Summary
This 8-K filing from American Express Company (AXP) on December 5, 2007, discloses a significant performance-based stock option grant to CEO Kenneth I. Chenault. The grant, split into two tranches (one on November 30, 2007, and a second expected in January 2008), totals 2,750,000 shares. These options are designed to incentivize continued high performance over a six-year period (2008-2013) and are subject to the achievement of specific financial metrics.
Key Highlights
- 1CEO Kenneth I. Chenault to receive a performance-based stock option grant of 2,750,000 shares, contingent on meeting specific performance targets.
- 2The grant is structured in two tranches, with the first approved on November 30, 2007, and the second expected in January 2008.
- 3Vesting of the stock options is tied to four key performance metrics: Continuing Operations EPS Growth, Revenue Growth, Average Return on Equity, and Total Shareholder Return relative to the S&P 500.
- 4All performance metrics must be met for full vesting of the options, with partial vesting possible for meeting lower performance thresholds.
- 5The performance period for these metrics is from January 1, 2008, to December 31, 2013.
- 6The company expects to incur an aggregate expense ranging from zero to approximately $25 million for each tranche of the grant during the performance period.
- 7Specific conditions for retirement, death, disability, or change in control events are outlined for potential pro-rata vesting.
Frequently Asked Questions
The filing does not disclose the total monetary value of the stock option grant at the time of the filing. However, it states the exercise price for the first tranche granted on November 30, 2007, was $58.98 per share. The total number of shares subject to the grant is 2,750,000, with the exercise price for the second tranche to be determined on the grant date in January 2008.
The options will vest based on the achievement of four equally weighted performance metrics over the period of January 1, 2008, to December 31, 2013. These are: 1) Average Continuing Operations EPS Growth of at least 12% per annum for 50% vesting, and 15% for 100% vesting. 2) Average Revenue Growth of at least 8% per annum for 50% vesting, and 10% for 100% vesting. 3) Average Return on Equity (ROE) of at least 33% for 50% vesting, and 36% for 100% vesting. 4) Average Total Shareholder Return at least 1 percentage point above the S&P 500 for 50% vesting, and 2.5 percentage points above for 100% vesting. Meeting lower thresholds results in partial vesting.
The stock options generally will not become exercisable prior to January 1, 2014, except in specific circumstances such as death, disability, or change in control, where a pro-rated portion may vest and become exercisable.
American Express expects to incur an expense ranging from zero to approximately $25 million in aggregate for each tranche of the stock option grant during the performance period. This expense is subject to the vesting conditions being met, performance levels achieved, and potential forfeiture of the award.