American Express Ties Executive Bonuses to Companywide Performance

At American Express, the previous bonus system encouraged business-unit leaders to compete for investment capital by tying their rewards to the relative performance of their own units. Leaders had incentives to advocate for resources for their divisions even when capital might generate higher returns elsewhere in the company.

The approach sharpened internal rivalries, according to one longtime executive. The company determined that the system led senior leaders to view their roles more like owners of separate divisions than builders of the overall enterprise. This became particularly evident during the pandemic when customer spending patterns shifted rapidly and the company needed to reallocate investment quickly across different parts of the business.

In response, the company eliminated the unit-versus-unit comparison for bonuses. Bonuses for the executive team will now rise or fall based on companywide measures including earnings per share, revenue growth, and shareholder return. The board sets targets around these metrics, and the leadership group shares in the outcomes.

The company reported that this change redirects internal discussions toward identifying the highest-return uses of capital across all operations. The new model requires additional emphasis on performance management to address situations where weaker units might benefit from strong overall results or stronger units feel they are subsidizing others.

It also increases the importance of holding individual leaders accountable when their units underperform. The company said the adjustment created a more unified operating approach during a period when internal divisions could have been exposed.

Background on the Change The prior system had a predictable annual cycle in which unit heads made their cases for larger shares of investment. This structure was intended to drive performance but also fostered competition that did not always align with enterprise-wide interests.

One longtime executive described resulting tensions that sometimes reduced overall effectiveness. The company implemented the revision to align incentives around shared outcomes. This removes the element in which one unit's success directly diminished another's compensation prospects.

The company stated the goal is to foster collaboration on capital allocation decisions that maximize returns for the enterprise as a whole.