company’s history, as the decade of the 1980s would bring tremendous growth in every department of Am Ex’s constantly widening sphere of business.
The Merchandiser
Chenault was originally hired by the merchandise services division of American Express, at the time a relatively obscure part of the Am Ex empire. Merchandise services was in the business of selling such exclusive goods as leather luggage, computers, and gold watches to Am Ex members via direct mail solicitation. Though Chenault had no hands-on experience in merchandising, he quickly made his presence felt, and in 1983 he was named vice-president of marketing for the division.
The following year, at the age of 34, Chenault assumed the role of general manager of merchandise services and senior vice-president of that division’s corporate umbrella, American Express Travel-Related Services Company. As general manager, Chenault saw his chief responsibilities as twofold: to sell goods efficiently and profitably to American Express members and to protect the unusually high degree of trust that members had come to enjoy with Am Ex.
American Express had a unique status in American marketing, its name and logo associated almost without exception with the highest quality of goods and services. The company represented itself as something of an exclusive club, and its members expected to be treated as such—“membership has its privileges” was for many years the company’s advertising slogan. Chenault therefore tried to ensure that the merchandise offered to members with their monthly bill was of luxurious quality and that customers received prompt, reliable, and courteous service. The American Express name was really the company’s most salable commodity, and Chenault capitalized on that by moving the range of merchandise further upscale and emphasizing the relationship of cardmember to club, rather than merely presenting a lot of goods for purchase. Under Chenault’s direction, the merchandise services division made sure its customers were aware of the uniqueness of American Express compared to other mail order companies.
Sales at the merchandise division jumped 20 to 25 percent annually during the mid-1980s, reaching approximately $400 million in 1986. The U.S. economy was generally good, and Chenault’s team of marketers had found the proper niche for their products, dramatically improving results at the bottom line. In recognition of his leadership, American Express promoted Chenault in 1987 to general manager and executive vice-president of the Platinum Card/Gold Card division of the Travel-Related Services Company.
In this role, Chenault was in charge of over 5,000 employees providing services to some four million wealthy holders of gold and platinum American Express cards, which entitled their owners to a number of exclusive financial and travel services in addition to those granted to all Am Ex members. His promotion to head of the Gold Card division reflected Chenault’s success as a marketer of the American Express upscale appeal, but his tenure there would be brief. Still in his mid-thirties, polished, and personable, Chenault was clearly a man on the rise.
Green, Gold, Platinum, and More
In 1989 Chenault was named president of American Express Consumer Card Group, USA, thereby becoming, in the words of American Express chief executive officer (CEO) J.D. Robinson III, “the quarterback of the corporation, responsible for all card operations in North America.” In his new position, Chenault assumed control of the mainstay of the company’s Travel-Related Services division, which is the oldest and most profitable segment of the Am Ex family of companies. Travel-Related Services generates approximately 40 percent of the parent company’s $25 billion in sales, and the cream of the division’s business is “in the cards,” as American Express executives like to say.
Chenault thus found himself in a position of enormous responsibility at a time of rapid change in American Express’s role in the credit/charge card market. Ever since the introduction of its “green card” in 1958 to compete with Diner’s Club, Am Ex had always remained at a safe distance from the furious battles waged by credit card companies such as Visa and Mastercard. American Express provided a charge card—requiring that items charged be paid for in full at the end of every month—that was widely used by business people for their travel and entertainment. Visa and Mastercard, on the other hand, were credit card companies, offering a line of credit to a much wider range of customers who could choose to delay payment of their bills by agreeing to pay a high rate of interest on the outstanding balance.
For several decades, American Express was the card of choice among wealthy travelers and business people, although it could be used only at a select number of airlines, restaurants, hotels, and retail stores, all of whom paid American Express roughly three percent of the amounts charged for the privilege of displaying the prestigious American Express logo. Participating merchants also had the assurance of knowing that their American Express customer was a member, and hence of a certain financial stability.
During the 1980s, however, American Express’s dominance of the high-end card market was challenged by the credit card companies, which made inroads among retailers and merchants by offering services at a much lower fee than American Express. As the world’s largest distributor of credit cards, Visa could justifiably point out to merchants that nearly every holder of an American Express card also owned a Visa card. The customer did not care which card was used, but the merchant stood to gain more than one percent of sales by taking the Visa over the American Express card.
By implementing such a strategy, the credit card companies had chipped away at the loyalty of American Express members and merchants during the 1980s, and it was into this difficult situation that Kenneth Chenault was thrust when he took over the reins of American Express Consumer Card Group, USA, in 1989. Of the several possible responses to the credit card challenge, American Express had already made a momentous decision before Chenault arrived on the scene. In 1988 the company issued its own all-purpose credit card, known as the Optima card, while continuing to rely on the cachet of the American Express charge cards. Chenault and his fellow American Express executives believed that Optima would perfectly complement the traditional green and gold cards; accepted at all the major retail outlets, Optima would stop the encroachment of the credit card companies upon American Express’s clients. In addition, because only American Express members could obtain the Optima card, the company anticipated a low ratio of default among its customers.
Faced Challenges in the 1990s
Initial results of the Optima card were not promising, however, and it was not long before Chenault and his staff found themselves at the center of a potentially disastrous situation. As the economy soured in 1990 and 1991, Chenault discovered that his Optima cardholders were proving a bad bet: their default rate was twice as high as expected, resulting in a particularly poor financial performance by the card division in the second half of 1991. Major financial publications such as Business Week and Fortune played up the poor results, which included an apparent attempt on the part of employees at Chenault’s Jacksonville, Florida, branch office to cover up the full extent of their losses. Wall Street analysts were not pleased by the sudden revelation of trouble in the card division, and the entire debacle tended to raise once more the question of American Express’s position in a charge/credit market bursting with new competitors and services.
Adding to Chenault’s headache was a minor rebellion on the part of Boston-area restaurateurs, who, with encouragement from Visa, had banded together and declared that they would no longer accept the more costly American Express card. This “Boston tea party,” as it was called, also generated the sort of adverse publicity American Express had already experienced.
In response, Chenault, hoping to pull the Am Ex Consumer Card Group through its early 1990s crisis, promised a new era of customer and merchant support at American Express, with special attention paid to the company’s wealthiest and highest-spending clientele. He also agreed to selective cuts in merchant fees but hoped to retain most of his merchants by emphasizing the traditional advantages of dealing with American Express’s wealthy membership.
Sources
Black Enterprise, December 1985; February 1988; February 1989; August 1989; March 1990.
Business Week, October 9, 1989; July 1, 1991; October 21, 1991.
Fortune, March 2, 1987; November 18, 1991.
Jet, June 15, 1992.
—Jonathan Martin
Chenault, Kenneth I. 1952–
Kenneth I. Chenault 1952–
Business executive
Green, Gold, Platinum, and More
WTC Attack Proved Leadership Ability
As CEO of American Express (Am Ex), Kenneth I. Chenault occupies one of the most prestigious positions in the world of American business. American Express is a widely diversified company with holdings in the areas of finance, brokerage, real estate, and travel services; but its strongest and most profitable unit has always been the famous American Express charge card, and it is Kenneth Chenault’s job to see the tradition continue in the twenty-first century. A graduate of Harvard Law School, Chenault has enjoyed a remarkably rapid ascent of the corporate ladder at American Express, where he was named president of the Consumer Card Group when only 38 years old. His rise to CEO was a historic one. Many projected him as the first African American to head a Fortune 500 company. Though he was not the first, his placement as CEO was still considered a major accomplishment.
Chenault was born in 1952 in Hempstead, New York, an affluent suburb of New York City. His father, Hortenius Chenault, was a dentist and his mother, Anne, a dental hygienist. From the time Kenneth was a small child, his parents encouraged him to excel in intellectual as well as athletic pursuits. As a boy, Chenault eagerly read the biographies of great men, both black and white, and he grew up with similar expectations for himself. While attending a highly regarded private school in Garden City, New York, Chenault excelled academically and was elected president of his class in high school. He then enrolled at Bowdoin College in Maine, one of the country’s finest liberal arts institutions, and from there went on to Harvard Law School, where he earned his degree in 1976.
As a recent graduate of Harvard, Chenault had his choice of many employment opportunities and at first followed the expected path by joining the New York corporate law firm of Rogers & Wells. It was not long, however, before he was tempted by the theory and practice of business, and in the late 1970s Chenault accepted a position at the Boston-based business consulting firm of Bain and Company. There he was involved in the research and design of business strategies for some of the largest corporations in the country, thus acquiring an extensive knowledge of all aspects of the business world while also making important contacts with business executives. During his tenure at Bain and Company, Chenault apparently decided that he was more interested in the business of
At a Glance…
Born in 1952 in Hempstead, NY; son of Hortenius (a dentist) and Anne (a dental hygenist) Chenault; married; wife’s name, Kathryn; children: Kenneth, Jr. Education: Bowdoin College, B.A., c. 1973; Harvard Law School, J.D., 1976.
Career: Rogers & Wells, New York City; consultant, Bain & Company, Boston, MA, attorney; American Express Company, New York City, 1981–, vice-president of marketing for merchandise services division, 1983, general manager of merchandise services division and senior vice-president of American Express Travel-Related Services Company, 1984-87, executive vice-president and general manager for American Express Platinum/Gold division, 1988, president of American Express Consumer Card Group, USA, 1989-93, vice chairman, 1993-95, president/COO, 1997-01, CEO/chairman, 2001–.
Memberships: IBM, board member.
Awards: Jackie Robinson Foundation, Robie Award for Achievement in Industry, 1996; Black Enterprise Magazine, BE Corporate Executive of the Year, 1999; Catalyst Award (American Express), 2001; Fortune Magazine, One of Fifty Most Powerful African-American Executives in America, 2001.
Address: Office —American Express Consumer Card Group, USA, American Express Tower C, New York, NY 10285-0001
business than in the abstract complexities of business law, and in 1981, when he was offered a job at American Express, he accepted the challenge and began a new career at the company’s headquarters in New York City.
American Express has been a leading financial and travel services business for more than a hundred years, with a well-established reputation as one of the classiest and most profitable companies in the world. From its origin as an express freight service for banks and other dealers in valuables, American Express evolved into the world’s travel companion, providing travelers checks and international banking services for its customers around the globe.
Am Ex’s 1958 introduction of the famous “green card,” a charge card for the well-heeled traveler, greatly extended the reach of the company’s business and set the scene for later forays into a range of financial services. When Kenneth Chenault took a position with American Express in 1981, it had just completed the most significant expansion in corporate history with the acquisition of the New York brokerage house of Shearson Loeb Rhoades, Inc. Chenault joined American Express at a more favorable moment in the company’s history, as the decade of the 1980s would bring tremendous growth in every department of Am Ex’s constantly widening sphere of business.
The Merchandiser
Chenault was originally hired by the merchandise services division of American Express, at the time a relatively obscure part of the Am Ex empire. Merchandise services was in the business of selling such exclusive goods as leather luggage, computers, and gold watches to Am Ex members via direct mail solicitation. Though Chenauit had no hands-on experience in merchandising, he quickly made his presence felt, and in 1983 he was named vice-president of marketing for the division.
The following year, at the age of 34, Chenauit assumed the role of general manager of merchandise services and senior vice-president of that division’s corporate umbrella, American Express Travel-Related Services Company. As general manager, Chenauit saw his chief responsibilities as twofold: to sell goods efficiently and profitably to American Express members and to protect the unusually high degree of trust that members had come to enjoy with Am Ex.
American Express had a unique status in American marketing, its name and logo associated almost without exception with the highest quality of goods and services. The company represented itself as something of an exclusive club, and its members expected to be treated as such—“membership has its privileges” was for many years the company’s advertising slogan. Chenauit therefore tried to ensure that the merchandise offered to members with their monthly bill was of luxurious quality and that customers received prompt, reliable, and courteous service. The American Express name was really the company’s most salable commodity, and Chenauit capitalized on that by moving the range of merchandise further upscale and emphasizing the relationship of cardmember to club, rather than merely presenting a lot of goods for purchase. Under Chenault’s direction, the merchandise services division made sure its customers were aware of the uniqueness of American Express compared to other mail order companies.
Sales at the merchandise division jumped 20 to 25 percent annually during the mid-1980s, reaching approximately $400 million in 1986. The U.S. economy was generally good, and Chenault’s team of marketers had found the proper niche for their products, dramatically improving results at the bottom line. In recognition of his leadership, American Express promoted Chenault in 1987 to general manager and executive vice-president of the Platinum Card/Gold Card division of the Travel-Related Services Company.
In this role, Chenault was in charge of over 5,000 employees providing services to some four million wealthy holders of gold and platinum American Express cards, which entitled their owners to a number of exclusive financial and travel services in addition to those granted to all Am Ex members. His promotion to head of the Gold Card division reflected Chenault’s success as a marketer of the American Express upscale appeal, but his tenure there would be brief.
Green, Gold, Platinum, and More
In 1989 Chenault was named president of American Express Consumer Card Group, USA, thereby becoming, in the words of American Express chief executive officer (CEO) J.D. Robinson III, “the quarterback of the corporation, responsible for all card operations in North America.” In his new position, Chenault assumed control of the mainstay of the company’s Travel-Related Services division, which is the oldest and most profitable segment of the Am Ex family of companies. Travel-Related Services generates approximately forty percent of the parent company’s $25 billion in sales, and the cream of the division’s business is “in the cards,” as American Express executives like to say.
Chenault thus found himself in a position of enormous responsibility at a time of rapid change in American Express’s role in the credit/charge card market. Ever since the introduction of its “green card” in 1958 to compete with Diner’s Club, Am Ex had always remained at a safe distance from the furious battles waged by credit card companies such as Visa and Mastercard. American Express provided a charge card—requiring that items charged be paid for in full at the end of every month—that was widely used by business people for their travel and entertainment. Visa and Mastercard, on the other hand, were credit card companies, offering a line of credit to a much wider range of customers who could choose to delay payment of their bills by agreeing to pay a high rate of interest on the outstanding balance.
For several decades, American Express was the card of choice among wealthy travelers and business people, although it could be used only at a select number of airlines, restaurants, hotels, and retail stores, all of whom paid American Express roughly three percent of the amounts charged for the privilege of displaying the prestigious American Express logo. Participating merchants also had the assurance of knowing that their American Express customer was a member, and hence of a certain financial stability.
During the 1980s, however, American Express’s dominance of the high-end card market was challenged by the credit card companies, which made inroads among retailers and merchants by offering services at a much lower fee than American Express. As the world’s largest distributor of credit cards, Visa could justifiably point out to merchants that nearly every holder of an American Express card also owned a Visa card. The customer did not care which card was used, but the merchant stood to gain more than one percent of sales by taking the Visa over the American Express card.
By implementing such a strategy, the credit card companies had chipped away at the loyalty of American Express members and merchants during the 1980s, and it was into this difficult situation that Kenneth Chenault was thrust when he took over the reins of American Express Consumer Card Group, USA, in 1989. Of the several possible responses to the credit card challenge, American Express had already made a momentous decision before Chenault arrived on the scene. In 1988 the company issued its own all-purpose credit card, known as the Optima card, while continuing to rely on the cachet of the American Express charge cards. Chenault and his fellow American Express executives believed that Optima would perfectly complement the traditional green and gold cards; accepted at all the major retail outlets, Optima would stop the encroachment of the credit card companies upon American Express’s clients. In addition, because only American Express members could obtain the Optima card, the company anticipated a low ratio of default among its customers.
Faced Challenges in the 1990s
Initial results of the Optima card were not promising, however, and it was not long before Chenault and his staff found themselves at the center of a potentially disastrous situation. As the economy soured in 1990 and 1991, Chenault discovered that his Optima cardholders were proving a bad bet: their default rate was twice as high as expected, resulting in a particularly poor financial performance by the card division in the second half of 1991. Major financial publications such as Business Week and Fortune played up the poor results, which included an apparent attempt on the part of employees at Chenault’s Jacksonville, Florida, branch office to cover up the full extent of their losses. Wall Street analysts were not pleased by the sudden revelation of trouble in the card division, and the entire debacle tended to raise once more the question of American Express’s position in a charge/credit market bursting with new competitors and services.
Adding to Chenault’s headache was a minor rebellion on the part of Boston-area restaurateurs, who, with encouragement from Visa, had banded together and declared that they would no longer accept the more costly American Express card. This “Boston Fee Party,” as it was called, also generated the sort of adverse publicity American Express had already experienced. In response, Chenault, hoping to pull the Am Ex Consumer Card Group through its early 1990s crisis, promised a new era of customer and merchant support at American Express, with special attention paid to the company’s wealthiest and highest-spending clientele. He also agreed to selective cuts in merchant fees. It was a start, but soon Am Ex’s board provided the opportunity of a lifetime.
In February of 1993 Am Ex forced out James Robinson III as CEO and replaced him with Harvey Golub. While most of upper management in the previous era resisted change, Golub welcomed it. Chenault blossomed under his leadership. In 1995 Am Ex signed Wal-Mart and more consumers signed up for an Am Ex card.
Moved Up and Named Successor
Chenault was also promoted to vice chairman in 1995. Two years later, he was named president and COO. This achievement meant more time in the public eye. Many clamored to learn more about Chenault. Most would revel in the attention, but Chenault was reluctant. Chenault, an avid Knicks fan, traded in his front row seats at Madison Square Garden for a less visible spot. He still devoted much time to his family, despite the workload increase.
Chenault oversaw the creation of the Blue card, as well as continued to compete with Visa and Mastercard for consumers. The Membership Rewards was a hit with consumers. With many successes, no one was surprised when Golub announced that Chenault would take over as CEO when he retired. “Ken was the only senior executive who had the courage to define the problem, admit there was a problem, and offer a possible solution,” Golub stated in Fortune. Many applauded this feat by Chenault. Though many in the African-American community speculated that he would become the first African-American CEO of a major U.S. corporation, Franklin Raines of Fannie Mae, received that honor. But it ushered in a new era, and Chenault became part of a growing list of top-level black executives.
When Golub stepped down in 2001, the economy had slowed and was experiencing a major upheaval. Chenault soon had to prove to everyone he could handle the $25 billion company. In order to continue to stay in the top three, Am Ex began budget overhauls, provided on-line services, and continued to create new products, including Private Payments and the Black card. It also expanded financial services to its international cardholders. The company also restructured its four business lines. In the midst of all these changes, Chenault was appointed as chairman, only four months after becoming CEO.
WTC Attack Proved Leadership Ability
In the summer of 2001, he twice reported losses for the company and announced thousands of layoffs. But no one was prepared for the tragedy that occurred on September 11, 2001, after terrorists attacked the World Trade Center in New York. Chenault, who was out of town, upon hearing of the attack, contacted security at the office, which was across the street from the Twin Towers, and had them evacuate the building immediately. His number one concerns were employee safety and customer service. While the building was evacuated, according to PR Week, Am Ex’s customer service helped more than 500,000 stranded cardholders get home. The company even did so much as charter planes and busses to help people reach their destinations. Am Ex also waived some fees and extended credit lines to help its customers.
Chenault called each of his senior level executives to make sure they were okay and to conduct an emergency meeting. On September 20th, he organized a meeting of 5,000 Am Ex employees to address concerns. According to PR Week, his compassion and leadership skills “drew praise from many quarters.” Chenault announced that the company would donate one million dollars to the families of the 11 Am Ex employees who died. He and a group of corporate leaders met with President George W. Bush to discuss the next step.
Though the travel industry was hit hard in the wake of the attacks, Chenault has been the glue that held the company together. Though Am Ex had to move its corporate headquarters, and many employees—including Chenault—were relocated, many were able to face the uncertain times thanks to the CEO. Chenault stated in Money, “We’ve got to face reality, but we can’t get mired down in reality.” The company was able to move back into its headquarters in the World Financial Center in May of 2002.
Chenault accepted the Catalyst Award on behalf of American Express in April of 2001. He was named in Fortune Magazine as one of the fifty most powerful African-American executives in America. Many continue to watch Kenneth Chenault, not only as he strives to keep American Express on top, but as he conducts business at a level that many deemed impossible for an African American to attain.
Sources
American Banker, January 27, 1995; November 20, 2000.
Black Enterprise, December 1985; February 1988; February 1989; August 1989; March 1990; August 1998; September 1999; February 2001.
Business Week, October 9, 1989; July 1, 1991; October 21, 1991; October 29, 2001.
Cardweek, August 2, 2002.
Directors & Boards, Winter 1999.
Ebony, February 2002.
Forbes, December 1, 1997.
Fortune, March 2, 1987; November 18, 1991; January 22, 2001.
Future Banker, January-February 2001.
Jet, June 15, 1992; April 1, 1996; April 23, 2001.
Money, October 1, 2001.
Newsweek, January 28, 2002.
PR Week, November 26, 2001.
—Jonathan Martin and Ashyia N. Henderson
Chenault, Kenneth I. 1951–
Kenneth I. Chenault
1951–
Chairman and chief executive officer, American Express Company
Nationality: American.
Born: June 2, 1951, in New York, New York.
Education: Bowdoin College, BA, 1973; Harvard University Law School, JD, 1976.
Family: Son of Hortenius Chenault (dentist) and Anne Quick (dental hygienist); married Kathryn Cassell (nonpracticing attorney); children: two.
Career: Rogers & Wells, 1977–1979, attorney; Bain & Company, 1979–1981, management consultant; American Express Company, 1981–1983, director of strategic planning; American Express Travel Related Services Company, 1981–1996, vice president, then senior vice president; 1986–1988, executive vice president of platinum/gold card; 1988–1989, executive vice president of personal-card division; 1990–1993, president of consumer-card and financial-services group; 1993–1995, president; American Express Company, 1995–1997, vice chairman; 1997–2000, president and COO; 2001–, chairman and CEO.
Address: American Express Company, World Financial Center, 200 Vesey Street, 50th Floor, New York, New York 10281-1009; http://www.americanexpress.com.
■ One of just four African American CEOs of Fortune 500 companies in 2004, Kenneth I. Chenault was a leader by example and an executive who focused on performance day in, day out. As the head of American Express Company (AMEX) he reenergized his company's brand, increased its market share, and won back many of the merchants who had abandoned the firm because of its high fees. He inspired fierce loyalty in his employees, boosting morale in the aftermath of the September 11, 2001, terrorist attacks. Chenault was designated to succeed the outgoing CEO in 1999 and officially took over the role in January 2001.
With 2003 sales of $25.9 billion American Express was a prominent financial-services firm and the world's number-one
travel agency. It issued traveler's checks, published magazines—such as Food & Wine and Travel & Leisure —and provided financial-advisory services. The company had four units: Global Corporate Services, Global Financial Services, Global Establishment Services and Traveler's Cheques, and U.S. Consumer and Small Business Services. On the Internet AMEX offered online banking and mortgage and brokerage services. Warren Buffett's Berkshire Hathaway owned about 11 percent of the company. Key competitors included Carlson Wagonlit, JTB, and Visa.
BRAINS BUT LITTLE AMBITION AS A YOUNG MAN
Chenault's immense success in corporate America could not have been predicted based on his performance early in life. As a high-school student in a middle-class white community he received a slew of Cs—except in history class, where he typically earned As. His parents knew that he was extremely intelligent but worried about whether he had the focus to maximize his potential. They were certainly good role models: Chenault's father graduated first in his class at Howard University's Dental School, and his mother graduated at the top of her class at Howard's School of Dental Hygiene. While he had an incessant desire to learn, Chenault conceded in Ebony magazine with respect to his poor performance in school, "I'm sure it was frustrating for them that I was not applying myself" (July 1997).
Chenault eventually received crucial mentoring from Peter Curran, the head of Waldorf High School—a private school in Garden City, New York—who encouraged the wayward student to apply himself. When Chenault graduated, he did so with numerous honors; he had been class president, an honor student, and the captain of the basketball, soccer, and track teams. He enrolled in Springfield College in Massachusetts, which had offered him a sports scholarship, but craved a more academic experience and thus ended up at Bowdoin College in Maine.
MOTIVATED TO MAKE A DIFFERENCE
At Bowdoin, Chenault realized that he wanted to pursue a profession that would enable him to help other African Americans. He debated the merits of a corporate career with fellow African American students—there were 23 at Bowdoin at the time, as compared with the 950 white students—who warned of a lifestyle that might ultimately force him to abandon his convictions. Chenault disagreed, believing it to be possible for an African American to succeed without selling out. During these often-heated discussions, Chenault displayed his aptitude for debate. Rasuli Lewis, a fellow Bowdoin student who remained a friend, told Ebony, "His style was to come in more the middle of the road, to say let's consider both sides here, and to look at it from the point of fact rather than emotion" (July 1997).
Chenault had the ability to elicit respect from African American and white students alike. Geoffrey Canada, another college friend, told Fortune, "This was a time when people wanted you to choose sides; he sat with whomever he wanted. What was remarkable was that he could do that and still remain in the mainstream of both worlds. Other people would end up being shunned by one group or the other" (January 22, 2001).
LANDING A COVETED JOB WITHOUT AN MBA
After graduating from Bowdoin and later from Harvard Law School, Chenault spent two years in corporate law at Rogers & Wells and two more years at Bain & Company as a management consultant. W. Mitt Romney, the son of former governor of Michigan who had attended Harvard Law School with Chenault and gone on to Bain, recruited Chenault to the firm. Romney told Ebony, "I'll take full credit for hiring Ken. Although Ken lacked an MBA, he was a natural fit for the business world. He was able to process a lot of conflict and frenzy and still be able to cut through the confusion and arrive at very powerful conclusions and recommendations and then see them through to their implementation" (July 1997).
BOOSTING AMEX'S BUSINESS AND HIS STOCK
Recruited by the legendary Lou Gerstner in 1981, Chenault moved to American Express to become a director of Strategic Planning in Travel Related Services. In early 1983 he joined the company's merchandise-services unit, which sold items such as luggage tags and clocks to cardholders through direct mailings and catalogs. Gerstner and other AMEX executives actually discouraged Chenault from joining the unit, which lacked the platform and visibility of other divisions.
Chenault saw the move from an entirely different perspective, however: if he could turn around the struggling division, he thought, people would notice. Instead of luggage tags and clocks Chenault invested in bigger-ticket items such as electronics and home furnishings. He formed partnerships with Panasonic and Sharp, which were eager to expand the distribution channels for their recently released video recorders. In just three years the division's sales skyrocketed from $100 million to $700 million. Tom Flood, who worked under Chenault from 1983 to 1986, remarked in Fortune, "The business grew so quickly, and he had made such a quick impact, that his stock really rose after that. It put him on the map" (January 22, 2001).
TURNING AROUND AMEX
By the early 1990s Chenault was overseeing most of the company's travel-related services. It was a challenging period; the economy was weakened by a recession, the company's card business was losing customers to Visa and MasterCard, and merchants began protesting the high fees that they were being forced to pay: AMEX charged a fee of 4 percent of every transaction, while Visa charged less than half that amount. Due to the excessive fees many merchants—including a group of Boston restaurants whose collective decision was tagged as the "Boston Fee Party" by local papers—eventually refused to accept the American Express card. Chenault commented in Black Enterprise, "The focus in the early 1990s was frankly one of survival; we were falling off a cliff. But you can't stand still and say the objective is to survive in the long term. You have to say that the objective is to win" (September 30, 1999).
As president of the domestic consumer-card division Chenault was instrumental in turning around the charge-card business. His many accomplishments included expanding the company's customer base beyond the affluent cardholders who paid off their balances each month; signing on an impressive number of gas stations, discounters, and supermarkets as acceptors of the card; establishing the later highly regarded Membership Rewards loyalty program (one of the biggest—if not the biggest—rewards program on the market); and striking partnerships with companies like Delta Airlines, wherein the company expanded its lending business through the issuing of cobranded cards that allowed customers to carry balances.
Additionally Chenault reached a truce with merchants, though not everyone at AMEX agreed with his strategy—particularly his expansion into lower-end businesses like gas stations. Tom Ryder, who rose through the ranks alongside Chenault, said in Fortune, "It was an extremely unpopular stance. Ken was the leader of a fairly small group that said unless we made some fundamental changes, we were going to eventually get killed" (January 22, 2001).
RISING THROUGH THE RANKS BASED ON PERFORMANCE
Chenault eventually won dissenters over, gradually transforming AMEX from an uncompetitive, obsolete company into a booming business. The level of interest in the Membership Rewards program surprised even Chenault. Quests for airline miles generated a surge in AMEX charges, and the program helped AMEX woo new merchants as well: the number accepting the card grew from 3.6 million in 1993 to more than 7.2 million worldwide in 1999.
As AMEX's financial performance vaulted forward, so did Chenault's career. In 1993 AMEX's new CEO, Harvey Golub, appointed Chenault as head of U.S. Travel Services, a title that entailed responsibility for the company's entire domestic card business and about half of its revenues. Together Golub and Chenault restructured the company, generating more than $3 billion in savings, and continued an aggressive foray into mainstream businesses. In 1995 AMEX signed on with Wal-Mart—an important win in the fight with Visa and MasterCard for market share.
Between 1995 and 2000 earnings increased every year, reaching $2.8 billion in 2000. The number of American Express cards issued to consumers increased from 25.3 million in 1994 to more than 29 million by 1996. In 1995 Chenault was named vice chairman, and two years later he was named president and chief operating officer. In April 1999 he was named the eventual successor to Golub.
THE SOFTER SIDE OF A LEADER
The public undeniably wanted Chenault to succeed. Anne Busquet, the president of American Express Relationship Services, noted in Ebony, "You would go in elevators and hear, 'Isn't it exciting about Ken? Can you believe that Ken got promoted? Isn't it fantastic? Oh, I feel much better about the company now that Ken is president.' People wrote him notes; he was flooded with e-mail; there were flowers and calls from corporate and political leaders" (July 1997).
People inside the company looked up to Chenault—even those who had competed with him for the CEO spot. The intense loyalty that he generated in colleagues was a product of his low-key, caring management style. Rather than being afraid of their leader—as was the relationship between many subordinates and their CEOs—Chenault's employees enjoyed his inspiring presence. The classic axiom states that leaders can lead by fear or by love; Chenault seemed to motivate workers to fear losing his love. Louise Parent, the executive vice president and general counsel for the company, remarked in Black Enterprise, "He is the kind of person who inspires you to want to do your best. Part of the reason is his example" (September 30, 1999).
AN AFRICAN AMERICAN PIONEER
When in January 2001 Chenault claimed the top position at American Express—one of the best-known symbols of U.S. capitalism, then with yearly sales of $25 billion—the prospects for African Americans in corporate America had seemed dismal. At General Electric, for example, just one of the top 20 business units was led by an African American. Only two other African Americans headed Fortune 500 companies: Franklin Raines was the CEO of Fannie Mae, and A. Barry Rand was the CEO of Avis. John O. Utendahl, himself a high-ranking African American working in financial services and a close friend of Chenault, told Fortune, "When Ken joined American Express 20 years ago, no one would have taken the odds that he would be CEO. But as crazy as this may sound, Ken would have taken that bet. The playing field for minorities may not be level, but when Ken plays, he plays to win" (January 22, 2001).
For his part Chenault did not dwell on racial issues. He understood the social significance of his appointment but wanted people to judge him based solely on his performance. He commented in Fortune, "It's a big deal; I won't minimize it. But I want them to say, 'He's a terrific CEO,' not 'He's a terrific black CEO.' Because the reasons why I'm CEO have nothing to do with the social significance of this breakthrough. I've always been focused on performance" (January 22, 2001).
A CEO STUMBLES
Early in his tenure as CEO Chenault sent the message to Wall Street that he had not been completely prepared for the job. After announcing record earnings for 2000, several months later he shocked investors with news of a $182 million write-off on some surprisingly risky assets in the company's money-management division, American Express Financial Advisors. Chenault consequently reduced the company's junk portfolio from 12 percent to about 8 percent and decreased the risks of other investments.
Several months later Chenault caused an even bigger tremor when he announced an additional $826 million charge on the same portfolio; second-quarter earnings sagged 76 percent to $178 million. The central problem was an investment strategy in high-risk junk bonds that had been embarked upon years before Chenault would have his say. While no one could criticize Chenault for operations that had been initiated prior to his watch, critics were troubled by the fact that Chenault appeared to make no effort to understand what the company's rationale at the time had been. When asked in BusinessWeek why American Express would put its money into such a risky investment, Chenault responded by simply saying, "I don't know. This is a strategy that was embarked upon seven or eight years ago. I don't know all the rationale and philosophy" (October 29, 2001).
BOOSTING MORALE AFTER SEPTEMBER 11
Chenault showed his true colors as CEO in the aftermath of the September 11, 2001, terrorist attacks on New York City. On the day of the attacks Chenault was stuck in Salt Lake City on a business trip. Still, he was able to make his leadership felt from afar, as he happened to be on the phone with a New York employee when the first plane crashed. AMEX's headquarters were across the street from the former World Trade Center; he asked to be transferred to security and told them to immediately evacuate everyone from the building.
In the hours and days that followed, Chenault made countless decisions that would ease the impact of the attacks on both cardholders and employees. To help the former, millions of dollars in late fees were forgiven, and credit limits were increased. In an effort to comfort the latter, Chenault invited his five thousand employees to New York's Paramount Theater on September 20 for a somber meeting. At that meeting he admitted that his grief had been so strong that he had needed to see a counselor. He announced plans to donate $1 million of the company's profits to the families of AMEX employees who had died on September 11. Charlene Barshefsky, a partner at Wilmer Cutler & Pickering who viewed a video of the event, told BusinessWeek, "The manner in which he took command, the comfort and the direction he gave to what was obviously an audience in shock was of a caliber one rarely sees" (October 29, 2001).
After 9/11 American Express committed to keeping its headquarters downtown; it was one of the first major companies to pledge their imminent return to Lower Manhattan.
Chenault commented in New York Voice Inc./Harlem USA, "Our 152-year history is filled with defining moments—staying open during crises when others close, coming through for our customers all around the world, doing the right things even when it is difficult to do. When we look back on this day several years from now, I believe we will see it as another defining moment that marked the beginning of a new era of growth and opportunity for our company and our city" (May 22, 2002).
FIGHTING FOR MARKET SHARES ON ALL FRONTS
In the first half of the 2000s Chenault continued pumping new blood into the AMEX brand. He pushed hard for the development of the Blue card, a trendy, fashionable card with a microchip allowing cardholders to make secure transactions online. The card appealed to the much-coveted younger demographic.
Further increasing the company's market share, Chenault led AMEX's campaign to build links with banks, changing the company's traditional policy of only issuing cards directly to consumers. He sold banks on the notion that they could increase their profitability by signing on with AMEX, because the company still took higher fees from merchants and because AMEX customers generally charged more money to their cards. Chenault said in American Banker, "The leverage that we had as a competitive advantage was a higher merchant discount rate" (June 30, 2000).
Chenault's strategy led to legal disputes with the Visa and MasterCard banking associations, which prohibited their members from issuing AMEX cards. In September 2003 a federal appeals court upheld a lower court ruling requiring Visa USA and MasterCard International to abandon long-held rules prohibiting member banks from issuing cards by American Express and other rivals. Visa and MasterCard said that they would appeal the ruling, while Chenault announced plans to forge partnerships with even more banks by the middle of 2004.
In one of Chenault's proudest accomplishments, he signed Tiger Woods to an AMEX contract. Both Chenault and Woods were leading figures who happened to be African Americans but whose winning appeal was truly universal.
See also entry on American Express Company in International Directory of Company Histories.
sources for further information
Byrne, John A., and Heather Timmons, "Tough Times for a New CEO," BusinessWeek, October 29, 2001, p. 64.
Fickenscher, Lisa, "The President of Amex Depicts It as Victim: Judge Admits Documents about DOJ Talks," American Banker, June 30, 2000, p. 1.
New York Voice Inc./Harlem USA, May 22, 2002, p. 19.
Pierce, Ponchitta, "Kenneth Chenault: Blazing New Paths in Corporate America," Ebony, July 1997, p. 58.
Schwartz, Nelson D., "What's in the Card for Amex? New CEO Ken Chenault Has No Shortage of Plans for American Express," Fortune, January 22, 2001, p. 58.
Whigham-Desir, Marjorie, "Leadership Has Its Rewards: Ken Chenault's Low-Key Yet Competitive Style Has Pushed Him Up the Executive Ladder and to the CEO's Chair," Black Enterprise, September 30, 1999, p. 73.
—Tim Halpern