Despite the impression that American International Group (AIG) was finally sailing into calmer seas as a result of a Moody’s report that suggested the giant insurer has a chance to repay the $87 billion it owes taxpayers, the reality is AIG’s situation in the era of government bailouts remains complicated and quite problematic. The WSJ reports, CEO Robert Benmosche who’s only been CEO of AIG for three months, is threatening to quit. At a board meeting last week, the strong-willed industry executive told fellow AIG directors that he was “done” though he agreed to think it over after they reacted with shock.
The CEO is chafing under constraints imposed by AIG’s government overseers, in particular a recent compensation review by Obama’s pay czar Kenneth Feinberg. Being 80% government owned since its rescue last year, AIG is one of the companies under Mr. Feinberg’s purview.
“Last week, Mr. Benmosche and other AIG board members met with Mr. Feinberg in New York. During the three-hour meeting, board members discussed difficulties of complying with pay policies and retaining talent at the company. Mr. Benmosche’s frustrations “hit a crescendo”…” Bob feels he is in an impossible situation,” the Journal cited a person familiar with the matter as saying.
It isn’t clear whether Mr. Benmosche would actually resign. If he does, the move could be highly disruptive as the co. tries to keep its businesses stable. Benmosche was said to be prepared to step down at least once before, in August, when his own pay package hadn’t yet been formally approved by Mr. Feinberg. What we know this time around however, is that he has told his board of directors he can’t run a company where executives’ salaries are restricted. This raises the question of whether or not government can dictate the salaries of corporate execs, even if it owns a majority stake in the company.
In his short tenure at AIG, Benmosche has developed a reputation for making provocative remarks and ruffling feathers as he seeks to achieve his goals. Remains to be seen whether this latest high-stakes game of chicken with Feinberg, thinking the pay czar will back down, will be successful.
AIG has had five CEO’s in recent years. Hank Greenberg and Martin Sullivan, were ousted. Robert Willumstad, stayed for only three months and the one prior to Benmosche, Ed Liddy, served less than a year.
A new CEO would be AIG’s third since the bailout in September 2008 and the fifth in less than 18 months.
Update: Benmosche says he’s not going anywhere. Here is the full letter:
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