Willumstad Calls on Hank Greenberg

Ah, to be a fly on the wall when Robert Willumstad makes his conciliatory call on Hank Greenberg today. Do sparks fly? Or is this the beginning of a thaw in the icy relationship between Greenberg and AIG? Time will tell. The important thing is that Willumstad reached out to AIG’s long-time CEO. It is exactly the right thing to do. And it could not have happened as long as Martin Sullivan was in charge.

Willumstad has at least one big plus going for him: he was not on the AIG board when it asked for Greenberg's resignation. And maybe he can begin to point the company in a new direction. But Hank Greenberg read my book, Fallen Giant, and even if he hadn't, he must have had his suspicions of what was going on behind closed doors. On page 169, published in 2006 after Willumstad's election to the AIG board, I say: "Greenberg apparently feels (Frank) Zarb's actions were a power grab. There are others at AIG, including a very senior executive, who agree. This executive argues that Zarb has a long-term agenda for AIG....Zarb wants different leadership (than Sullivan), perhaps even the new AIG director from Citibank, Robert Willumstad, who is expected to replace Zarb as chairman."

But Greenberg is a practical, hard-nosed businessman and if Willumstad can improve results, he will listen. Or more than likely, Willumstad will ask for suggestions and Greenberg will have plenty.

But I wonder if Willumstad can really deliver on what I bet are the two most important items Greenberg wants from AIG: l) one or more board seats and 2) for AIG to abandon the lawsuit to gain Starr International's AIG stock (some 12% all told).

Greenberg has made it clear through various maneuvers and statements that he would like some say at AIG through board participation. More so now that the stock has fallen nearly 50 percent in the past year.

It does not necessarily have to be him but it does have to be directors he approves of. Even if he wanted a seat it is debatable that AIG could elect him with two pending legal matters he faces: the pending state civil suit over what happened at AIG when he was there and the possible Wells notice over the same issue.

Greenberg's second demand should be that the AIG law suit be dropped over the $20 billion (the price before AIG plummeted) in stock. That suit was probably bought by AIG to keep stockholders happy since transferring the stock back to AIG would be a real plus. But the board would have to approve dropping the suit and that would be a touchy situation.

Perhaps today's meeting will result in some good will. But it would most benefit AIG shareholders and the organization itself if it yields something more substantive.