American Express Thrives on Diversity : Despite Clashes, Loose Rein on Executives Benefits Huge Complex

NEW YORK â€”  Slowly sipping a soft drink in his suite overlooking the Hudson River, James D. Robinson III, chairman of American Express, is a study in repose.

His voice is soft and smooth, as are his cherubic face, whose unfurrowed complexion resembles that of a child, and his manner, which is unassuming, courteous, even deferential.

His appearance and demeanor seem to mirror his career: Scion of a wealthy Atlanta banking family and graduate of the Harvard Business School, he ascended the ranks of American Express with apparent effortlessness--and he was named chief executive in 1977 at the age of 41.

He has become a prominent spokesman for business on public policy issues and is active in charity work. He plays in pro-am golf tournaments and mixes with celebrities: Henry A. Kissinger and Gerald R. Ford are on his board of directors.

There is no hint that he resides at the center of one of the most turbulent and unconventional major corporations in America.

The foundation of American Express is a gigantic, 130-country complex of machines tended by most of the company’s 76,447 employees that processes an incessant torrent of transactions involving credit cards, traveler’s checks, and other financial services in an environment as placid as Robinson’s office. The executive superstructure, though, seethes with political strife, cultural clashes, divisional rivalries, executive turnover, and an abiding restlessness and inconstancy.

Lost Power Struggle

Last week’s resignation of Sanford I. Weill, 52, the company’s president, who came out second in a long power struggle with Robinson, is just the most recent example. Weill will leave the company on August 1.

Such ferment has debilitated many companies. Yet despite the casualties, Robinson has molded the turmoil at American Express into an energizing and creative force. In the process, he is providing students of corporate behavior with an arresting model of how a giant corporation like his, with revenues last year of $12.9 billion, can escape the perils of bureaucratic ossification.

Despite his “Harvard Club� background, to use one of his pejoratives, Robinson is an apostle of “constructive conflict� and “cultural variety,� which he says “makes you able to deal with change, spot new things to do, innovative ways to serve the marketplace.�

Largely due to federal deregulation, change has become endemic in the once-staid financial services industry. Deregulation initially seemed to offer a veritable cash machine of new opportunities. Outsiders such as Xerox and RCA rushed to acquire financial services concerns, while existing players such as banks and insurance companies rapidly broadened their product lines.

The cash machine has turned out to be less than bountiful, however. Intense competition has caused many companies to retrench or leave the business. Three of the biggest and most ardent financial services conglomerates--Sears, Roebuck, Prudential and Merrill Lynch--have found returns below expectations.

American Express’ record stands in sharp contrast.

Very Successful

It has been increasing its assets, now $64.5 billion, faster than any other financial institution. Its $610 million in net profits last year, according to Fortune magazine’s annual list of non-industrial companies, were more than those of any other diversified financial company, any insurance concern (excluding investment earnings), and any commercial bank other than Citicorp, the only other major financial institution whose success rivals that of American Express. The market value of American Express’ stock--more than $10.7 billion--is greater than any other financial company by a wide margin.

While most of its major competitors, especially Sears, are endeavoring to consolidate their wares in so-called financial department stores, American Express stresses, indeed revels in, diversity. It strives for collaboration whenever possible. But it is basically a company whose diverse divisions--each run autonomously by its own board--sell diverse products in diverse markets.

That approach is deeply rooted in the company’s history. Displaying a remarkable ability to redefine itself, American Express was founded in 1850 as a freight forwarder, then moved into credit cards, traveler’s checks, and international banking.

The Travel Related Services division, handling cards and traveler’s checks, remains the core of the company, accounting for 63% of its profits last year. Generally acknowledged as one of the most astute consumer marketers, American Express has handily defended those products against a rash of competitors.

But most of the company’s more recent growth has been through acquisitions. It bought Novato, Calif.-based Fireman’s Fund Insurance, a large life and property-casualty concern, in 1968. But the biggest deals have come under Robinson.

The most notable: Shearson Loeb Rhoades, the second largest brokerage house in the country for $530 million in 1981; most of the non-U.S. assets of Geneva-based Trade Development Bank Holding for $520 million in 1983; Investors Diversified Services, a major investment manager and marketer of mutual funds and insurance, for $727 million in 1984; and Lehman Bros. Kuhn Loeb, a top investment banking firm, for $380 million in 1984.

The personalities within these divisions range widely: driving stockbrokers at Shearson; more aristocratic corporate financiers at Lehman; secretive, Middle Eastern bankers at Trade Development Bank; homespun, Midwestern door-to-door sales people at IDS; conservative, clubby underwriters at Fireman’s Fund. Yet all have become important contributors to American Express’ bottom line.

Robinson also acquired an array of strong managers that is extraordinary in its diversity, ranging from brash, pragmatic entrepreneurs from Shearson such as Weill, to conceptual strategists from the management consulting firm of McKinsey & Co. such as Louis V. Gerstner Jr., who will replace Weill as president, to more traditional professional corporate managers from General Electric such as Robert F. Smith, chairman of American Express’ international bank.

Few of the company’s senior managers have been at the company more than 10 years and most, like Robinson, are in their 40s.

Executives Are ‘Tigers’

“A huge number of financial services companies are run by dummies,� says Alan E. Levi, who follows the industry for Alliance Capital Management, a large investment manager. “But the people at American Express are tigers. The company tolerates wide latitudes of idiosyncrasies and doesn’t force people into the corporate mold. At times it can be cutthroat, but they have more vitality, aggressiveness, and entrepreneurial spirit than nearly all of their competitors.�

“At many financial services companies like Prudential, you have consistent patterns of people rising up through the organization so that the institutional way of thinking is reasonably consistent,� says Harvey Golub, who was recruited from McKinsey last year to run IDS. “The top people at American Express came out of different markets, and have different perspectives. That makes for an awful lot of discussion and argument and keeps us very flexible.�

Largely due to his unobtrusive personality, Robinson’s pivotal role at American Express is widely misunderstood. “He’s a nice guy, but a yawn, the weak link,� says a Wall Street analyst in a typical remark.

Michael A. Lewis of E. F. Hutton disagrees, “Robinson’s the diplomat, the mediator, the guy who keeps everything from flying topsy-turvy and turning into a battle royale.�

Harold B. Ehrlich, until recently chairman of a Shearson investment management unit, uses another analogy: “He’s like an orchestra conductor. He’s got a bunch of high-strung prima donnas, some really smart, tough guys, half of whom would drive you up the wall, and he gets them to work together and brings out the best in them.�

Lengthy Training

Robinson has been training for that role since his youth. A very competitive sports buff, he was held back by his short, slight stature, irksome especially for the son of a very large man, then chairman of the First National Bank of Atlanta, known as “Big Jim.� Robinson compensated by hanging around with school jocks.

At a football game during his first year at the Georgia Institute of Technology, some bullies made passes at his girlfriend. When he protested, one of them punched him. Humiliated, he began pumping iron four hours a day and by graduation had raised his weight from 120 pounds to 205 pounds.

But he gradually learned there were other ways to deal with one’s limits. In a Harvard Business School course, he was part of an eight-person project group, each of which was to select a leader.

“Six members in my group were Baker Scholars (the school’s most academically distinguished students) and I wasn’t one of them,� he recalls. ‘But somehow they elected me leader. Maybe it was because I was the least threatening. But getting bright, competent people around me really turns me on, and that’s when I’m able to do my best.’

He initially advanced his career by cultivating expeditious relationships with “godfather figures,� as he terms them. He became an assistant to Thomas S. Gates, chairman of Morgan Guaranty Trust. He was recruited for American Express in 1970 by Eugene R. Black, a company director, former head of the World Bank, and a long-time friend of Robinson’s father.

Howard L. Clark, American Express chairman and an imperious figure not known for surrounding himself with strong-willed associates, was very taken by Robinson and it became clear he saw Robinson as his successor.

Unauspicious Start

Robinson, though, had little administrative experience prior to joining the company, and his first major job--running the international bank--was, by several accounts, not auspicious. At Clark’s urging, he took speech lessons to improve his voice projection. In anointing him chairman, Clark had to assuage much skepticism among some directors that Robinson’s wasn’t strong enough to run the company.

That skepticism soon reasserted itself. Anxious to put his own stamp on American Express with some acquisitions, Robinson held discussions with Walt Disney Productions, Philadelphia Life Insurance, and Book-of-the-Month Club, but none came to fruition.

Far more embarrassing was Robinson’s widely publicized and badly executed effort in 1979 to take over McGraw-Hill, which was beaten back by a fierce counterattack.

Robinson did manage that year to acquire a 50% interest with Warner Communications in Warner Amex Cable Communications. But since then, despite an investment by Robinson’s company of $350 million, the cable TV firm has never turned a profit and American Express recently announced a plan to dispose of its interest. (It is still awaiting a response from Warner.)

The 1981 Shearson acquisition, widely seen as among the shrewdest financial services acquisitions in years, did more than revitalize Robinson’s reputation.

The infusion of Shearson executives, especially Weill, revitalized American Express’ rather plodding, hidebound culture.

Sense of Urgency

What was called the “Shearsonization� of American Express “introduced a sense of urgency, an entrepreneurial spirit,� Robinson says.

Much less visible was the redefinition it occasioned in the way Robinson regarded his role. Says Salim B. Lewis, head of the investment firm of S. B. Lewis & Co., who conceived and helped execute the deal, “Jim knows he doesn’t have a killer instinct. And he’s not a guy who feels he should put the ball through the goal. But he is the guy who can sit on the sidelines and organize the players and knows where the ball should go.�

“He knows what buttons to push--money, status, recognition, whatever,� says Ehrlich. “ He plays on your personality in a way to make you do things for him.

“Jim has always liked to dazzle people with athletic feats, high-wire stuff,� says a long-time acquaintance. “He likes being able to hit the golf ball a mile. He always liked people to know how tough his schedule is, how he can take a night flight and arrive fresh in some distant city. I’m sure he would like to be a street fighter like Sandy Weill and the others. But isn’t it just as impressive, maybe even more impressive, to manage all those tigers by the tail?�

Easier said than done, it turned out, at least with Weill.

The press carried stories with headlines like “The Odd Couple� showing Robinson and Weill smiling with their arms draped around each other. And, by all accounts, they achieved a comfortable, if less than intimate, working relationship. Yet even before the Shearson deal was consummated, according to sources with close knowledge of the company, Weill was planning how to take Robinson’s job.

Weill had agreed to the deal in part due to Robinson’s assurance that he could move into American Express’ top management. Initially, he asked to be named to the then-vacant post of president. But Robinson demurred, and in part to forestall Weill, he promoted to president Alva O. Way, a former General Electric executive who was vice chairman.

Higher Aspirations

While still retaining the chief executive slot at Shearson, Weill settled for chairman of American Express’ executive committee and a position on the board. But he made no secret of higher aspirations.

Installing Shearson’s public-relations man on the American Express payroll, Weill, who relishes publicity, was readily available for press interviews in which he often gave the impression he was Robinson’s successor and was already more or less running the company. He quietly lobbied other directors on his executive skills. He won the right to sign the letter to shareholders in the 1981 annual report along with Robinson and Way. The betting on Wall Street was that Robinson would be on his way back to Atlanta within a year.

(Weill today acknowledges he aspired to become chief executive. But he denies he “regarded Jim as a rival� or that he “ever did anything politically to force that issue.�

If Robinson resented the public image Weill was fostering, he apparently never said anything about it to associates. “He was pleased when Sandy got the headlines,� says an American Express official. “He’s always thought that was an important part of Sandy’s needs.�

The American Express board, though, was not pleased. Several directors had initially opposed the Shearson deal because they disliked Weill’s temperamental, confrontational personality.

“Weill set the board on edge,� says one director. “Jim was letting him get away with murder. We gave Jim the message we didn’t want co-leaders. Either he would be the boss or we’d get someone else.�

Subtle Strategy

Robinson’s strategy as others at the company perceived it was subtle but effective. He did nothing to curb Weill’s visibility. But he gave Weill few continuing line responsibilities. Weill became a trouble-shooter and idea man, a minister without portfolio. While not satisfying Weill’s political ambitions, the system took full advantage of his creative talents.

Expanding Weill’s franchise, further, might have impeded Robinson’s policy of giving his divisional managers maximum autonomy.

Robinson made Weill president in 1983, when Way, who reportedly felt squeezed by Weill, left to take a post at Travelers Corp. Weill, in turn, relinquished the top spot at Shearson to Peter A. Cohen, 39, the firm’s vice chairman.

But then Robinson brought on center stage another ardent if less flashy aspirant for higher office, Louis Gerstner, 43, who moved into the executive committee chairman job.

Head of the Travel Related Services division and a highly organized team player, Gerstner is credited with the impressive performance of the American Express Card in recent years, and prior to the Shearson deal was considered Robinson’s heir apparent. He was said to have been upset about the rash of attention accorded Weill and Shearson while he and his division, the company’s “cash cow,� were ignored.

Gerstner soon had more actual executive authority than Weill. He continued to run Travel Related Services, co-signed the letter to shareholders, and last year was given expanded parent company responsibilities in corporate finance and strategy.

Weill took on such temporary chores as overhauling the management of Fireman’s Fund, which suffered severe losses in 1983. But his only continuing function, other than oversight over IDS and Fireman’s Fund, was chairman of the board’s finance committee. The heads of IDS and Fireman’s Fund reported to him, but they operate largely autonomously.

Infuriated Executive

With his role at American Express increasingly circumscribed, Weill reasserted some of his former prerogatives at Shearson. This infuriated Cohen and exacerbated a longstanding rivalry between the two men.

Cohen, tough, cocky, but more controlled than Weill, had been Weill’s chief assistant for years. While Weill conceived of the dizzying sequence of 17 acquisitions that had built Shearson into a major firm, Cohen was left to make the pieces fit together. While Weill was heralded as the conceptual genius, Cohen was seen as merely a good detail and systems man.

Cohen admired Weill. But, in a recent interview with Institutional Investor magazine he explained a brief departure from Shearson in the late 1970s to work at Republic National Bank by saying, “I’d . . . always worked in (Weill’s) shadow. A lot of people wondered if I was really me or just a product of Sandy; and even though I was confident of my abilities, sometimes I’d sit there and wonder that myself.�

He once told Euromoney magazine that he wanted “to make Sandy so successful that he has to do something else. . . . My job is to push him up and out.�

In January, 1983, the same month Weill moved up and out of Shearson, Cohen negotiated the acquisition of Trade Development Bank, which was headed by Lebanese-born Edmund J. Safra, a billionaire who is considered one of the savviest international bankers. Cohen had served as Safra’s assistant at Republic National Bank, which Safra controls.

Weill, though, reasserted himself by negotiating a deal in principle seven months later to acquire Investors Diversified Services and other assets of Alleghany Corp.

Didn’t Like Price

That did not turn out to be the triumph Weill had intended. The deal had been announced hastily due to leaks. After studying it more carefully, American Express executives concluded almost unanimously that while the concept was astute, the terms were ill-conceived and the price was, as one puts it, “outrageous.�

Giving Alleghany Chairman Fred M. Kirby II very close to what he had asked for, Weill had agreed to pay more than $1 billion in American Express stock. That was three times Alleghany’s book, twice its market price, and 20 times its earnings. And the 22.9 million American Express shares Alleghany would receive, about 10% of the total, would dilute the interests of existing shareholders.

Asked why Weill, a reputably tough negotiator, acquiesced to Kirby’s offer, one person involved in the negotiations responds, “After Peter’s deal, Sandy was just dying to do his own deal.�

Opposition within American Express to the Alleghany deal became so intense that Robinson backed out the following month. Weill, say friends, was mortified. And he was incensed that the deal’s most vocal critics were Cohen and others at Shearson, who saw IDS as a competitor. At one point he even considered trying to fire Cohen.

In September, American Express and Alleghany agreed to new terms calling for a mixture of stock and cash worth $773 million. (The final price of $727 million reflected a later decline in American Express stock.) Weill defends the original price and terms and maintains that IDS “will turn out to be one of the smartest things American Express has ever done.�

Cohen came back six months later by pulling off the deal with Lehman Bros. Kuhn Loeb.

Sometimes Frustrating

“The rivalry between Sandy and Peter has been a mentor-protege, father-son sort of thing,� Robinson says. “Sometimes it’s been frustrating to one or the other, but to the extent that it’s been part of the element to do deals, I think it’s terrific.�

The rivalry between Weill and Robinson, say friends of the two men, has also been beneficial to Robinson. “It was a time of trial by fire for Jim,� says one. “He was out-dazzled for a while. But I think Sandy’s challenge has made him stronger and more confident.�

As the loser of both, neither of the rivalries was beneficial to Weill. “Sandy became increasingly isolated,� says a friend. “He had no real constituency.� He complained to associates that he was nothing but Robinson’s “deputy dog.� But Robinson made it clear, says one source, “that every other channel (at American Express) was closed.�

Last month, Weill put together a proposal to acquire Fireman’s Fund from American Express through a leveraged buy-out. But some of his friends didn’t take the idea very seriously. Says one, “It was the last flailing of a guy who didn’t know what to do with himself and was trying to find a way to be in charge of something.�

When the board last Monday rejected the proposal as too low, Weill felt he had no choice but to resign, effective on Aug. 1. His joint press interviews with Robinson the next day projected the same warm camaraderie of those after the Shearson deal, with both men affirming their friendship.

Asked why he was leaving, Weill replied, “I want to do my own thing, to run and build something again.�

Relieved at Departure

Though publicly regretful, Robinson reportedly is also relieved at Weill’s departure. Indeed, while outsiders have often criticized American Express for its high executive turnover, Robinson feels that is inevitable, even healthy for a company trying to maintain a strong managerial cadre.

“We’re going to lose some people along the way,� he says. “But we’ll have benefitted from their time here. . . . A company where no one leaves suggests a lot of mediocrity that is built in.�

Much of the turnover at American Express has been much less amicable than Weill’s resignation. It illustrates the trauma often associated with the company’s polyglot cultural mix. Yet while individuals have often suffered, American Express and Robinson have invariably emerged unscathed and better off from the experience.

Last October, for instance, Safra, who had been serving as head of the company’s international bank, resigned amid much mutual recrimination. Though the rift was deep and complex, the root problem seemed to be that even as tolerant a company as American Express wasn’t able to accommodate Safra’s freewheeling, secretive style.

“Edmund couldn’t make the cultural and mental jump from being his own boss to being part of a big organization,� Robinson says.

Safra, in response to written questions, calls that statement “dangerously misleading� and blames American Express’ “approach to the management of assets and real enhancement of shareholder value,� an apparent reference to the sharp decline in the value of the company’s stock he received for TDB during 1983 and 1984. The stock, which was depressed by major underwriting losses reported by Fireman’s Fund, later climbed after he disposed of his holdings.

Posted Record Profits

Early fears Safra’s departure would precipitate huge withdrawals by TDB depositors, many of whom were personal friends, have not materialized. (Safra remains on the American Express board and is barred from setting up a competing Swiss bank until 1988.) Despite a very large portfolio of Latin American loans, American Express bank last year posted record profits and a higher return on assets and equity than nearly all major U.S. banks.

“We learned a lot from Edmund,� says Smith, the bank’s chief executive. “But I think we’re a lot better off without him.�

The acquisition of Lehman Bros. was even more stressful. The once proud partnership had surrendered its independence largely due to a power struggle between its two top executives, and many of its employees were angry and embittered.

And they didn’t feel especially warm about their savior: Firms such as Lehman--which serve primarily institutional and corporate clients--tend to look down on firms such as Shearson--which serve mainly individual or “retail� investors--as declasse. Numerous partners and associates fled following the acquisition. “It was culture shock,� says one. “Who wants to live with a bunch of retail hacks?�

Not unlike American Express itself, though, Shearson is something of a monument to the harmonious integration of disparate personalities, having assimilated over the years virtually every sort of firm, large and small, on Wall Street. It has achieved this largely through a managerial structure that, regardless of the firm’s size, is quite informal and collegial.

Increased Lead

Shearson has smoothly absorbed most of Lehman. But troubles remain in its prestigious investment banking operation, which was Lehman’s chief attraction to Shearson and which has lost some key partners and clients.

Says a former senior Lehman partner who left prior to the sale and who retains close contacts at the firm, “It’s a clear disaster. People are just miserable. Their business has been really falling off.�

But some Lehman partners still at Shearson take issue with that assessment. Cohen steadfastly maintains that “90% of (the acquisition) is working like a clock. It’s even better than we had reason to expect.� Long the most profitable large retail firm on Wall Street, Shearson increased its lead in 1984, with a profit margin more than twice that of any of its competitors.

A key to Shearson’s profitability has been strict cost control, especially its practice of retaining only the most essential employees of the firms it acquires and jettisoning--ruthlessly, some critics charge--everyone else. As a Shearson officer once put it, Weill “takes no prisoners.�

Neither does Cohen. He says the bulk of the hundreds of Lehman people who left were asked to leave because, says Cohen, “they couldn’t cut it.�

Some observers contend that its “no-prisoner� approach is among several less-than-pleasant facets of the Shearsonization of American Express. Says Levi of Alliance Capital Management, “These guys are not nice people.�

Not long after revised terms for the IDS deal were announced, Walter D. Scott, the firm’s president, was summoned to New York. At the company’s quarterly meeting with security analysts, Robinson introduced him and praised his record at IDS. That evening, Weill took him out to dinner and fired him as chief executive. (He was given the title of chairman but soon left the company.)

Cruel Behavior

“What did they have to gain from publicly humiliating a man like that?� asks a former American Express executive, who did not work at IDS. “That’s typical of their unnecessarily cruel behavior.�

Scott, now head of U.S. operations for Grand Metropolitan, a diversified British concern, does not dispute that characterization of the incident. But he adds, “It made sense to put their own guy in.�

Harvey Golub, the new chief executive, has restructured and redirected IDS, introduced numerous new products, and sharply increased revenues and profits.

The most frequently cited instance of corporate callousness involves Fireman’s Fund.

The unit had long been one of American Express’ biggest profit producers. But due to a sudden jump in claims on property-casualty policies beginning in August, 1983, Fireman’s Fund suffered a pretax loss for the year of $242 million. Due to a $230-million increase in its reserves, its contribution to American Express’ after-tax profits dropped from $244 million to $30 million. That ended the company’s proudly flaunted record of 36 annual earnings increases.

American Express executives essentially blamed Fireman’s Fund for the loss. And though conceding they should have been more aware of what was going on in California, they claimed, as Robinson put it, to have been “blind-sided� by Fireman Fund’s failure to give sufficient warning of the developing problem.

Robinson dispatched a team of New York executives headed by Weill and William M. McCormick, head of the card and traveler’s check division. Weill, associates say, had long felt that Fireman’s Fund, like many of the brokerage firms Shearson had acquired, was over-staffed and under-motivated. Coming out of the IDS embarrassment, they say, he was anxious to move decisively at Fireman’s Fund.

Mass Firings

During what some called the “December debacle,� Weill and McCormick fired 1,150 of the firm’s 14,000 employees, including virtually all the senior executives, and began instituting numerous reforms.

Several of those laid-off executives interviewed by The Times claim New York should shoulder a large portion of the blame.

To them, the underlying cause of the problem was that, as former American Express chief financial officer Sigurd D. Medhus puts it, “Fireman’s Fund was under pressure, too much pressure, to grow,� to improve earnings at a time when the property-casualty insurance business was in a severe down-cycle.

In response, and with the full approval of New York, Fireman’s Fund announced publicly a new strategy to double market share in five years. Though urged by Fireman’s Fund management to avoid excessive price competition, its sales force of 10,000 independent brokers booked a lot of new business at what turned out to be excessively low prices.

That came at an unfortuitous time. Nearly all of the large commercial insurers were hit by an unanticipated surge of claims during the second half of 1983. Former Fireman’s Fund officials concede that installation of a new computer system delayed their awareness of the surge. But they contend that they had been warning New York for months, as a letter in August to Robinson by Fireman’s Fund Chief Executive Edwin F. Cutler put it, about “our ability to overcome the disastrous effects of the insurance industry’s price war.�

‘Made Us Scapegoats’

“They just made us the scapegoats,� says a former senior executive. “I’m not saying we did everything right or that the place couldn’t have stood some improvements. But it could have been done with much less pain and bloodshed.�

“These things are never done with all the grace and skill you might have hoped,� Robinson responds. “But those people were running at 30 miles an hour when the rest of us were running at 90 or 100. . . . We decided we had to change the culture by starting at the top and convincing them we meant business.�

“Immediate action had to be taken,� says Cutler, who was among the casualties and is now retired. “I may not agree with the way things were done, I don’t get warm and friendly thinking about it, but it was their decision to make.�

Fireman’s Fund’s property-casualty division is still operating in the red, despite major cost cutting. Weill concedes that “the turnaround has been a lot slower than I thought it would. I thought it was like a brokerage house and we could do it in 30 days.�

Analysts are generally impressed with the numerous reforms that McCormick has instituted in systems, training, claims mangement and other areas, but they are reserving judgment on the long-term payoff.

“We were in a bigger hole than anyone felt,� McCormick says, “But I think we’re on our way to bvuilding a tight, lean, competitive fighting force.�

Last week, American Express announced it would arrange a public offering of shares in Fireman’s Fund’s property-casualty operations while retaining full ownership of the relatively small life division. Many analysts see the move, expected within the next three or four months, as a prelude to full divestment of the division, which American Express executives have said does not fit with the consumer financial services orientation of most of the rest of the company.

The extent to which its different divisions have an affinity with one another has long been a matter of concern to American Express executives. Shortly after the Shearson merger, Robinson proclaimed that American Express was “not a conglomerate with a variety of disparate businesses� but “one enterprise.� The idea was that if its subsidiaries could market each other’s products, the whole would be greater than the sum of its parts.

All of the major financial services conglomerates have found such synergies elusive. Though American Express has over 120 cross-marketing projects under way, cultural differences and divisional rivalries have made synergy especially problematical.

More Myth Than Reality

“It’s more a myth than a reality,� says Medhus, the former chief financial officer. “Even though the people at the top say, let’s work together, the deeper into the organization you go, the more parochial people become.�

Leery of alienating its customers, the card division has resisted proposals from other parts of the company, as a Shearson executive put it, to “penetrate American Express’ cardmember base.�

Not long ago, the card division got into a battle with the international bank when the bank tried to foreclose on a loan and, thus, close down a Hong Kong club that was a big generator of card revenues. The dispute went all the way to Robinson, who told the bank to hold off.

American Express has had better luck with nonmarketing synergies such as centralized financial management and various cross-fertilization projects. It is pulling together employees in different divisions with similar functions, such as customer service, to work on common problems. And it uses talent from one division to solve problems in other divisions.

But overall, American Express has been backing away from some of the more extreme one-enterprise visions.

“We’d like to get some extra leverage from synergy, but that’s not the fundamental rationale,� says Gerstner. “We’d rather have a group of enormously successful, carefully positioned speciality shops than go the department store route.� American Express points to numerous surveys showing little evidence consumers are anxious to buy all their financial services in one place from a single vendor.

Sharpened Focus

Earlier this year, the company even dropped American Express from the name of units like Shearson and IDS to “sharpen� the company’s “focus on our individual brand names as well as on the multiple distribution channels and carefully targeted market segments.�

Though American Express is the nation’s largest manager of other people’s money--it handles close to $80 billion--it conducts this business through more than a dozen separate units with widely varying strategies. Often one will be selling General Motors when another is buying. They often compete for business.

“You’d have to be crazy to try to pull everything together,� says American Express’ communications chief Harry L. Freeman. “You need different strokes for different folks.�

While that may be an effective marketing tactic, unauthorized, nonattributable interviews at the company suggest some internal yearning for more stability, cohesiveness and central leadership.

“Everything is too much in a state of flux,� says one executive. “Everyone is wondering, where are we going, why are we going there. You want vitality, but you also need confidence that decisions are being made rationally.�

“Jim may be sitting on top of four or five wild horses, but I’m not sure he has the reins very tightly in his hands,� adds a former senior officer. He may control the managers, but he is in less control of what they do. The direction American Express sometimes seems less a function of Robinson’s vision, say sources at the company, than the flow of ideas from others crossing his desk.

“You don’t have a sense of his presence,� says a lower-level employee. “You don’t hear his name mentioned.� Another executive confides, “Despite what they tell you, there really isn’t a long-range plan around here.�

Robinson, though, remains content with his approach, and he would certainly seem to have the numbers on his side. Recently he was asked whether American Express was thinking about further acquisitions soon.

“Who knows?� he answered.

Did that mean he didn’t want to comment or really didn’t know?

“That’s really it. I don’t know. Look, if anybody tells you they have visited with the future and that it’s clear, I’d say, watch out! Because things keep changing.�

THE MAJOR ACQUISITIONS OF AMERICAN EXPRESS UNDER JAMES ROBINSON

Price paid (In millions Company Year of dollars) Shearson Loeb Rhoades 1981 $915 Boston Co. ’81 47 Foster & Marshall 1982 76 Robinson-Humphrey & Co. ’82 77 Balcor Co. ’82 53 Davis, Scaggs Co. 1983 * Ayco ’83 * Chiles, Heider & Co. ’83 * Investors Diversified Services ’83 * Trade Development Bank ’83 550 Columbia Group 1984 * Lehman Bros. Kuhn Loeb ’84 360

* undisclosed