Kenneth L. Chenault.
While completing his last year at Harvard Law School in 1976, Kenneth I. Chenault became an American Express Co. card member. (His first card was gold, the most exclusive offered by the company at the time, according to a recent Business Week story on him.) Five years later, after serving as a management consultant at Bain & Co. and an attorney at Rogers & Wells, he joined AmEx. His boss was Louis V. Gerstner Jr., who was then heading AmEx's largest division, the Travel Related Services Group (TRS). Their paths have just crossed again in a meaningful way. Chenault, who became president and COO of AmEx in 1997, is now, in a twist of irony, overseeing his former boss: In October 1998, he was elected to the board of IBM Corp., whose chairman and CEO is Louis Gerstner.
"Louis has always had his eye on Ken for his board," says IBM director Cathleen Black, adding that he has been trying to woo Chenault for years. Black, president of Hearst Magazines and an IBM director since 1995, serves on IBM's corporate governance committee, which has accountability for director selection. The timing was never right for Chenault. But, Black says, "Louis is very persuasive," and through persistence ultimately convinced Chenault that if he were to join any outside board, IBM was a place where he could make a significant contribution.
"Believe me, Ken has many, many opportunities to join literally dozens of boards," Black says. Executives of his stature must be extremely selective when considering joining boards because of the time commitment, she says, and they must also have a very strong belief in the future of the organization. She hails Chenault as an accomplished executive, and says IBM is a world-class company and the perfect board opportunity for him.
Chenault served under Gerstner for eight years. In his first job as director of strategy for TRS's merchandise services division, Chenault immediately established a successful track record: revenue from mail-order services tripled to $500 million in only two years. By the time Gerstner resigned in 1989 to head RJR Nabisco Inc., Chenault was managing the entire consumer card group for TRS.
The early '90s were turbulent years at AmEx. It was significantly trailing Mastercard and Visa in market share, prompting a series of massive cost-cutting restructurings and new marketing strategies to get AmEx back on track - areas where Chenault proved instrumental.
Frank Popoff, chairman of Dow Chemical Co. and an AmEx director since 1990, remembers those years vividly. "I joined AmEx during the beginning of the end of the Jim Robinson era," he says. He admits to being"a fan" of Robinson, but does say that it became appropriate for the longtime AmEx CEO to step aside. In 1993, Robinson was replaced by Harvey Golub, who immediately placed Chenault in charge of TRS, and together they forged a business strategy to regain market share.
Popoff describes Chenault, who is now 47, as a leader who has full support of his team, but is not necessarily a consensus manager. "Chenault has good ideas and stands up for initiatives he believes in," he says.
That is a quality that has manifested itself throughout Chenault's career, highlights of which include: Invigorating AmEx's traditional marketing strategy, which included expanding the line of AmEx jointly issued "co-branded" cards to 60 with such businesses as NatWest Bank, Peugeot Motors, and Delta Air Lines; significantly growing the number of merchant accounts; streamlining a number of TRS businesses into one finely tuned operation; and overseeing a massive $3 billion cost-reduction reengineering program (eliminating 16,000 jobs).
"Ken gave us the confidence to divest some of the things that needed divestiture" says Popoff. "It's hard to make a decision to divest a number of well-performing businesses without the full confidence that the core business was in good hands. Ken was instrumental in helping us with those decisions."
Popoff views Chenault's insider status on the AmEx board (Chenault became an AmEx director in 1997) as a definite plus, adding that Chenault has the "ability to leave his line job in the hall" and address in a totally objective way the governance issues on behalf of the shareholders. "Chenault clearly articulates strategic issues and budgetary processes from a perspective not tainted by the near-term interests of the business or units he might be responsible for," something the Dow chairman says he might expect from a lesser director. Popoff adds that "Chenault offers the AmEx board significant insight and helps his outside board colleagues grasp internal issues that they simply are not tuned into as is someone from the management rank."
Earl Graves, publisher of Black Enterprise magazine, has been Chenault's close friend for more than 20 years. He also sees Chenault as having as his paramount goal to grow AmEx and create value for shareholders. During a get-together over this past Christmas holiday, Graves says he complimented Chenault on the job he's done at AmEx, citing how much its card business has grown. "Five years ago," he recalls telling Chenault, "there were many businesses that wouldn't take AmEx. Now, whether it's Tiffany's, Wal-Mart, or even Safeway, they will grab it and eagerly use it."
"Chenault's perspective and strategic thinking is always reflective of his sense of doing good for the shareholder," says Graves. "If you hear him talk about AmEx, the first or second line will be something that has to do with shareholder value."
Chenault, who declined to be interviewed for this article, also serves on nonprofit boards, including the Arthur Ashe Institute of Urban Health, which develops training programs and health education services in medically underserved urban communities. He has been a director of the organization since its inception in 1992, and currently is vice chair of the financial development committee. Ruth Browne, director of the institute, says that Chenault is always well informed, articulate, efficient, very focused during deliberations, and generous in using his resources, particularly in accessing people who will lend their time, expertise, and finances to help the organization.
Says Browne, "Let me put it this way: We don't just have access to his Rolodex. Ken will access his Rolodex for us. That's really what you need in a board member, and that's what he does."
Robert Catell, chairman and CEO of Keyspan Energy Co. - which traded on the NYSE until 1997 as Brooklyn Union Gas Co. and now trades as Keyspan had the dual pleasure of working with Chenault in both the corporate and nonprofit sectors. He first met Chenault as a director of the Junior Achievement Program of New York.
The group had a high-level board, then chaired by former IBM CEO Frank Carey. Catell recalls how impressed he was with seeing Chenault in action on that board, and thought he had many attributes that would be beneficial to any board, including his own.
So, in 1988 Catell invited Chenault to serve on the board of Brooklyn Union Gas. The utility industry was becoming deregulated, and Catell thought Chenault's background in marketing and financial services would be useful as the company headed into a competitive environment. Chenault served as a director of Brooklyn Union (now a subsidiary of Keyspan) until 1998.
"Ken advised me on marketing and the importance of establishing a brand identity," says Catell. "He's also been helpful in giving us guidance on selecting the best candidates for management positions, particularly if that person came from a diverse background."
In addition to AmEx and IBM, Chenault's corporate directorships include Quaker Oats Co. He has been a director there since 1992.
The media, most recently in a Business Week December 1998 cover story, often portray Chenault as one of the top-ranked African American executives in the country, perhaps even the first to become CEO of a Fortune 500 company. (While Graves is certain Chenault will someday earn the brass ring at AmEx, he predicts that Maytag Corp. President and COO Lloyd D. Ward will be the first, as Maytag CEO Leonard A. Hadley is scheduled to retire in the spring of 1999).
Hugh Price, president of the National Urban League and a director of Sears, Roebuck & Co., Bell Atlantic Corp., and Metropolitan Life Insurance Co., says that what's so exciting about Chenault's IBM appointment is that "It is symptomatic of a whole new wave of African American corporate directors who have become steeped in the business world, are on a CEO track, and understand the intricacies and nuances of corporate operations." Price, who is also Chenault's neighbor, points out that, historically, there have been many fewer African American senior corporate executives than there are today. Much like himself, he adds, African Americans traditionally became involved with the Civil Rights movement, or assumed administrative and management positions in higher education or law. Chenault's IBM board appointment, Price feels, is reflective of this wave that is "taking African American directors to a whole new plateau."
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|Title Annotation:||American Express Co.'s president appointed to the International Business Machines Corp. board|
|Publication:||Directors & Boards|
|Date:||Jan 1, 1999|
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