CEO of AIG, Martin Sullivan

AIG Fires Another CEO

June 16, 2008 12:30 AM
by Anne Szustek
Amid intense pressure, Martin Sullivan, the CEO of American International Group, resigns and is replaced by Robert Willumstad, a former Citigroup executive who has been chairman of the company's board since 2006.

30-Second Summary

On Sunday night, June 15, American International Group (AIG) announced that its Chief Executive Officer, Martin Sullivan, had resigned and been succeed by Robert Willumstad, a former Citigroup executive who has served as Chairman of the Board of Directors of AIG since 2006.  The company also appointed Stephen Bollenbach, a current director, as its lead director.  Many public companies today have a non-executive serve as Chairman of the Board, and where, as with AIG now, the Chairman is also the CEO, the company appoints a "lead director" to serve as the principal, non-executive voice of the board.

The moves follow reports earlier in the weekend of an emergency board meeting to address growing unrest among major shareholders of the company.  

Just last Thursday, three shareholders, who collectively own 4 percent of the company, delivered a joint letter demanding changes at the management and board level. 

These shareholders had previously sent a letter to the board in early May, complaining of the Company's performance. Willumstad and another director met with the three shareholders, with Willumstad telling the shareholders, “You’re not telling us anything we don’t know.”

The company also faced withering criticism from its former CEO, Maurice "Hank" Greenberg, who was pushed out as CEO under pressure from then-New York Attorney General Eliot Spitzer in October 2005 and was replaced by Sullivan.  Greenberg still owns nearly 12 percent of AIG and asserts that the company would not have endured its recent problems if he were still at the helm.  A recent Wall Street Journal editorial supported the view that Greenberg's removal was costly to AIG's shareholders, and was quickly rebutted in a public letter from counsel to the board, and supported in a public letter from counsel to Greenberg.

AIG's board tried to support Sullivan, an Englishman who spent 37 years at AIG, after starting as an 18-year old clerk in its London office. But the shareholder letter was merely the latest of Sullivan’s woes.

The Securities and Exchange Commission is examining whether AIG adequately marked down the value of credit-default swaps.  And in the past two financial quarters, the company has announced $13 billion in losses and $20 billion in write-downs, resulting in the company needing to raise $20 billion in capital to shore up its balance sheet, vastly diluting its current shareholders.

But despite the influx of capital, Citigroup analyst Joshua Shanker wrote in a May 27 report that the billions put in may not be enough to keep AIG’s credit rating, already downgraded last month, from slumping further.

Headline Links: Major AIG shareholders protest; SEC launches accounting probe

Video: ‘AIG’s Executive Storm’

Related Topic: Greenberg Fighting Board Three Years After Ouster

Key Players: Robet Willumstad, Martin Sullivan


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