AIG CEO, Chairman Liddy Calls It Quits

Finding a New CEO Won’t Be Easy, Consultants Say

American International Group Inc. (AIG) announced on May 21 that Chairman and CEO Edward M. Liddy intends to step down once the board finds replacements for him.

But who would apply for a job that requires regular coach flights to Washington to be abused by Congress on international television, to run a company that in many ways symbolizes the financial crisis?

And oh by the way, Liddy held this job earning just $1 a year.

“They’re going to have a heck of a time getting somebody,” said Alan Johnson, managing director of New York-based compensation consultant Johnson Associates.

“It’s one thing to be looking out from the parapets of the castle and have them shooting at you, but it’s another thing to be shot in the back.”

Consultants and experts said someone with political savvy, even an outright politician, might be best-suited for the job, given that the U.S. government owns nearly 80 percent of the giant insurer, and that billions in public funds are on the line.

Liddy has recommended that the chairman and CEO roles be separated and, according to the company, the board of directors agrees with that strategy.

Earlier in the month, the company that has been bailed out by the federal government announced the nomination of six new directors to stand for election at the company’s annual shareholder meeting on June 30, 2009. This slate will reconfigure the board so that a majority of its members will be newly-elected independent directors.

According to the statement issued by AIG, Liddy believes that the company should install a more permanent leadership team and structure along with the new board.

The searches for two replacements — a CEO and a chairman — will be handled by both the reconstituted board and the trustees of the AIG Credit Facility Trust, which represents the government’s 80 percent stake in the company.

“Much work remains to be done at AIG, but much has already been accomplished,” Liddy said. “With the financial assistance of the Federal Reserve Bank of New York and the U.S. Department of the Treasury, we have made substantial progress in stabilizing AIG, reducing the systemic risk that led the government to rescue the company, protecting our policyholders and our businesses, and developing a plan to repay American taxpayers. I am proud that we are now implementing this repayment plan.”

But Liddy’s short tenure as CEO is marked by the public scolding he received at the hands of lawmakers over bonuses paid to AIG’s financial product unit, whose bad bets on mortgage-backed securities brought the giant firm to its knees last year.

That scolding may have satisfied the need for a scapegoat, but it also thins the ranks of job candidates.

“Congress acted grossly unprofessional, vindictive, and there are ramifications,” said Johnson. “The next guy doesn’t have to take this job, we’re not going to get as good a person, and the American people will probably lose additional billions of dollars because of it.”

Under Liddy’s leadership, the company has also begun the process of rebranding its insurance businesses as AIU Holdings to protect them from further negative fallout from the troubles caused by the AIG financial products unit.

Liddy, a former Allstate executive who was retired but took the AIG job largely in the name of public service, said he expects his successor to be paid a much higher salary.

But Americans, prompted in part by their president, attacked Wall Street compensation as galling and excessive as the country tumbled last year into a severe recession blamed heavily on banks and others in the previously high-flying financial sector.

“They narrow the pool substantially and increase the chances of making a bad pick if they get too chintzy” with compensation, said Bert Ely, political policy consultant at Ely & Co. in Alexandria, Va. “Given how poorly the government has conducted itself over the last six to eight months, it cannot make a convincing argument that the person they pick will not be a political punching bag,” he said.

Reuters contributed to this story.

Topics AIG