Martin Sullivan must have realized he had a hard act to follow when he took over for industry titan Maurice Greenberg as CEO at AIG, but I doubt he thought it was going to be this hard, after he was unceremoniously replaced last month in the day-to-day command chair by the beleaguered company's chairman, Robert Willumstad.
Mr. Sullivan took a public beating, with potshots from his predecessor perhaps the death blow. Mr. Greenberg wrote the board in May, warning that "AIG is in crisis," while questioning a capital-raising plan and other performance issues on Mr. Sullivan's watch.
Mr. Greenberg contended that $15.3 billion in write-downs, prompted by subprime-related credit woes, resulted in "a complete loss of credibility with the investment community and even further loss of value for shareholders."
You could forgive Mr. Sullivan for wondering where Mr. Greenberg comes off lecturing him about AIG's management after leaving the company under a dark cloud, with allegations that questionable finite reinsurance deals were used to help artificially prop up its balance sheet–in other words, to cook the books.
Mr. Greenberg still may face a federal suit over those bogus transactions, which have resulted in criminal convictions for five others involved at AIG and General Reinsurance. Litigation is also ongoing between Mr. Greenberg and AIG.
In any case, Mr. Willumstad was an obvious choice to take over as CEO, given his familiarity with AIG–having served as chairman since November 2006–and his prior top leadership positions at Citigroup and Travelers.
However, one point bothering me is that Mr. Willumstad will take on the CEO position in addition to his role as chairman. He made it clear in a conference call for analysts that his appointment as CEO is not on an interim basis, and he gave no indication he's even thinking about stepping aside as chairman.
That is a big mistake, I believe.
This is where American companies get into trouble. The chair should be head of the board, independent of day-to-day operations, looking over the shoulder of the CEO.
Having the two posts together removes a critical check and balance, lessening accountability at a firm where one-man rule went on for far too long.
No matter how good or honest anyone might be in doing these two critical jobs, the roles of chairman and CEO should remain separate to assure someone independent is watching the store for shareholders.
After his appointment as CEO, Mr. Willumstad immediately reached out to Mr. Greenberg in a gesture of d?tente–an odd choice, perhaps, given the fact that the regulatory and legal actions splitting the parties have not yet been resolved.
I don't envy Mr. Willumstad the challenges he faces in either role. He promised that "a thorough strategic and operational review of AIG's businesses and their performance" would be completed by Labor Day, but he shouldn't expect much slack from a jittery investment community.
Andrew Kligerman, managing director at UBS Investment Research, wrote that "before AIG rebounds, we think investors will need to see more than a new CEO–such as solid execution." I would second that motion.
Operating in the middle of a soft insurance market, a shaky stock market and a chokingly tight credit market, in an economy heading into recession, he'll need more than a little skill and a whole lot of luck to pull off a quick turnaround.
It would have been better if he'd only taken on one job at a time.
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