The demand for AIA (AIA) shares is expected to be high tomorrow as the company makes its trading debut on the Hong Kong stock exchange after a remarkably successful IPO, which valued the company at $30.5 billion. The IPO set records as the largest in Hong Kong and the largest ever in the insurance sector as cornerstone investors made strong commitments. A Reuters poll is forecasting AIA will start trading Friday at HK$21.79 each, nearly an 11 percent premium on its IPO price. At that price, the market capitalization of AIA will be roughly $33.9 billion.
This is encouraging news for AIG, which sold a 58 percent stake in its Asian life insurance unit last week and has the option to issue more shares. AIG can sell roughly a billion additional shares during AIA’s first month as a listed company, potentially taking the total amount raised in the IPO to $20.5 billion and cutting its stake to 33 percent. The demand for a piece of AIA is also welcome news for U.S. taxpayers, since AIG plans to utilize the AIA sale proceeds to repay much of its Federal Reserve loan.
But there is one big loser in all of this – Britain’s Prudential plc (PUK), which tried to buy all of AIA in May (not just 53 percent of it), for $35.5 billion. The deal fell through after Prudential shareholders got nervous and forced the board and new CEO Tidiane Thiam to lower its offer to $30.4 billion. While AIG’s initial valuation of AIA was only slightly higher than Prudential’s second offer, exercising the option to sell more shares will easily bring in more money than the deal it walked away from. And while AIA is subject to a lockup after the IPO, it will be allowed to sell 50% of its remaining shares 12 months after the listing and the other 50% after 18 months.
So first of all, Prudential has to be kicking itself for not offering AIG more money. The market is showing $30.4 billion was just too low and AIG was right to abandon the deal even though AIG CEO Robert Benmosche wanted to do it. But his directors were against him on this one. And even more worrisome for Prudential, it has now turned its Asian life insurance operations into a potential takeover target for AIA. A few years down the road, the predator could become the hunted.
Prudential and AIA are the two biggest international insurers in Asia and the only companies with branches across the continent. Bloomberg Businessweek reports Prudential agents have been outselling their AIA competitors due in part to AIG’s woes, but with AIA reborn as an independent company, that gap should narrow. After all, AIA is the only life insurer in China that is wholly owned by a foreign company, continuing AIG’s long history there. AIA’s new CEO, Mark Tucker, has said he wants to triple AIA’s value. He not only used to work for Prudential but was Thiam’s boss. With more than 15 years experience in Asian markets, Tucker has to be just the kind of guy who might relish a run at his old company.
Thursday, October 28, 2010
Wednesday, September 8, 2010
Corporate pressure on governments - what BP could have learned from AIG
There’s yet another reason for Americans to hate outgoing BP CEO Tony Hayward. The Gulf Oil spill villain has flatly refused a request by U.S. senators to testify next month about his company's role in the release of the Libyan terrorist who bombed Pan Am Flight 103. Hayward didn’t even bother to invent an excuse – he just said BP has nothing to add to earlier statements.
It’s incredible that it took the Gulf oil spill for Congress to call BP on the carpet for the release of the man convicted of killing 270 people when Flight 103 blew up over Lockerbie, Scotland in 1988. BP admitted in late 2007 it told the British government that "We were concerned about the slow progress that was being made in concluding a prisoner transfer agreement with Libya. We were aware that this could have a negative impact on UK commercial interests, including the ratification by the Libyan Government of BP's exploration agreement."
I doubt we’ll ever find out the whole story of how BP influenced the UK and Scottish governments, based on my experience with AIG. I worked as the insurer’s global troubleshooter in the 70s and 80s and saw firsthand how a huge corporation can pressure foreign governments. But AIG, which had a reputation of being tough with foreign governments, was less tough when it came to the Chinese. CEO Hank Greenberg told me to get us invited to China after Nixon’s historic visit in 1972.
So we hired Chase, which was ahead of the game, to help us. It was a long, slow process and a careful one, influenced by our long history in China. (AIG got its start in Shanghai in 1919 and was quite successful until being expelled by Mao in 1949). We knew you could not push the Chinese too far like we did other governments. While we used a stick occasionally, we found the carrot far more effective.
For example, after I helped AIG reestablish operations in China, Greenberg couldn’t do enough to ingratiate himself with the country’s leaders. He even bought the original doors to Beijing’s Summer Palace from a Paris antique dealer so he could return them to the Chinese. Those efforts paid off when Greenberg personally negotiated the final details of China’s admission to the World Trade Organization with Chinese Premier Zhu Rhongi in 2001. It’s mindboggling that the U.S. government allowed a CEO to take the lead role in finalizing this critical trade pact.
AIG was always careful of Chinese sensitivities, but at times, we made mistakes. Once, when we were about to deliver a proposal, our lawyer told us the translator we had hired on the cheap used old Chinese, which named our company American International “Clique” Instead of “Group.” We found a good translator and eventually had the proposal accepted.
Nothing AIG did in China ever remotely approached BP’s efforts to use the British government to bolster its oil exploration deal with Libya. I’m glad the U.S. Senate is trying to get to the bottom of things, but BP’s stonewalling will make that very unlikely.
It’s incredible that it took the Gulf oil spill for Congress to call BP on the carpet for the release of the man convicted of killing 270 people when Flight 103 blew up over Lockerbie, Scotland in 1988. BP admitted in late 2007 it told the British government that "We were concerned about the slow progress that was being made in concluding a prisoner transfer agreement with Libya. We were aware that this could have a negative impact on UK commercial interests, including the ratification by the Libyan Government of BP's exploration agreement."
I doubt we’ll ever find out the whole story of how BP influenced the UK and Scottish governments, based on my experience with AIG. I worked as the insurer’s global troubleshooter in the 70s and 80s and saw firsthand how a huge corporation can pressure foreign governments. But AIG, which had a reputation of being tough with foreign governments, was less tough when it came to the Chinese. CEO Hank Greenberg told me to get us invited to China after Nixon’s historic visit in 1972.
So we hired Chase, which was ahead of the game, to help us. It was a long, slow process and a careful one, influenced by our long history in China. (AIG got its start in Shanghai in 1919 and was quite successful until being expelled by Mao in 1949). We knew you could not push the Chinese too far like we did other governments. While we used a stick occasionally, we found the carrot far more effective.
For example, after I helped AIG reestablish operations in China, Greenberg couldn’t do enough to ingratiate himself with the country’s leaders. He even bought the original doors to Beijing’s Summer Palace from a Paris antique dealer so he could return them to the Chinese. Those efforts paid off when Greenberg personally negotiated the final details of China’s admission to the World Trade Organization with Chinese Premier Zhu Rhongi in 2001. It’s mindboggling that the U.S. government allowed a CEO to take the lead role in finalizing this critical trade pact.
AIG was always careful of Chinese sensitivities, but at times, we made mistakes. Once, when we were about to deliver a proposal, our lawyer told us the translator we had hired on the cheap used old Chinese, which named our company American International “Clique” Instead of “Group.” We found a good translator and eventually had the proposal accepted.
Nothing AIG did in China ever remotely approached BP’s efforts to use the British government to bolster its oil exploration deal with Libya. I’m glad the U.S. Senate is trying to get to the bottom of things, but BP’s stonewalling will make that very unlikely.
Thursday, August 5, 2010
AIG Continues Recovery But Second Quarter Revenue May Be Lower
Tomorrow, AIG releases its second-quarter results and analysts predict a 99-cent-a-share profit, which would be down from this period last year. Revenue is expected to drop by about a third. Since AIG’s general insurance and domestic life insurance businesses account for about half its revenue, we’ll want to look closely at how those divisions are performing.
Still, overall, the AIG story is positive. Bloomberg reports AIG has reduced the debt it owes on a Federal Reserve credit line by about $3.5 billion over the last three months. One unit, American Life Insurance Co., reported partial results for the second quarter - net income tripled in the six months ended May 31 to $694 million. And AIG is being helped by the stabilization in mortgage assets held in the Maiden Lane entities created in 2008 to remove AIG’s toxic securities.
You can credit a lot of AIG’s recovery to CEO Robert Benmosche, who has finally brought stability and firm leadership. But the big question remains – will AIG be able to pay back taxpayers? AIG is planning to sell Alico to MetLife and put AIA Group up for a public offering. AIG has no choice but to sell its non-core businesses so it can pay down the Fed credit line. But in the long run, that’s only going to make it more difficult to earn revenue and increase profits.
AIG may now be winding down that divestment strategy. AIG previously said it was considering spinning off its property-casualty insurance business, and now reportedly it plans to keep it. I think after AIG gets rid of Alico and completes the AIA IPO, it needs to stand firm, and concentrate on growing its business.
In June, the Congressional Oversight Panel predicted the government will likely remain a significant shareholder through 2012 and said U.S. taxpayers "remain at risk for severe losses." But Fed Chairman Ben Bernanke has told Congress he thinks AIG will repay everything. AIG stock is up about 32% since the beginning of the year and value investors are recommending a buy. If this kind of progress continues, taxpayers could even make some money when the government unloads its 80% ownership.
Still, overall, the AIG story is positive. Bloomberg reports AIG has reduced the debt it owes on a Federal Reserve credit line by about $3.5 billion over the last three months. One unit, American Life Insurance Co., reported partial results for the second quarter - net income tripled in the six months ended May 31 to $694 million. And AIG is being helped by the stabilization in mortgage assets held in the Maiden Lane entities created in 2008 to remove AIG’s toxic securities.
You can credit a lot of AIG’s recovery to CEO Robert Benmosche, who has finally brought stability and firm leadership. But the big question remains – will AIG be able to pay back taxpayers? AIG is planning to sell Alico to MetLife and put AIA Group up for a public offering. AIG has no choice but to sell its non-core businesses so it can pay down the Fed credit line. But in the long run, that’s only going to make it more difficult to earn revenue and increase profits.
AIG may now be winding down that divestment strategy. AIG previously said it was considering spinning off its property-casualty insurance business, and now reportedly it plans to keep it. I think after AIG gets rid of Alico and completes the AIA IPO, it needs to stand firm, and concentrate on growing its business.
In June, the Congressional Oversight Panel predicted the government will likely remain a significant shareholder through 2012 and said U.S. taxpayers "remain at risk for severe losses." But Fed Chairman Ben Bernanke has told Congress he thinks AIG will repay everything. AIG stock is up about 32% since the beginning of the year and value investors are recommending a buy. If this kind of progress continues, taxpayers could even make some money when the government unloads its 80% ownership.
Friday, July 2, 2010
No apologies from the man who crashed the world
When I read Joseph Cassano’s prepared testimony for the Financial Crisis Inquiry Commission, there was one phrase that really hit me: “it was the right thing to do.” Cassano, the man whose credit default swap shop at AIG went so haywire it triggered a global financial catastrophe, actually said this twice. It was the reason AIG decided to stop writing deals with subprime exposure in 2006. And it was also why he volunteered to take no bonus for 2007. In nine pages of prepared remarks, there were no apologies, no remorse, no contrition.
Fortunately, when Cassano sat down in front of the congressionally appointed commission yesterday in Washington, he didn’t read the self-serving document, which was too complex for anyone but himself to understand. And he was gracious enough to tell the commission they shouldn’t blame his team at the Financial Products Unit, saying, "Don't criticize them, criticize me."
Well they did, but it took a lot for the commission to get Cassano to admit he did anything wrong. When Cassano was asked if he made any errors, he said, “When I think about the single error that may have been made by me I think how when I retired I didn't volunteer to be the chief clear, chief negotiator for the collateral calls.” Cassano went on to say if he hadn’t left he could have gone to the counterparties and “negotiated a much better deal for the taxpayers than what the taxpayers got.”
Wow. One error from the man who crashed the world, as Michael Lewis dubbed him in his brilliant Vanity Fair piece. And if only he had had stayed at AIG, I guess everything would have turned out so much better.
I commented on Cassano’s testimony on Bloomberg television, saying I was really angry because Cassano not only walked away from AIG with $300 million; he was paid a million dollars a month to consult for AIG afterwards because they needed him to unwind their deals.
After two years of silence, Cassano finally spoke this week, now that he doesn’t have to worry about charges. Afterwards, his lawyers said Cassano hopes his testimony “helps to correct the serious misinformation now buried in the public discourse about AIG FP." But he can’t rewrite history, and the only thing Cassano accomplished was to give the public a good look at the hubris that led to AIG’s downfall.
Fortunately, when Cassano sat down in front of the congressionally appointed commission yesterday in Washington, he didn’t read the self-serving document, which was too complex for anyone but himself to understand. And he was gracious enough to tell the commission they shouldn’t blame his team at the Financial Products Unit, saying, "Don't criticize them, criticize me."
Well they did, but it took a lot for the commission to get Cassano to admit he did anything wrong. When Cassano was asked if he made any errors, he said, “When I think about the single error that may have been made by me I think how when I retired I didn't volunteer to be the chief clear, chief negotiator for the collateral calls.” Cassano went on to say if he hadn’t left he could have gone to the counterparties and “negotiated a much better deal for the taxpayers than what the taxpayers got.”
Wow. One error from the man who crashed the world, as Michael Lewis dubbed him in his brilliant Vanity Fair piece. And if only he had had stayed at AIG, I guess everything would have turned out so much better.
I commented on Cassano’s testimony on Bloomberg television, saying I was really angry because Cassano not only walked away from AIG with $300 million; he was paid a million dollars a month to consult for AIG afterwards because they needed him to unwind their deals.
After two years of silence, Cassano finally spoke this week, now that he doesn’t have to worry about charges. Afterwards, his lawyers said Cassano hopes his testimony “helps to correct the serious misinformation now buried in the public discourse about AIG FP." But he can’t rewrite history, and the only thing Cassano accomplished was to give the public a good look at the hubris that led to AIG’s downfall.
Thursday, June 3, 2010
AIG's Asian Gamble
The collapse of the AIG-Prudential deal could turn out be more promising than the original agreement for the British insurer to buy AIG’s largest Asian life-insurance business, AIA, for $35 billion dollars.
First, it shows that AIG’s board is far more independent than during the Greenberg era. Benmosche battled a highly contentious board over the original Prudential deal until he was able to push it through in March. But this time, he couldn’t get his way. AIG’s board hung tough and refused to accept Prudential’s lower offer. It was reportedly unanimous except for Benmosche.
The big question is why AIG’s board turned down $30 billion, which is more than is being predicted for any IPO. Who knows what went on in that board room, but most interesting reason I have heard is that some directors thought they could eventually sell AIA for a lot more to the Chinese. And already we’re hearing reports that Assicurazioni Generali SpA, Europe’s third-biggest insurer, may be interested in buying parts of AIG’s operations in Asia.
The directors might also prefer to sell off slices of AIA gradually in an IPO, while the business continues to grow. So, over the long haul, they could beat the Prudential price. Since the U.S. government owns nearly 80% of AIG and could have vetoed the board’s refusal to take the lower offer, it suggests they buy this argument.
In fact, Treasury Secretary Timothy Geithner praised the company’s decision to walk away from the Prudential offer. He told reporters yesterday,”A.I.G. is now free to pursue a bunch of other options to help maximize the return, reduce any risk of loss to the taxpayer. They have got a very strong management team, a much stronger board in place, making incredibly impressive progress frankly in restructuring that entity.”
Geithner’s faith in AIG is pretty remarkable, reflecting the turnaround Benmosche has been able to pull off since he took over last August. AIG’s board is betting the company will do even better and Geithner is letting that bet ride. Of course, the taxpayers who provided the stakes don’t have a say. I personally would have bet on Benmosche over his board, but I applaud Geithner for not interfering. We’ll see how well AIG can do with AIA and let’s hope neither taxpayers nor investors come up short.
First, it shows that AIG’s board is far more independent than during the Greenberg era. Benmosche battled a highly contentious board over the original Prudential deal until he was able to push it through in March. But this time, he couldn’t get his way. AIG’s board hung tough and refused to accept Prudential’s lower offer. It was reportedly unanimous except for Benmosche.
The big question is why AIG’s board turned down $30 billion, which is more than is being predicted for any IPO. Who knows what went on in that board room, but most interesting reason I have heard is that some directors thought they could eventually sell AIA for a lot more to the Chinese. And already we’re hearing reports that Assicurazioni Generali SpA, Europe’s third-biggest insurer, may be interested in buying parts of AIG’s operations in Asia.
The directors might also prefer to sell off slices of AIA gradually in an IPO, while the business continues to grow. So, over the long haul, they could beat the Prudential price. Since the U.S. government owns nearly 80% of AIG and could have vetoed the board’s refusal to take the lower offer, it suggests they buy this argument.
In fact, Treasury Secretary Timothy Geithner praised the company’s decision to walk away from the Prudential offer. He told reporters yesterday,”A.I.G. is now free to pursue a bunch of other options to help maximize the return, reduce any risk of loss to the taxpayer. They have got a very strong management team, a much stronger board in place, making incredibly impressive progress frankly in restructuring that entity.”
Geithner’s faith in AIG is pretty remarkable, reflecting the turnaround Benmosche has been able to pull off since he took over last August. AIG’s board is betting the company will do even better and Geithner is letting that bet ride. Of course, the taxpayers who provided the stakes don’t have a say. I personally would have bet on Benmosche over his board, but I applaud Geithner for not interfering. We’ll see how well AIG can do with AIA and let’s hope neither taxpayers nor investors come up short.
Thursday, May 27, 2010
Benmosche makes a big promise, but can AIG deliver?
"I'm confident you're going to get your money back, plus a profit." That was AIG CEO Robert Benmosche’s pledge to a Congressional Oversight Panel yesterday. This wasn’t the Benmosche who said last fall he was prepared to tell Congress to "stick it where the sun don't shine." But despite his conciliatory performance, afterwards panel chair Elizabeth Warren told the Wall Street Journal she was frustrated by the lack of detail to back up his projections. She started the hearing by calling AIG “a corporate Frankenstein, a conglomeration of banking and insurance and investment interests that defied regulatory oversight."
I’ve been very impressed with Benmosche’s ability to turn AIG around this year and I was also impressed yesterday that he was able to restrain himself during an inquisition by the people he once called “crazies.” He did get a bit testy at one point when asked about the testimony of Cliff Gallant, a KBW Inc. analyst who cut the stock to “underperform” last month because he thinks meeting U.S. obligations may wipe out common shareholders. Gallant is predicting AIG shares could be worth $6 within a year. Benmosche said of Gallant’s analysis, “You’ll have to see if he understands the company as well as I do,”
I appeared on Bloomberg TV to analyze yesterday’s hearing and told Mark Crumpton that I agree that Benmosche will be able to pay off AIG’s debt in full. The company has great prospects because it’s honed down a gigantic operation into two basic areas: Sun America, a life insurance business, and Chartis, the property & casualty operation, which made a great deal of the $1.45 billion in profits announced in the first quarter of this year. Benmosche is turning AIG into a smaller company with a great core business.
Once the government pulls out, a lot of great things will happen; foreign investments funds will move in along with other investors, and AIG will continue to make money, pay the government back, and grow the company into a reasonable size.
Benmosche will continue to face tough questions along the way, but it appears he now realizes he just can’t say whatever he thinks when it comes to Washington. The best thing for him, taxpayers, and AIG’s investors will be when the U.S. government is paid back and AIG can run its business with only normal regulatory supervision.
I’ve been very impressed with Benmosche’s ability to turn AIG around this year and I was also impressed yesterday that he was able to restrain himself during an inquisition by the people he once called “crazies.” He did get a bit testy at one point when asked about the testimony of Cliff Gallant, a KBW Inc. analyst who cut the stock to “underperform” last month because he thinks meeting U.S. obligations may wipe out common shareholders. Gallant is predicting AIG shares could be worth $6 within a year. Benmosche said of Gallant’s analysis, “You’ll have to see if he understands the company as well as I do,”
I appeared on Bloomberg TV to analyze yesterday’s hearing and told Mark Crumpton that I agree that Benmosche will be able to pay off AIG’s debt in full. The company has great prospects because it’s honed down a gigantic operation into two basic areas: Sun America, a life insurance business, and Chartis, the property & casualty operation, which made a great deal of the $1.45 billion in profits announced in the first quarter of this year. Benmosche is turning AIG into a smaller company with a great core business.
Once the government pulls out, a lot of great things will happen; foreign investments funds will move in along with other investors, and AIG will continue to make money, pay the government back, and grow the company into a reasonable size.
Benmosche will continue to face tough questions along the way, but it appears he now realizes he just can’t say whatever he thinks when it comes to Washington. The best thing for him, taxpayers, and AIG’s investors will be when the U.S. government is paid back and AIG can run its business with only normal regulatory supervision.
Tuesday, May 25, 2010
Dominating the board of directors – no longer business as usual at AIG
Probably the best part of being an author is getting to discuss the issues you write about with an informed group of people. That was the case at the Metropolitan Club in Washington, D.C., where I was the luncheon speaker last week, talking to a very sophisticated audience that knows both Wall Street and Washington.
There were lots of questions—Hank Greenberg may be gone from AIG, but everyone still wants to know what he is doing and how he is doing. While I spoke about many facets of AIG, most of the questions were about Greenberg. One question I hadn’t heard before was: Is there any connection between Greenberg’s settlement with the SEC and the fraud case again him, which was filed back in 2005 by then-New York Attorney General Eliot Spitzer? A judge recently called that case “devastating” and told Greenberg’s lawyer he saw big problems with establishing a defense. In August 2009, Greenberg agreed to pay $15 million to settle SEC accusations that he altered AIG's financial records to inflate its earnings.
At the time, the SEC did not talk about whether the settlement might have any impact on the related civil fraud charges brought by Spitzer. I noted that in that settlement with the SEC, Greenberg publicly declared that he never engaged in fraud and had no responsibility over accounting issues. That irritated the SEC, which said corporate leaders can’t use accounting gimmicks and sign off on distorted financial reports. Greenberg then released a subsequent statement saying that the size of his fine was “a reflection of the importance of the charge to the SEC.”
I also was asked about last year’s bonus controversy, which I think is finally becoming old news. And even though AIG seems to be on the road to recovery, I was asked if the company still plans to rebrand itself. My answer was probably not, since key subsidiaries, both the Asian ones and ALICO are being sold off and the core business has been renamed Chartis. So AIG remains only as the name of the holding company.
Perhaps the most interesting part of the event was when I was chatting after lunch with people who wanted their books signed. Someone mentioned that when Greenberg was CEO, he put Barber Conable, former congressman and head of the World Bank, as head of the audit committee of AIG’s Board of Directors. Conable reportedly then hired another accounting firm to advise the committee. (PwC had been AIG’s long-time auditor) and Greenberg reportedly strongly objected. People probably don’t remember that the audit committee said that it couldn't vouch for AIG's accounting in 2001 and 2002. The committee said it couldn't be sure that the audits had been carried out according to normal standards or even that PwC was in fact "independent," according to the Washington Post.
Today, because of Sarbanes Oxley, boards are much more independent. And thanks to the current crisis, they will be even more independent. All the D&O insurance in the world won't protect directors and their reputations. Challenging a CEO instead of signing off on whatever he wants is becoming the norm. The Wall Street Journal reportedly recently that a special board committee at AIG, which includes directors with experience in restructuring and workout situations, has engaged investment-banking firm Rothschild as an independent adviser. If AIG’s board had been that independent, proactive, and knowledgeable in financial matters ten years ago, it could have stood up to Greenberg’s domination of the board and AIG today just might be in a very different place.
There were lots of questions—Hank Greenberg may be gone from AIG, but everyone still wants to know what he is doing and how he is doing. While I spoke about many facets of AIG, most of the questions were about Greenberg. One question I hadn’t heard before was: Is there any connection between Greenberg’s settlement with the SEC and the fraud case again him, which was filed back in 2005 by then-New York Attorney General Eliot Spitzer? A judge recently called that case “devastating” and told Greenberg’s lawyer he saw big problems with establishing a defense. In August 2009, Greenberg agreed to pay $15 million to settle SEC accusations that he altered AIG's financial records to inflate its earnings.
At the time, the SEC did not talk about whether the settlement might have any impact on the related civil fraud charges brought by Spitzer. I noted that in that settlement with the SEC, Greenberg publicly declared that he never engaged in fraud and had no responsibility over accounting issues. That irritated the SEC, which said corporate leaders can’t use accounting gimmicks and sign off on distorted financial reports. Greenberg then released a subsequent statement saying that the size of his fine was “a reflection of the importance of the charge to the SEC.”
I also was asked about last year’s bonus controversy, which I think is finally becoming old news. And even though AIG seems to be on the road to recovery, I was asked if the company still plans to rebrand itself. My answer was probably not, since key subsidiaries, both the Asian ones and ALICO are being sold off and the core business has been renamed Chartis. So AIG remains only as the name of the holding company.
Perhaps the most interesting part of the event was when I was chatting after lunch with people who wanted their books signed. Someone mentioned that when Greenberg was CEO, he put Barber Conable, former congressman and head of the World Bank, as head of the audit committee of AIG’s Board of Directors. Conable reportedly then hired another accounting firm to advise the committee. (PwC had been AIG’s long-time auditor) and Greenberg reportedly strongly objected. People probably don’t remember that the audit committee said that it couldn't vouch for AIG's accounting in 2001 and 2002. The committee said it couldn't be sure that the audits had been carried out according to normal standards or even that PwC was in fact "independent," according to the Washington Post.
Today, because of Sarbanes Oxley, boards are much more independent. And thanks to the current crisis, they will be even more independent. All the D&O insurance in the world won't protect directors and their reputations. Challenging a CEO instead of signing off on whatever he wants is becoming the norm. The Wall Street Journal reportedly recently that a special board committee at AIG, which includes directors with experience in restructuring and workout situations, has engaged investment-banking firm Rothschild as an independent adviser. If AIG’s board had been that independent, proactive, and knowledgeable in financial matters ten years ago, it could have stood up to Greenberg’s domination of the board and AIG today just might be in a very different place.
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