What is the primary purpose of this 8-K filing?

The primary purpose of this filing is to report the approval of the performance-based criteria for executive compensation. This includes the annual incentive awards for 2005 and the longer-term 'Portfolio Grant XVI' (PG-XVI) awards covering the period 2005-2007. The company is establishing these criteria to align executive pay with company performance and to comply with tax regulations requiring compensation to be performance-based for full deductibility.

What specific financial metrics will be used to determine executive bonuses for 2005?

For the 2005 annual incentive awards, executive bonuses will be determined based on the company's performance against pre-established goals for diluted Earnings Per Share (EPS) and Return on Equity (ROE) for the year ending December 31, 2005. The Compensation Committee may also consider other financial and non-financial measures, including shareholder return, revenue growth, customer base expansion, and strategic execution.

How will the longer-term PG-XVI awards be structured?

The PG-XVI awards, covering the three years ending December 31, 2007, have two main components. The Financial Incentive Component (FIC), worth 60% of the award's target value, will be based on the company's average annual diluted EPS, net revenue (managed basis), and ROE over the performance period. The Stock Incentive Component (SIC), worth 40%, will be based on American Express's total shareholder return compared to the S&P Financial Index over the same period. Both components have threshold performance requirements for any payout to occur.

Are there any considerations for the planned spin-off of AEFC in relation to these executive compensation plans?

Yes, the performance criteria were initially approved without taking into account the potential impact of the planned spin-off of American Express Financial Corporation (AEFC). However, the terms of the awards allow the Compensation Committee to make equitable adjustments to the calculation, terms, or performance levels if a spin-off or other material corporate transaction would result in an unreasonable payout. The company anticipates reviewing the criteria and thresholds post-spin-off, which is expected in the third quarter of 2005.

AXP 8-K: Material Agreements

Summary

This Form 8-K filing by American Express Company (AXP) on April 1, 2005, details the approval of performance-based criteria for executive compensation for the fiscal year 2005 and for the "Portfolio Grant XVI" (PG-XVI) awards covering the three-year period ending December 31, 2007. The Compensation Committee of the Board of Directors has established these criteria to ensure compensation is performance-based, aiming for full deductibility under U.S. tax laws. These awards, granted under the 1998 Incentive Compensation Plan, can be paid in cash or restricted stock.

Key Highlights

1Approval of performance-based criteria for 2005 annual incentive (bonus) awards and PG-XVI awards.
2Performance metrics for 2005 annual incentive awards include diluted Earnings Per Share (EPS) and Return on Equity (ROE).
3PG-XVI awards (2005-2007) have two components: a Financial Incentive Component (FIC) based on average annual diluted EPS, net revenue, and ROE; and a Stock Incentive Component (SIC) based on total shareholder return relative to the S&P Financial Index.
4Compensation payouts are contingent on achieving pre-established objective performance goals set by the Compensation Committee.
5The Compensation Committee retains discretion to adjust payouts downwards based on company, business unit, and individual performance, as well as other factors.
6Awards are structured to be "performance-based" for tax deductibility purposes.
7Specific maximum potential payouts are outlined for the CEO and other Named Executive Officers for both 2005 annual incentives and PG-XVI awards.

AMERICAN EXPRESS CO 8-K Report, Material Agreement (Apr 1, 2005)

Summary

Key Highlights

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