AIG's Hank Greenberg Won't Let Go
When he was in his 70s, and still very much on top of the world, AIG chief executive Maurice "Hank" Greenberg used to laugh off any hint that his time at the helm of the world's largest property/casualty insurer might be nearing an end. Asked about retirement in 2002, he replied, "I had a great-grandmother who worked until she was 108 and then died in an accident."
Now Greenberg is 87, and he certainly seems no closer to retiring than he was then. He has a book coming out at the end of the month (The AIG Story, written with George Washington University law professor Lawrence A. Cunningham). He's still a regular talking head on CNBC. And he's the guy behind the shareholder lawsuit against the federal government that launched a thousand jokes and outraged exclamations this week when word got out that AIG's board was considering joining it (that is, suing the people who saved the company from bankruptcy four-and-a-half years ago; the board decided today to stay out).
What Greenberg hasn't been since 2005, though, is CEO of the company he ran for 37 years. Eliot Spitzer, then New York's righteous avenger of an attorney general, saw to that, leading an investigation of accounting practices at the company that resulted in Greenberg's ouster. Three years after that, of course, AIG stood on the brink of collapse, and the U.S. government ended up taking control of the company.
It is the terms of that takeover that Greenberg is challenging with his lawsuit. But his bigger argument goes something like this: If Spitzer hadn't forced him out, he would have still been running the company in 2008, and it wouldn't have gotten into nearly the trouble that it did.
Read Carol Loomis's Fortune profile of Greenberg at his peak, in 1998, and one can't entirely discount this argument. One tidbit:
Greenberg, for example, is a fanatic about AIG's internal auditing, conducted by 100 people who roam the company looking for wrongdoing. Anything they spot is reported directly, in writing, to Greenberg and a few other executives, including CFO Howard Smith. Over time, says Smith, he's learned that he'd better get to the reports immediately or he will have the unwelcome experience of not having read a report, even as Greenberg is on the phone asking him for comment. Recently, Greenberg heard from a visitor that some companies seemed to be "outsourcing" their internal audit (an oxymoron if there ever was one). At this news, Greenberg threw back his hands, rolled his eyes, and in effect asked that his ears be spared such rot.
A guy like that might just have had a shot at reining in AIG Financial Products before it helped unleash a global financial meltdown. True, AIG FP was already deep into the business of insuring subprime mortgage deals in 2005. And we just can't know if the management approach that served the company well for decades would have been as effective in the midst of a once-in-a-lifetime crisis. But still, given Greenberg's undisputed managerial brilliance and boundless energy, you can't entirely laugh off his claim.
What you probably should laugh off, however, is the accompanying implication that Greenberg therefore bears no responsibility for what happened after he left. A responsible leader prepares the way for succession. Greenberg appears to have been convinced that he was going to stay in charge forever, or at least till he was 108. For a while his sons, Jeffrey and Evan, were seen as possible successors, but both left to run other insurance companies (Jeffrey ended up being forced out as CEO of Marsh & McLennan in 2005 by yet another Spitzer investigation; Evan remains CEO of Zurich-based ACE. Lots of other high-level executives left over the years as well. With Greenberg out, the executives he left behind simply weren't up to the challenge of a financial crisis.
Cornelius Van Der Starr, who had founded the firm that later became AIG in Shanghai in 1919, had poached Greenberg from a rival insurer in 1960, and put him in charge in 1968. Greenberg took the company public in 1969, and went on to build it into a global colossus. In an age of short-term, hired-hand CEOs, there's a lot to admire in his commitment. But at some point he seems to have become incapable of separating the institution from himself. Le entreprise, c'est moi.
He's still incapable of it. Even after leaving AIG, Greenberg remained in charge of the Starr International, an odd but effective long-term-compensation vehicle for top AIG executives (see the 1998 Loomis article for a description) that was long the biggest holder of AIG shares. And it is Starr International, its stake diluted dramatically by the 2008 government takeover, that is leading the shareholder lawsuit. For AIG's current management and board, the suit is a nuisance they'd rather see go away. But Greenberg just isn't going to let go. He apparently doesn't know how.