The Week In Review - Free To View

The Week In Review - Free To View

It's was an interesting Wednesday for New York-based AIG and its former executives. S&P improved its outlook on the firm; its former CEO Hank Greenberg lost an attempt to dismiss a legal case that goes back to events now nearly a decade old (when Hank was a spry youngster of 79 and was still in charge of both AIG and CV Starr, which in those days was effectively a pension-savings vehicle for AIG's senior executives); finally, current CEO Bob Benmosche confirmed that some AIG jobs would be going offshore.
For a company which partly struck difficulties in the mid-2000s because it was trying to smooth out volatility of earnings, the new AIG appears to have less desire for a strategy of "safe and steady".
Part of this is down to the personality of Bob Benmosche, a man who appears to see his battle with cancer as a minor irritant when compared with far more important battles, for example with anyone who cares to talk down AIG and its brand.
The Greenberg case (People v Greenberg, et al, New York State Supreme Court, New York County, No. 401720/2005, if you are desperate to look it up) is the one which recalls what doesn't just seem like a different era, but which actually is a different era. The facts of the matter have been well recorded, and, even though the events led to prison sentences for several former AIG senior executives, they were rather overshadowed by the later implosion at London-based AIG Financial Products. 
But the civil case between the New York Attorney General and Greenberg rumbles on. The suit was originally brought by Eliot Spitzer, who for a short time went on to be State Governor. He was succeeded by Andrew Cuomo, who went on to be State Governor. Now AG Eric Schneiderman is in charge. And he too, has said that he looked forward to "moving toward a trial that will finally offer the opportunity to hold Mr Greenberg accountable for his alleged role in a massive fraud".
However, it is the other two items that have genuine significance for AIG. Standard & Poor's upgraded its outlook on AIG to Stable from Negative. It said that AIG was benefiting from "declining financial leverage" (a charming euphemism for "is less in hock") and that it was generating improved operating earnings. AIG, which for a few years after the sacking of Hank Greenberg and the AIGFP disaster was seen as such a basket case and damaged brand that one CEO wanted to shrink it down to a fraction of its former size and also got rid of the AIG name for parts of the business.
Benmosche is hewn from a different oak. One of his first acts when he became CEO was to bring the New York staff together – many of whom had been abused in the street by other New York citizens as if AIG and AIG alone was responsible for the financial crisis of late 2008 – and tell them that AIG would once again become a name to be proud of, not a name to hide from. He said that the dismantling of AIG would cease. And, most importantly, he led. And his people followed.
That leadership quality and style was evidenced again this week when property & casualty chief executive Peter Hancock confirmed that jobs in that division would be shifted from New York to lower cost-centres, including Texas and the Philippines. 
Hancock gave what might be called an "industry-standard" speech in these circumstances. He said that there would be some labour-cost arbitrage at first, and that over time the move would "result in "business process optimisation and finally automation".
Benmosche, even when the news was bad, kept his common touch. He advised staff that it might not be a good idea to buy a home in the New York area. This was bad news shorn of company speak and put at the level of the personal, and I suspect AIG employees respected him for it. Benmosche does not pretend that some changes are bad news for individuals. He confronts it; he tells staff that change is ahead; and, in a personal way, he tells them how to cope. Far better to act in that way than to say nothing until you wield the axe.

Latest Issue

July/August 2017


In this month's Reactions

  • Brexit movers
  • Axis-Novae
  • Stephen Catlin's memoirs
  • London Market Awards

Click here to view this issue


Follow Us on Twitter @reactionsnet