'The brand is special': Warren Buffett called on American Express' CEO to protect its reputation during the coronavirus pandemic

• Warren Buffett called on American Express CEO Stephen Squeri to safeguard the company's brand and customer relationships during the coronavirus pandemic.
• "The one thing he has and will continue to always point out to us is that the brand is special," Squeri said about the billionaire investor and Berkshire Hathaway boss in mid-March.
• "The most important thing about American Express is the brand and the customers that aspire to be associated with the brand," Buffett told Squeri when he became CEO, Squeri said this week.
• American Express followed Buffett's guidance by prioritizing service, adjusting rewards, and offering relief to struggling customers.
• Visit Business Insider's homepage for more stories.

Warren Buffett gave a key piece of advice to American Express CEO Stephen Squeri about navigating the coronavirus pandemic as it threatened to spark a surge in late payments and defaults: protect the company's brand and customer relationships.

"I talked to our largest shareholder, Warren Buffett," Squeri said on an investor update call in mid-March, according to a transcript on Sentieo, a financial-research site.

"The one thing he has and will continue to always point out to us is that the brand is special," the head of the financial-services titan continued.

"That brand needs to be cared for, the brand needs to be invested in and we will continue to do so through tough times and through the good times," he added.

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Safeguarding the Amex brand meant focusing on service, Squeri argued on the call.

"It is so important that we take care of our customers during this time," he said. "Some of them are going through stressful situations."

Prizing customers

Buffett offered similar advice to Squeri shortly after he became American Express CEO in 2018.

The investor told him that "the most important thing about American Express is the brand and the customers that aspire to be associated with the brand," Squeri said at a Bernstein conference this week, another Sentieo transcript showed.

Squeri took Buffett's guidance on board as US officials began shutting businesses and issuing stay-at-home orders to slow the spread of the virus, hammering the economy and spiking unemployment.

American Express focused on maintaining its customer service after it was forced to shift from a fully physical operation to a virtual one, he said. Call volumes didn't drop with "lots of people looking for refunds," but the business made picking up the phone a top priority, he added.

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The company has taken other customer-friendly steps such as adjusting rewards for card members to reflect the new status quo, Squeri said. For example, it's offering statement credits to customers who use certain cards to pay for streaming services, and to businesses that use them to cover cell-phone calls and shipping fees.

Moreover, American Express rolled out pandemic relief programs to help customers struggling financially, Squeri said. The measures include waiving late fees, lowering interest rates, and cutting monthly payments.

A "one-of-a-kind" company

Buffett has a special interest in American Express because it's one of his oldest holdings. His investment partnership plowed 40% of its capital into the company in the mid-1960s after its stock halved following the Salad Oil scandal, when American Express was fooled into lending millions to a fraudster, Buffett said in his 1994 shareholder letter.

American Express remains one of Buffett's biggest investments. Berkshire held more than 150 million shares representing about 19% of the company at the end of March — a stake valued at nearly $13 billion at the time.

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Buffett has also praised American Express many times over the years.

"A truly great business must have an enduring 'moat' that protects excellent returns on invested capital," he said in his 2007 letter, giving the "powerful worldwide brand" of American Express as an example.

Buffett also described it as a "one-of-a-kind" company and "extraordinary business franchise" in his 1980 letter.

Moreover, in his 2006 letter, he expressed great admiration for then-CEO Ken Chenault, who replaced Microsoft cofounder and Buffett's close friend Bill Gates on Berkshire's board earlier this year.

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