The Big Shareholders Get Martin Sullivan

On May 21, I predicted Martin Sullivan had a maximum of six months to turn the giant that is AIG around, assuming no more write offs and a ratchet up in the stock. I was five months too generous but my shortsightedness was only half my fault. One half was inevitable and the other a closely guarded secret. First, until two weeks ago, Hank Greenberg was the only major shareholder loudly complaining, complaints which the company tended to brush aside as more of the same. But I should have guessed others would join the chorus. A group led by Eli Broad, whose company Greenberg bought, and two other large shareholders, made it clear they wanted change in management and in the board. It took this event and the Board's response to bring the Chairman of AIG out of the closet: Robert Willumstad long has held aspirations to be a CEO and he lobbied for the AIG job when the board was considering hiring a headhunter to find a replacement for Sullivan.

The market's lukewarm response suggests it is not persuaded. Only Mr. Broad responded positively even though his original letter to the board said he did not want a CEO from the board. His response was more for the appointment of Mr. Bollenbach, former CEO of Hilton Hotels, as lead director.

Why are Mr. Willumstad's credentials for the AIG job less than sterling as successful as his career at Citigroup has been? First, as Chairman, he has walked hand in hand with Mr. Sullivan much of the way. So some of Sullivan's failings rub off on him. Secondly, a mantra of Hank Greenberg, which his devotees firmly believe, has always been that at AIG you have to know insurance. Willumstad's statement that the insurance divisions reported to him at Citigroup won't cut it. Third, the notion that he will have a plan for the company by Labor Day is not reassuring to shareholders or anyone else. It bespeaks of how complicated the company is and why another insider could do better. Finally, the company has taken a step back in its much praised reform in corporate governance. Willumstad will be Chairman as well as CEO.