Good morning. Welcome to our 2013 annual meeting of shareholders. I'm very pleased that you could join us today. I now call the meeting to order. I am Ken Chenault, Chairman of the Board and Chief Executive Officer, and I will be presiding at this meeting. With me on the dais is Carol Schwartz, Secretary of the Company, who will assist me in conducting the meeting. Before we begin, I remind you that the order of business and the rules of the meeting are set forth in the printed agenda handed out when you came in. Before I comment on the Company's financial performance, Carol will read a statement called for under the securities laws.
The discussion today contains certain forward-looking statements about the Company's future financial performance and business prospects, which are subject to risks and uncertainties and speak only as of today. The words believe, expect, anticipate, estimate, optimistic, intend, plan, aim, will, should, could, likely, and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements, including the Company's financial and other goals, are set forth within the Company's first quarter 2013 earnings press release and earnings supplement, which were furnished in an 8-K report with the Securities and Exchange Commission on April 17th, 2013, and in the Company's 2012 10-K, which is on file with the SEC as well. Paper copies of the first quarter earnings release and supplement are also available here today at this meeting. The discussion today also contains certain non-GAAP financial measures.
Information relating to comparable GAAP financial measures may be found in the presentation slides for today's meeting, as well as the earnings materials for the first quarter and prior periods that may be discussed, all of which are posted on our website at ir.americanexpress.com. We encourage you to review that information in conjunction with today's discussion.
Thanks, Carol. Let me begin today with our 2012 performance. I believe 2012 was a solid year for our financial performance. We generated good growth, while at the same time making substantial investments in our future performance. For 2012, we generated $4.5 billion in net income, revenue growth of 5%, 6% when adjusted for foreign exchange rates, and a return on average equity of 23%. In the fourth quarter, we reported three items that impacted our full-year financial performance: a restructuring charge, rewards expense, and card member reimbursements. Excluding these items, adjusted EPS for the full year was $4.40, up 8%, and adjusted return on average equity was 26%. Given the continued slow growth across the global economy last year, I'm very proud of our overall performance. The core performance of our business was strong.
Our revenue growth was quite solid, particularly relative to our card-issuing peers, and our relatively high return on equity reflected the strength of our business model and our hard work to provide superior value to our customers and shareholders. Our results in 2012 were driven by the strong performance of our business metrics. Our billings growth weakened somewhat over the last three quarters of the year, but remained relatively strong given the global environment. At $888 billion, billed business for the full year was our highest ever, as was our average spend of almost $16,000 per basic proprietary card member. Cards in force continued to grow steadily. In 2012, we passed the 100 million mark for cards in force, reflecting the continued strength of our brand, our increasing global relevance, and our commitment to providing premium value and service to our customers.
Our loans grew consistently during the year, with our focus on premium lending serving to drive not just balances, but billings as well. Our premium lending strategy also contributed to our credit metrics remaining at historic lows while also being the best in the industry. Despite some moderation of billings growth in the U.S., we continued to see our share of credit spend increase through 2012. A slowing of debit spend across the major networks led to a share increase for us when looking at credit and debit combined. Against this base, we rose to 15.6% of share for the year. This outcome has been the result of a lot of hard work in an extremely competitive environment, along with our consistent investment in both card member and merchant value. On a relative basis, the strength of our performance was quite clear.
Our billings base continues to be the largest by far against our major issuing peers, almost 2.5 times larger than that of Chase and Citi, and our growth rate remained relatively strong. Our spend-based model means we're not overly dependent on loans to grow revenues, but we generated positive growth nonetheless. Citi, Chase, and B of A continued to see an absolute decline in balances for the fourth year in a row. You can also see this when looking at earnings. Our 2012 earnings results were far less dependent on credit reserve releases than that of our issuing peers. Our earnings were primarily driven by the strong performance of our businesses.
The strength of our financial performance allowed us to invest back into our businesses in 2012 at near record levels, leading to the acquisition of new card members and merchants, premium card launches and upgrades that earned more business from high-spending card members, and programs designed to help merchants build their businesses, such as the third annual Small Business Saturday. In fact, Shop Small programs have become such a benefit for small merchants that we and our network partners are supporting this idea around the world, including in Canada, the U.K., and Israel, to name just a few. There were also major signings that expanded our merchant base, most notably Tim Hortons in Canada. How big is Tim Hortons? To put it in perspective, Tim sells 2 billion cups of coffee a year.
We continue to expand our digital capabilities, such as our Amex Offers feature, which allows us to provide customized merchant offers to card members on their mobile phones. Our digital initiatives contributed to another strong year of online billings growth. In 2012, we estimate that our online billings grew to over $152 billion, up approximately 15% from 2011. From all of the numbers and analysis we've seen, we continue to believe we're the spend volume leader among card issuers in online payments. We also continue to expand our geographic footprint and diversity through Loyalty Partner, a company we acquired in 2011, which runs coalition reward programs in several countries outside of the U.S. In 2012, Loyalty Partner grew its enrollee base to 50 million members, up 38%, helped by the launch of the program in Mexico and by our expansion in India.
Performance marketing is a promising opportunity for our company. Loyalty Partner is one way we are expanding those services. We continue to invest in our Serve technology platform, which enables digital commerce innovations and options for people underserved by the traditional banking system. Now, one significant way that we're using Serve's capabilities is through Bluebird, one of our most exciting new product launches for 2012. Issued by our company and available at Walmart stores and online, American Express and Walmart have come out with Bluebird. It is the next-generation alternative to debit and checking accounts. It combines prepaid with online, offline, and mobile capabilities to help customers better manage and control their everyday finances. It's also bringing new customers into our franchise.
As of the last time we reported on this in January, 85% of Bluebird enrollees were new to American Express, with nearly half under the age of 35. As of the end of January, we had issued 575,000 Bluebird accounts. Our acquisitions continue to be strong. Helped by Bluebird, Serve, and other digital initiatives, in 2012, we added approximately 2.5 million new customers in our enterprise growth group, showing the ever-broadening reach of our alternative products. While new products and services have been a key focus for us, we haven't lost sight of our heritage. As such, we continued to strengthen our customer service capabilities. New and improved tools, along with the incredible service ethos and commitment of our customer care professionals and travel counselors, allow us to fulfill the promise of our brand each and every day.
Because of their efforts, our card members recommend to a friend scores have improved by more than 30% over the last three years. Our customer retention by 40% over the last five years. Our exceptional service and product value also earned us our sixth J.D. Power Award in the United States last year and a number of other major service awards around the world. These awards are ultimately won by the commitment of our people. I am incredibly proud of them. Overall, our financial performance in 2012 allowed us to make substantial investments in our future growth. I believe we did so productively. Along with our business performance, another key means of funding our growth investments has been our control of operating expenses. Our efforts here have been company-wide. Upgraded technology platforms are increasing our productivity and speed to market.
We have restructured operations which are making us more efficient and improving our service quality. We continue to offer better ways for our customers to interact with us online and through mobile channels. The restructuring plan we recently announced is meant to build upon this progress. One piece of this plan involves re-engineering our model in global business travel as we continue the shift toward online channels and automated servicing tools. We're also streamlining our staff groups across the company so that we can concentrate more resources on high-growth areas, optimizing our client management and sales functions, and eliminating duplicate efforts while strengthening controls. We expect that these changes will result in a net reduction of 5,400 jobs. It's never easy to take an action that involves people losing their jobs.
Yes, as difficult as this is on a personal level, I believe it's the right thing to do for the business. Having a lean and flexible operating structure is critical to our growth strategy. Making these changes now while we are operating from a position of strength is the best time to do it. While we have made progress during the year, we did have a major disappointment. In October, after a lengthy review of our U.S. card practices, several regulators concluded that American Express failed to follow consumer laws in a number of instances over the past few years. The issues involved several areas, including card solicitations, late fees for charge cards, and debt collection practices.
In general, they stemmed from what the regulators found were customer disclosures that could and should have been clearer, misinterpretation of new and evolving regulations, and certain process-oriented errors, some of which went back several years. We have taken responsibility for correcting these issues and strengthening our controls to help prevent future mistakes. Our main concern is safeguarding the American Express brand and our relationships with customers. Compliance is more critical than ever given the heightened scrutiny and expectations of regulators and the public. As I've told our people, we have to make sure that our products and services work as intended, that our messaging is clear and accurate, our marketing offers are fulfilled as stated, and that we see everything from the vantage point of our customers. Our interests and those of our regulators are in complete alignment.
We both want to make sure customers understand our products and are treated well. For the sake of our brand, we can accept nothing less. Our financial results and the progress we made against our growth objectives led to a good year in terms of the performance of our share price. Whether looking over a one, three, or five-year time horizon, our total shareholder return was very strong. We outperformed the S&P 500 over the entire time frame and outperformed the S&P Financials over both three and five years. During 2012, we also increased our dividend rate by 11%. Our entire organization is very proud of the value we were able to provide to all of our shareholders for the year. As we move into 2013, our company priorities are the same as they were in 2012, to drive growth, drive efficiency, and deliver superior service.
Driving growth is critical to our profitability, position in the marketplace, and our long-term success. Driving efficiency allows us to compete effectively and provides a funding source for future investments. Deliver superior service is about who we are as a company. It's about our customer commitment, and it provides us with a significant competitive advantage. While we have a great deal of work ahead of us, our first quarter results are a good sign of the momentum we've already generated against our goals. We announced our results on April 17th, and I believe we had a very good quarter. We generated $1.15 of EPS, up 7% from last year. Revenues grew by 4%, 5% on an FX adjusted basis. Our return on average equity was 23%, 26% when adjusted for our fourth quarter items.
Worldwide billings grew by 6% on a reported basis and 7% on an an FX adjusted basis. Worldwide loans grew by 4%. Our global net write-off rate was 1.9%, down 40 basis points from the first quarter last year. Finally, our capital ratios continued to be well above regulatory requirements. Because of the strength of our business model and our balance sheet, we were advised in March that the Federal Reserve had no objection to our capital plan. This plan includes repurchasing up to $3.2 billion of company shares as part of our buyback program during the last three quarters of 2013 and up to a further $1 billion of shares during the first quarter of 2014. The actual number of shares repurchased will be based on our business plans, financial performance, and market conditions.
The plan we submitted also included a 15% increase in our dividend rate from $0.20 to $0.23 a quarter, which will be payable in the third quarter. We know that many shareholders rely on our dividend, and it was important to our board that we try to fulfill these expectations. Assuming all of the capital plans submitted to the Fed are fully executed, analysts estimate that American Express will have the second highest total payout ratio, dividends plus share repurchases of the 18 financial services companies reviewed. While the environment in 2013 has some ongoing challenges, I believe our performance in the first quarter keeps us in a strong competitive position. We grew our core businesses while also making progress in our ongoing digital transformation. Here are some examples.
In early January, we announced that we were expanding our global relationship with Barclaycard to include an American Express card issuing agreement in the U.K. We also announced a Tweet to Buy partnership with Twitter, which allows American Express card members to make purchases directly on the Twitter platform using their synced card products. In March, we announced that our Bluebird accounts would be eligible for FDIC insurance and that Bluebird would also be adding a check-writing capability. I was also pleased with the news that American Express had risen to number 13 on Fortune's list of the world's most admired companies. It's great to be recognized, of course, but our focus remains on providing exceptional value and service to our customers and investing in and growing our business for the moderate to long term for the benefit of our customers, our employees and all of you.
Yes, this list recognizes our financial performance and our business results, but it also recognizes how we achieve our results by being a good employer, a fair competitor, and a socially responsible corporate citizen. In closing my discussion of our performance, let me just say a few things. As I've discussed with you before, my focus over the last several years has been on making sure our company navigated through challenging economic conditions in the best position possible relative to our payments, card issuing and other competitors. Our business model and our assets, capabilities and relationships are unique in the industry, and I believe they position us well for future growth. We have sound strategies in place with excellent people implementing them. While we'll always face competition and environmental challenges, I'm very pleased with and proud of the position of the company today.
In 2013 and beyond, we're moving forward on transforming our 163-year-old company for the digital environment and extending our leadership within payments and services. With our commitment to shareholder value, our financial strength, our unique competitive advantages, the power of our brand, and most of all, the quality and character and commitment of our people, I believe we're more than up for this challenge. Before beginning the formalities of our annual meeting, I also want to mention two important changes to the board. As you've seen, two valued members of our board, Jan Leschly and Ed Miller, are retiring and are not standing for election today. I couldn't let this meeting pass without conveying my appreciation to them both for their service to American Express and to all of us as shareholders.
They are both long-serving board members, with Jan joining our board in 1997 and Ed doing so a few years later in 2003. Both Jan and Ed have served this company and all of us as shareholders with the highest level of integrity, with exceptional competence and expertise, and with a true commitment to our customers, clients and employees. Now we'll continue to have the benefit of Ed's good judgment through his service as chairman of the Audit Committee of American Express Centurion Bank, one of our two Utah-based banks. On behalf of our board of directors and all of our shareholders, I want to thank Jan and Ed for their commitment and service to American Express. Before beginning the formalities of our annual meeting, I also want to mention several recent organizational changes. Earlier this month, we named Ed Gilligan President of American Express Company.
Ed has been with the company for 33 years and has served as Vice Chairman since 2007. This promotion recognizes the important role he has played over the last few years in helping to lead our largest business group out of the recession and keeping us in a strong position to deliver results for our shareholders. The second change is the upcoming retirement of Louise Parent, our company's general counsel. Louise has been an employee of American Express for 36 years and has served as our general counsel for 20 years. Louise has been an exceptional advocate for the company and all of its shareholders. She is one of the finest general counsels in the world, and she is a trusted advisor to me and our board. Louise will stay on as we search for a successor and for a transition period thereafter. Thank you, Louise.
Let's now turn to the formal business of our meeting. Because this is a meeting of shareholders, only shareholders should speak, and the comments should relate to the company's business. To permit shareholders who could not be here today to listen to these proceedings, we are providing a live audio webcast of today's meeting. As chairman, I will be responsible for the conduct of today's meeting. In doing so, I will seek to have an orderly, informative session in which we get our business done, complete the voting and tabulating, and give shareholders the opportunity to ask questions that are relevant to the company's business. To accomplish this, I ask that each shareholder keep his or her remarks brief and to the point and not interrupt other shareholders. Please keep your remarks to two minutes unless you are presenting a proposal.
Our goal is to assure that all persons who wish to speak get a chance to do so in an orderly way. Privacy considerations prevent me from discussing at this meeting questions relating to any specific card member. However, four of our customer care professionals are here and available to help anyone with any personal card matters after the meeting. They will be available at the table outside of this room after the meeting adjourns. Let me now introduce our directors who are with us today. I will ask each to stand briefly while I mention their names. Please hold your applause until all have been introduced. With us today are Charlene Barshefsky, Ursula Burns, Peter Chernin, Anne Lauvergeon, Ted Leonsis, Jan Leschly, Rick Levin, Edward Miller, Steve Reinemund, Daniel Vasella, Robert Walter, Ron Williams. One of our directors, Sam Palmisano, could not be here in person with us today.
Did I say Rich McGinn? Good. Excuse me. You can stand, and you can get extra applause, Rich. You gave applause to Rich, but I think we should give applause to the entire board. Also with us today is Ward Hamm and Maureen Gill, partners of our audit firm, PricewaterhouseCoopers. All right, Carol, let's get on with the formalities.
Ken, I present a copy of the Notice of Annual Meeting of Shareholders dated March eighth, 2013, and affidavits showing that notice of this meeting was duly given. Copy of the notice and affidavits will be filed with the minutes of this meeting. All shareholders of record at the close of business on March first, 2013, are entitled to vote at this meeting. A certified list of the company's shareholders of record is present at today's meeting and will remain open for inspection during the meeting. The minutes of the last annual meeting of shareholders are also here and are available for inspection. Company has designated Peter Deskovich and James Diaforli of Broadridge Financial Solutions to act as inspectors of election. The inspectors have taken their oaths to faithfully and impartially execute their duties.
All right, Carol, do we have a quorum, and may we proceed?
The inspectors of election have determined that holders of at least 952 million shares, or over 86.4% of the common stock of the company entitled to vote at this meeting, are present or are represented by proxy and constitute a quorum.
Fine. The meeting is now duly convened for the purpose of transacting business properly before it. At this point in the proceedings, we will move to the various proxy proposals. If you have already voted by proxy and do not wish to change your vote, you need do nothing further. For those of you who haven't voted by proxy or for those of you who wish to change your vote, ballots will be handed out to you. Will any shareholder who wants a ballot please raise your hand? Have over here in the middle. Anyone else? In the back here, the ushers will come to give you a ballot. If you are voting today by ballot, please vote on all items. A submission of a ballot will revoke your prior proxy. We will now introduce the proposals. I remind you that comments should pertain to the proxy proposals under consideration.
We have the opportunity for general questions later after we close the polls. The first item of business is the election of the board of directors.
I propose the election of the 13 persons whose names and biographies appear on pages 58 to 64 of the proxy statement to be elected as directors of the company, to hold office until the next annual meeting of shareholders, and until their successors are duly elected and qualified.
The next matter is the proposal to ratify the appointment of PricewaterhouseCoopers to audit the company's accounts in 2013. The company's Audit and Risk Committee has appointed PricewaterhouseCoopers as the company's independent registered public accounting firm for 2013. The board asks the shareholders to ratify the committee's appointment. Carol, would you introduce the resolution?
I offer the resolution appearing on page 66 of the proxy statement ratifying the appointment of PricewaterhouseCoopers LLP, as the company's independent registered public accounting firm to audit the accounts of the company and its subsidiaries for 2013.
The next matter is the advisory vote on executive compensation. Carol, would you introduce the resolution?
I offer the advisory resolution to approve the compensation of the company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K. This resolution appears as item three on page 67 of the proxy statement.
The next proposal is a proposal of Mr. Steiner relating to the separation of the positions of chairman and CEO. It appears on page 68 of the proxy statement. Mr. Steiner will now introduce the proposal.
Okay. Ms. Laura Campos is also here. Laura, please introduce the proposal.
Morning, I'm Laura Campos. I'm here to move proposal number four, calling for an independent board chair. I have been asked to read the following statement on behalf of Kenneth Steiner. "Shareholders request that our board of directors adopt a policy that, whenever possible, the chairman of our board of directors shall be an independent director. An independent director is a director who has not previously served as an executive officer of our company. This policy should be implemented so as not to violate any contractual obligations in effect when this resolution is adopted. The policy should also specify how to select a new independent chairman if a current chairman ceases to be independent between annual shareholder meetings. Foster flexibility, this proposal gives the option of being phased in and implemented when our next CEO is chosen.
When our CEO is board chairman, the arrangement can hinder our board's ability to monitor our CEO's performance. Many companies already have an independent chairman. An independent chairman is the prevailing practice in the United Kingdom and many international markets. This proposal topic won 50% plus support at three major U.S. companies in 2012, including 55% support at Sempra Energy. This proposal should be evaluated in the context of our company's overall corporate governance as reported in 2012. GMI/The Corporate Library, an independent investment research firm, has rated our company D continuously since 2009 with high governance risk and high concern in executive pay. Please vote to protect shareholder value and support proposal number four. Thank you.
Thank you very much. The board of directors' reasons for opposing this proposal appear on page 69 of the proxy statement.
Mr. Peter Lindner, a shareholder, is present at the meeting today. In accordance with our bylaws' advance notice provisions, Mr. Lindner, if you wish to do so, you may now present your proposal and place your name in nomination.
The microphone is coming over.
By the way, I made a copy of what I'm going to say, and also to the secretary. Can somebody take it? Thank you. I made copies for the members of the board. Thank you. I have extra copies for other people, if you could pass it around. Can you pass it? Thank you. Hi, I'm Peter Lindner. I have a website, amexethics.com, and I hope you go to it. This two-page flyer is on it. Basically, I'm saying something pretty heavy. Ken Chenault falsely signed the Sarbanes-Oxley certification to the SEC, which is a crime. Basically, if you look at the footnotes here, it says, "Signed by Ken Chenault, CEO, May 4th, 2010." The reason why it's false is because Ken had stated that Amex had abided by the Amex Code of Conduct.
The SEC specifically allows whole classes of officers to be exempt from the code of conduct. Ken Chenault said no one is exempt, including him. A vice president, Jason Brown, Esquire, from the General Counsel's office, told me in February of 2006 that Qing Lin violated the Amex-Lindner contract of June of 2000, which said, and it says on the back of this, paragraph 13, "The company agrees to instruct and direct the following company employees not to disclose any information," let me reiterate, "any information regarding Mr. Lindner's employment to the company and should refer all references to the appropriate human resources," specifically Ash Gupta, Qing Lin. If you look to the left of it on the second page, there's a handwritten note, and that note is dated February 2006 .
It says, "Qing Lin, credit officer," and below it, there's a double quote mark with three bullet points. The first one says, "Peter is a technical guy." Well, right there, you know Qing violated the rule because that's any information. He also wrote, "I'm not sure whether he can be used at AXP." AXP is a stock exchange symbol for American Express. In other words, in 2006, the contract that was signed by me, by Ash Gupta, who's a banking president, by American Express, was violated. He told me that. I wrote back, "You admitted it," and he denied it.
Mr. Lindner, would you introduce your proposal?
I am.
Okay. Thank you.
In 2009, I had to get him under oath, below you see it under oath where J.K. Brown says, you see the quote marks? Yeah. "Peter is technical." Then what did he say? Qing said he's not sure whether Peter Lindner, meaning me, can be used at American Express. Qing said that he did provide any information to Boaz.
Mr. Lindner, you need to present your proposal.
My proposal-
You only have a few minutes.
Please, sir. This here man is talking to me. What I'm saying is my proposal is that the board and should look make Ken tell the truth, that you should look into that. PricewaterhouseCoopers, who I went to and try to present this information, refused to speak to me. Under generally accepted accounting practices, if there is something wrong, you don't ignore it and say, "Well, that's minor." You dig deeper. If they had dug deeper, they would've also found that the Amex Code of Conduct was not handled well because Kenneth Chenault said that management listened to the Code of Conduct. He is part of management. He didn't.
Okay, Mr. Lindner.
Jason Brown is part of management. He didn't.
All right. Now finish your proposal because we're going to stop this. Finish it.
Well, this has been going on since 2006. In 2006, you know that he lied, and you never wanted to answer it. This is 2013.
Okay.
Just like at Penn State, Jerry Sandusky had sex with kids.
Okay. Mr. Lindner. Mr. Lindner.
Mr. Lindner.
I'm going to ask the microphone.
Kenneth Chenault said.
Mr. Lindner.
Yes.
I'm warning you. If you do not finish in the next 30 seconds, you're going to sit down, and you're going to be escorted out.
Okay, I'll finish in 30 seconds. I have 5:05 P.M. on my cell phone. My proposal is that Amex should re-look at their Code of Conduct and should form a truth commission, so that if people tell the truth about what they did, they will be forgiven. If they hide anything, sort of like in Monica Lewinsky with Clinton, if they hide anything, they will be fired. I think that Qing was fired after I brought this to the attention two weeks after the annual meeting in 2009, but so should Jason Brown. You caused several people to commit perjury. Fisher Jordan lied to the judge saying they didn't talk about me.
Okay. I think we've heard your proposal.
All right, 30 seconds is over. Sit down.
We've heard your proposal. Okay, the board of directors opposes Mr. Lindner's shareholder proposal and recommends against his candidacy. If any shareholder wishes to vote on Mr. Lindner's shareholder proposal relating to the Amex Code of Conduct, you may do so on item five of the ballot. If any shareholder wishes to vote for Mr. Lindner as a board candidate, you may do so by writing his name in the ballot under item one in the space below the words "Other nominate." Does anyone need a ballot? Okay. As stated on page 74 of the proxy statement, the named proxies are exercising their discretionary voting authority to vote against Mr. Lindner's proposal and nomination.
At this point in the meeting, please turn in your ballots so we can tabulate the votes on the proposals introduced today. The ushers will now collect the ballots. If you have brought your proxy to the meeting and haven't turned it in, you may do so now.
Okay. If anyone has a ballot, raise your hand, and the usher will collect it.
Has everyone who wishes to vote done so?
Okay, there's a ballot over here, John.
Okay. We'll wait for that ballot. As you're finishing it, everyone who wishes to do so, having voted, I declare the polls closed and ask the inspectors of election to collect and tabulate the ballots. I will now take the general questions while the inspectors of election count the votes.
Mr. Chairman?
Yes, Mr. Corba.
Yes. I want my fellow stockholders to listen very carefully. I'm worrying about what the company's doing and not about this here stockholder here, about his griefs. My name for the record is Harry Corba. I reside in Yonkers, N.Y. As one of the 32,565 common stockholders in this here company, I want to make some facts known to these here other stockholders. My friend, Mr. Kenneth I. Chenault, is 61 years old. For the year 2012, he did a very outstanding job, and I want you to listen very carefully. Last year when the annual meeting was held on Monday morning, April 30th, 2012, the common stock closed on the New York Stock Exchange at $60.17. It closed Friday before the annual this morning at $67.25. Since the last annual meeting, the common stock has risen $7.58. $7.58.
Number 2, this is my 21st out of 25 annual meetings of American Express Company, which I'm attending in person this morning. Number 2, no stockholder in this here room could make the comment I'm going to make. This is my 1,075th annual meeting since Tuesday noon, April 19th, 1955. It was 58 years ago this past Friday, April 19th, 2013, and nobody in this here room could make this here type of comment. I want to make another comment in reference to a very fine young lady by the name of Mrs. Ursula M. Burns, 54 years of age. Holds the distinction of being the first African American of a Fortune 500 company. I want all the stockholders here to give this here young lady a round of applause. I want to make two comments, Mr. Chairman, on the auditors, PricewaterhouseCoopers.
I want you to tell me exactly, because I see that for 2012, you paid this here company $1,064 more in 2012 than in 2011. My last question on this matter is this. In 2011, you told me you had 112 full-time lawyers on the payroll of American Express, 112. What's the status now for 2012? Easy question.
Let me check with our esteemed general counsel, Louise Parent.
Full-time lawyers.
Okay, thanks.
Thank you very much, Mr. Corba
Hi. My name's Aaron Brenner, I represent Marco Consulting Group Trust with 16,173 shares of American Express. I wanted to come back to a topic that Mr. Chenault raised concerning Audit, Risk and Compliance Committee, specifically the committee's role in ensuring that the company is adhering to all relevant regulatory and consumer protection requirements, ensuring that the board is exercising effective control over American Express management with regard to consumer protection. That our concerns are material was underscored last fall, as Mr. Chenault mentioned. The Consumer Financial Protection Bureau ordered American Express its subsidiaries to pay $85 million to 250,000 customers after the CFPB found, quote, "That at every stage of the consumer experience, from marketing to enrollment, to payment to debt collection, American Express violated consumer protection laws." Unquote.
American Express was also ordered to pay $27.5 million in civil monetary penalties, a total of more than $110 million. As we know, in a competitive industry where brand equity is a key driver of value, regulatory compliance failures like these can reduce customer loyalty and damage company value. At the heart of these kinds of violations was a failure in compliance systems and internal controls, something which falls squarely under the responsibility of the Audit, Risk and Compliance Committee. At least one member of the committee, Steven Reinemund, is a director at another company, Walmart, which has suffered major compliance failures, in that case, regarding the violations of the Foreign Corrupt Practices Act. A number of observers have criticized the board for failing to exercise effective control over management, that company is spending millions of dollars to clean up the problems there.
With that in mind, can Mr. Reinemund or another member of the Audit, Risk and Compliance Committee please tell us what specific actions have been and will be taken to prevent further violations in the areas of consumer protection, regulatory compliance, and internal controls?
I think actually I am the best person to answer that question. Let me say very, very clearly as you stated, is that last fall, several banking regulators issued consent orders relating to various aspects of our U.S. card business. What I would emphasize is that we take these matters very seriously. In the whole area of compliance, we are focused from top to bottom in the organization on this. We are working very hard to comply with the requirements of the orders. Our board and our audit committee is briefed every meeting on compliance and how we are performing and the end-to-end processes that we have set up. We are continuing to enhance our compliance programs and to be sure that we operate in a way that is consistent with our regulators, our customers, and our own high expectations.
One of the points that I have made is that we need to be lockstep with our regulators. What you have not heard from us is complaining about the regulators, because what we believe is that these regulations and the regulatory environment will help make us a better company. I can assure you that the audit committee of this board holds us fully accountable, is incredibly conscientious, follows up on our reports. We consistently give them reports on all that we are doing in compliance and that impacts the regulatory environment. We have consequence management that we have impacts as a result of what has happened on compensation. I think we have accountability in our system. I think we have processes from an audit committee standpoint and an overview standpoint. The reality is that we believe strongly that enhanced regulation will help us become a better company.
The other point that I would make over the years, and certainly in this year, is that we enjoy excellent loyalty from our customers. We take brand building very seriously. One of the points I have made to our organization, that you should only make deposits in what I call the brand bank, never withdrawals. What happened this year was a withdrawal. As a board, as an audit committee, and a management team, we are very focused on correcting all the areas that we need to correct. Thank you. Any other questions? Yes.
Your note. I am either fulfilling a bucket list event or starting a new annual tradition. This is my first board of directors meeting.
Welcome.
Thank you. When I was in the first grade, my father was in community theater. I learned how to read by cueing him in "The Solid Gold Cadillac." If you know the play, you'll understand Mrs. Partridge has one share. My shares are a drop in the bucket compared to Mrs. Partridge's one share. I've been involved with American Express since I got my first traveler's checks at 14. I worked for the company in systems in the late '70s. Card member, whatever, I love the Tribeca Film Festival. I guess it became too efficient last year because the new ticketing system this year created interesting line-standing dynamics for the population. I would like to encourage you to rethink the ticketing system for the Tribeca Film Festival next year. If you need a good old-fashioned, old-school systems analyst, I'd be happy to apply.
My name is Susan Katz.
Well, thank you for your offer. What I would simply say, as you may know, the Tribeca Film Festival had its origin from the tragedy of 9/11. The whole purpose was really to revitalize downtown Manhattan. It's been an outstanding success, I'm also a believer that there are always things that you can improve and you need to focus on continuous improvement. I will have someone after the meeting speak to you to understand specifically what the issues are relative to the ticket line. Fortunately, the Tribeca Film Festival is very popular, we want to make sure that for all the customers, it's as convenient and fun as possible. Thank you for your comments. Yes, Mr. Berman.
Philip Berman, portfolio manager and shareholder. Just a few questions. How are American Express prepaid cards doing specifically in actual numbers now that we have a large bank heavily promoting their own new prepaid debit card?
First response, Mr. Berman, is I can't talk about anything that we have not disclosed. Up through January, we have 575,000 Bluebird cards, which we are very pleased with. In fact, Walmart, I think in their earnings release in the third quarter, also talked about how positive they were about it. As I mentioned, 85% of those customers are new to our franchise, and that is very exciting. A good number are under 35. What's important about this product, it's not just a prepaid product. It is an alternative to checking accounts, traditional checking accounts. As you may know, the FDIC reports that there are 10 million households that are unbanked and 24 million households that are underbanked. For the less affluent and poor, they are paying exorbitant fees to conduct basic banking services, and they're also having to wait online.
This is a product that I think meets the needs of a very important customer segment. It's also a product that we have constructed economics, so we believe this is a win-win for the customer and for us, and we're very excited about the growth prospects of Bluebird.
PayPal has over 50% revenues at eBay. What is American Express doing to directly tap their market for future growth?
Well, I think what's important is if you look at PayPal, and PayPal certainly has done quite well. I think what is important to understand is we have over $152 billion online, which is more than PayPal. This is part of this digital transformation that we have been talking about over the last several years. We are involved in a range of digital initiatives to drive our business. What I'd also emphasize, in the world that we live in, you have competitors and you have partners sometimes in the same company. PayPal is a frenemy for us. They are a very large merchant acquirer. They acquire many merchants for us, small, medium-sized merchants. At the end of the day, our view is to continue to improve our value propositions, to dramatically expand our presence online, to get a greater share of online spending.
I think what all of you should feel very positive about is the progress we are making in our digital transformation. One of the signs of that is the fact that we are the leading biller relative to online billings, and higher than PayPal.
Do you see any plateauing in the downward slide of international card volume income, which has been heavily trending lower?
I think what's important is one goes around the world. Certainly, if you look at Europe we certainly have seen a decline over the last 12 to 18 months. What's been positive is that we've seen some stability relative to the third, fourth, and first quarter. The reality is it has declined. It's stable. We certainly have seen good growth in some regions, like Mexico has performed very well. Asia, we feel good about. Certainly, we're in an uncertain global environment. The key thing at the end of the day is who is growing in an uncertain environment. The challenge that I've laid out for our organization is that American Express is going to grow in a slow-growth environment. We obviously would like to grow faster, what's key is that we grow faster than the competition.
Any long-term plan to ever reclassify American Express away from the bank category we are now in?
I think what's important is that we are unique in financial services. I also think we're unique in the services industry overall. One of the things that we're doing as a company, if you really look at our business, we're bringing together buyers and sellers. That presents a range of opportunities. While we are a bank holding company, and we take that very seriously, I think what also is important is we are a focused competitor. That gives us some advantages relative to financial services companies. It also has allowed us to be very competitive with a range of non-traditional companies, and that's something we intend to pursue.
Any possibility the board can review the mandatory director service retirement age, as we will always be losing high-value directors such as Edward Miller and Jan Leschly in the future?
Well, I think you're absolutely right. Jan and Ed are absolutely terrific, and we really miss them. At this point, we're going to keep the age requirement in place, despite the fact that we're losing two outstanding directors. Thank you very much for your comments. Any other questions, comments? Yes, Mr. Corba. Okay, why don't we go here, and then we'll have you, Mr. Corba? Yes.
Hi, I'm Christopher Edwards. I'm an independent shareholder, and my question is about cybersecurity. Wanted to make sure that if people are breaking into either the banks or into the corporate group, I wanted to know if that information should be made public, if and when it happens.
I think part of what I would say is certainly as a financial services company, and as you know, a company that has a reputation for keeping our customers' data secure, we take the threat of cybercrime very seriously. We have a very comprehensive information security program in place at our company. As you may know, the denial of service attacks, particularly over the last few months, have increased substantially, and they've been directed against several U.S.-based banks, including us. Last month, we experienced an attack that impacted our customers' ability to access their account information and complete other transactions online. We had plans in place to ensure that we minimized the business impacts, and we handled that very well.
We have executed a plan with a focus on ensuring that sensitive customer information was protected, and our customers could get service through other channels. I just want to assure you that we're very focused on that where appropriate, we will make that public. We're obviously working with the Secret Service, the CIA, the FBI, and everything we do is in accordance with their protocol.
One more. In terms of marketing, over the last year, I've talked with a lot of people. A lot of people aren't aware that we have traditional credit cards other than our charge cards. Bluebird's definitely an inroad in the right direction. What can we do to make people more aware of more traditional credit cards?
Well, I think what's happening when you say traditional credit card, you're talking about revolving credit cards?
Revolving.
Yeah, here's I think what's important, because I think the evidence would say that people are aware based on their behavior. If you look at our performance, we had accounts receivable growth of 4%. If you look at the bank cards, they were flat to negative. Our focus is on premium lending. We think that is the right wheelhouse for us. Our credit metrics are best in the industry. What we're finding is that we're able to make people aware, not just with above-the-line advertising, meaning TV advertising, but we're also using a lot of online advertising. We're bringing on 50% of the cards we acquire are coming through online channels. There's a lot we can do from an awareness standpoint and are doing. I think the point is that in the industry, we're one of the few that are growing.
The rest are flat or declining. I think we are making progress there.
Thank you.
Thank you. Mr. Corba.
Yes, I want to ask you two serious questions. I always got this here policy, if I don't know, I'm not baffled to tell you. First of all, I want to tell you, Ken, I'm very sorry to tell you that I don't have any kind of American Express card because any kind of business I do, I pay cash. I don't use any kind of charge. I'm about 18 years older than you.
You don't look it. You look very young.
No. I just want to make a comment to you because you just brought it up. For a man to make this kind of statement I'm going to make, I go with people all over. I don't drink, I don't smoke, I don't gamble. I do a very large amount of walking.
I want to make one more comment to you because I'm a little bit confused because you made a comment about increasing the $0.18 to $0.20 on March 26, 2012. You just made a comment that the dividend is going to be increased again from $0.20 to-
$0.23.
Yeah, when?
I think the date is the third quarter, I believe.
Oh, the third quarter.
Yeah.
Oh, okay.
Yeah. Okay?
Okay. Thanks.
All right. Thank you very much. All right. Well, thank you.
I do have a question.
Yes.
That gentleman asked about the accounting practices, and you said that you take it very seriously. How do you explain my charges that you violated the Sarbanes-Oxley and that I went to Pricewaterhouse personally to present evidence, and neither of you took that evidence and looked into whether Chris Sacca and Gene Park lied to Judge Garaufis that Amex didn't try to stop me prior to 2009, when in 2007, Jason Brown, and the quote's in the document, Jason Brown specifically stopped me from communicating with the Securities and Exchange Commission. I'd like to know, and the board director-
Mr. Lindner
of Pricewaterhouse can address it. Are you going to look into it?
No. Mr. Lindner, you had your opportunity to speak.
This is about due diligence.
You made your point.
No, I'd like to know if you're going to look into it.
No. We are not going to address that. Your matter is under litigation. Sit down.
It is?
Sit down, please. Sit down. We're not going to entertain the question.
Mr. Lindner, we've been in litigation with you. It is not proper for us to comment on the matters that are subject to litigation.
You can look into it.
We will not do that.
You can look into it.
Okay, we heard you.
And-
Is there another question? Was there another question up there?
Yes. We'll take one more question.
Hi, my name is Todd Paisley, I just wanted to point out that with respect to giving money back to shareholders, it doesn't make sense economically to pay dividends as opposed to retaining the money and repurchasing shares because shareholders have to pay taxes on any dividends that they are distributed. That same money could be more efficiently used if it's used to repurchase shares. Of course, anyone that wants to make money off of American Express in the interim period could just sell a small portion of their shares as opposed to expecting dividends from American Express. Secondly, I'd like to know how you are planning to increase the global network and merchant services business. I'm just curious because that's your best business in my mind.
Well, I would say two things. One is there are two sides on the issue that you just raised. We clearly believe that it's appropriate to give out a dividend. We also believe it is appropriate to do share repurchases. I think what's important is in 2012, 98% of the capital that we generated was returned to shareholders by both dividends and share repurchases. I think clearly from a shareholder standpoint, we've operated very well. Well, I'll simply say with GNS, we have a number of terrific businesses. GNS is a terrific business. We plan to continue to expand that business dramatically. We're working with 140 banks around the world in 150 countries. We're very pleased with the progress that we're making. I think what it emphasizes is the value that banks see in the American Express brand and the services that we provide.
It's allowed us to dramatically increase our scale and relevance. We think that GNS has significant growth runway ahead of it, and we're going to continue to be very focused on it. Thank you.
I'd just like to point out with respect to the repurchasing shares versus dividends, that Berkshire Hathaway's 2012 annual report, it lays out the math for why you don't want to issue dividends, but rather repurchase shares. I just want to point that out.
What I would say is Warren Buffett owns 13% of us.
Yes.
We like Warren Buffett very much. There are always two sides, and I think Warren would always agree that there are two sides to the story. Thank you for your comments and your views. What I'd like to do at this point is, Carol, have the Inspectors of Elections tabulated the votes?
They have. I will report them. In a moment, I will announce the votes. The votes I'm about to announce are preliminary. In accordance with SEC rules, we will file a report on Form 8-K with the SEC within four business days, and that 8-K report will contain the final tabulation of the votes. On the election of directors, the Inspectors of Election report that the 13 nominees of the board of directors listed in the proxy statement received the plurality of the votes cast. Each of the 13 nominees received at least 803 million votes, or approximately 93.2% of the votes cast. On the ratification of PricewaterhouseCoopers LLP, the Inspectors of Election report that at least 946 million shares, or 99% of the votes cast, were voted to ratify the appointment.
On the advisory vote on executive compensation, the Inspectors of Election report that at least 763 million shares, or 89% of the votes cast, were voted to approve the compensation paid to the company's named executive officers. On the proposal relating to the separation of chairman and CEO roles, the Inspectors of Election report that at least 664 million shares, or 77% of the votes cast, were voted against the proposal. On Mr. Lindner's shareholder proposal, the Inspectors of Election report that at least 862 million shares, or 99% of the votes cast, were voted against the proposal.
As a result of this morning's voting results, I declare the slate of 13 director nominees recommended by the board are elected for a one-year term. The company's shareholders have approved and ratified the company's appointment of PricewaterhouseCoopers for 2013. A majority of the votes cast have approved the compensation paid to the company's named executive officers, and the shareholder proposal on the separation of the chairman and CEO roles did not pass. I also declare that Mr. Lindner was not elected a director of the company and that his shareholder proposal did not pass. There being no further business to come before the meeting, I declare the meeting adjourned. Thank you very much.