Following are the highlights of American Express CEO Ken Chenault's new compensation package. For once, it seems, a CEO of one of America's largest and most respected companies has his compensation squarely lined up with that of shareholders' interests.
By month's end, Chenault will have amassed options controlling 2.75 million shares of AmEx stock. To take advantage of these options, however, he must meet some hefty performance goals over the next six years. You heard it right, six years. In a world where performance is often measured on a quarterly basis, the distant time horizon enforces Chenault to focus on the big picture, rather than having a relentless short-term focus on "making the numbers."
For the option grant to kick in and be worth anything, here's what Chenault must accomplish:
- Earnings must grow no less than 15% per year on average.
- Revenue must grow at least 10% per year.
- Return on equity must equal 36% on average.
- Total return to shareholders must outperform the S&P 500 by 2.5% per year, on average.
Hats off to AmEx for taking the lead in promoting a truly responsible and shareholder-aligned compensation package.
Source & complete article: http://www.fool.com/investing/value/2008/01/10/american-express-sets-ceo-compensation-standard.aspx
