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Kenneth Chenault
Kenneth Chenault Kenneth Chenault


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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 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 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 US 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 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) JD 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 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 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 US 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 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 .



 
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