By Diane Brady
On the eve of turning 77, some executives might have already spent years in retirement plying their favorite golf course. Not Maurice R. "Hank" Greenberg, the hard-charging chairman and CEO of American International Group (AIG ). For one thing, he doesn't play golf. More important, despite 35 years at the helm, Greenberg has no plans to quit anytime soon.
Since the surprise exit of his president and heir-apparent son Evan in September, 2000, Greenberg has said little about who'll succeed him -- and when. That uncertainty had helped pull the stock close to a new low of $66 a share in recent months, to the point where the $62 billion insurance powerhouse was trading at a discount to the market, despite its strong earnings performance.
On May 1, Greenberg finally unveiled a succession strategy that includes appointing veterans Martin Sullivan and Edmund Tse as co-chief operating officers, naming director Frank Zarb as chairman of the executive committee, and creating a new seven-member office of the chairman.
Investors reacted positively. The stock rose more than 2%, to almost $71. The problem is Greenberg himself gave no indication of when he'll actually leave. It could be several years or longer.
The board insisted on no timetable, Greenberg says, and he's certainly eager to keep jetting around the planet and putting in long hours for AIG. "I had a great-grandmother who worked until she was 108 and died in an accident," he boasts. "Everybody ages differently.... I play tennis and ski as hard as I ever did before."
Impressive, for sure. What's more, many shareholders and pundits on Wall Street want him to stick around to keep up that stellar earnings streak. "He's still very much at the top of his game," says Al Capra of Putnam Lovell NBS Securities. Adds analyst Bijan Moazami of Friedman, Billings, Ramsey: "Nobody can manage this company better than Hank."
At this point, that's probably true. And it's all the more reason why Greenberg's next task should be to groom a terrific successor and step aside. Sure, the stock may take a hit, but it's already well below its late-2000 high of $104. By lingering so long in the post, Greenberg bolsters the dangerous impression that he's irreplaceable to this public company, which is simply not true.
Given AIG's bench strength of corporate managers and diversity of top-notch businesses, which range from asset management to aircraft leasing, several people are no doubt qualified to take over. Some even speculate that Greenberg's eldest son Jeffrey who now runs Marsh & McLennan, could come back to fill his father's shoes.
Along with exposing top managers to a broader cross section of businesses, Greenberg should devote a significant chunk of the next year exposing them more to the political and corporate heavyweights who now jump when they hear his name. Greenberg's political clout and reach are legendary in the industry -- and will take a lot of effort to replicate. As Michael Paisan of Williams Capital Group puts it: "He's one of the only people who can knock on the door of the premier of China and have the guy answer it."
Yet, with the exception of Greenberg's now-departed sons, AIG's top talent has been largely faceless to the outside world. That's because, until recently, it has been all about Hank. He talks to the Street. He gives the speeches at conferences. He controls a significant chunk of the shares through personal holdings and the company's nonprofit foundation.
No wonder investors panicked when the AIG chief didn't show up for his annual "fireside chat" with analysts in February because of the flu. "People thought he was already in the coffin," says Michael Smith of Bear Stearns.
Greenberg claims to be baffled by such reactions. "This fascination with my age is incredible," he sighs. But a man steeped in the world of insurance no doubt realizes that someone entering their 78th year on earth isn't the safest investment risk -- especially when no clear backup is in place should something go wrong.
Greenberg notes that Zarb, now 67, would be an excellent interim chairman "should I get on the wrong airplane and it doesn't land." He also adds that he and the board have discussed more permanent successors, though he won't name any names.
Even if Greenberg is still in fighting form in the boardroom and on the tennis courts, it's time for him to truly prepare to hand the mantle to somebody else. After all, Jack Welch of General Electric knew he had to step aside at the age of 65. Greenberg scoffs at the comparison, noting that both GE and IBM have watched their stock fall since naming new chief executives.
But that kind of deadline forces both a board and a leader to set a real plan and prepare for a smooth succession. As it stands, all Greenberg will say is that he wants the next AIG chief to have 10 to 25 years or more on the job to make his mark. Given his current desire to stay on the job, that could mean even 47-year-old Co-COO Sullivan might be reaching for his retirement check before Greenberg is out the door.
Brady is an associate editor of BusinessWeek in New York
Edited by Beth Belton