American Express' CEO ran his bold pandemic plan by Warren Buffett. The investor supported it - and urged him to take care of Amex's brand and customers
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- American Express CEO Steve Squeri ran his pandemic plan by his biggest shareholder, Warren Buffett.
- Squeri wanted to avoid layoffs, acquire businesses, and invest $1 billion in new cardholder rewards.
- Buffett voiced his approval and underscored the vital importance of Amex's brand and customer base.
American Express CEO Steve Squeri called up Warren Buffett, his company's biggest shareholder, to win his support for a bold plan at the height of the COVID-19 pandemic. The famed investor and Berkshire Hathaway CEO wasted no time saying he was on board.
Lockdowns, travel restrictions, and business closures in the spring of 2020 cut Amex's credit-card billings in half, and threatened to trigger defaults on up to $12 billion of its loans and credit-card debts, the Financial Times reported in a recent profile of Squeri.
Instead of reining in spending and laying off workers, Squeri thought the best course of action was to retain his employees, seek out businesses to buy, and invest $1 billion in offering a fresh set of rewards for its many homebound cardholders. He believed the long-term payoff would justify the short-term pain, and the strategy would allow the company to capitalize on a tough situation, he told the FT.
The Amex CEO ran his approach by Buffett, whose Berkshire conglomerate owns a $24 billion or 20% stake in the financial-services titan. Buffett's conglomerate has held Amex stock for over 25 years, and still counts it among the five largest positions in its roughly $350 billion equity portfolio.
"I called Warren Buffett and said, 'We're probably going to lose $4 a share, and I am not sure when billing is going to come back . . . But I think what we need to do is take care of our colleagues [and] take care of our customers. If we do that, I think, we'll have long-term viability for our shareholders,'" Squeri told the FT.
Buffett replied that "the most important thing to take care of is your customers and your brand." In Squeri's telling, the investor added that "it's hard to get customers back" and "once you damage the brand, it's damaged."
Squeri promptly rolled out cardholder rebates on shipping and streaming fees, and later acquired online-banking platform Kabbage for a reported $850 million. The approach helped drive Amex's revenues up 25% last year, and has paved the way for growth of 15% to 17% this year, the FT said.
The Amex CEO has shared other snippets of his conversation with Buffett. In April 2020, he said the Berkshire chief told him the Amex brand is special and needs to be cared for and invested in, for example by taking care of ailing customers.
Around the same time, Squeri recalled speaking to Buffett shortly after becoming Amex's CEO in 2018. The investor emphasized to him then that Amex's greatest strength is its brand, and its customers who aspire to be associated with its brand.
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