Dear American International Group (AIG 0.96%) board members,
First let me say thank you, from one happy American taxpayer. It took a lot of chutzpah for Maurice Greenberg to conjure up this suit against the federal government for alleged shareholder abuse. Imagine, coming after Uncle Sam for stepping in to save his old company -- to the tune of $182 billion, the biggest federal bailout in U.S. history -- when no one else would touch the company with a 10-foot pole, and when AIG had no one but itself to blame for its troubles.
And big troubles they were, when AIG, having charged blindly into the credit-default-swap market -- a market the previously mild-mannered and successful insurance company had no business whatsoever being involved in -- found it couldn't cover its extensive bets there. Of course, the federal government had no choice but to ante up as a result. AIG had gotten itself so insidiously interwoven into the fabric of the U.S. economy, if the Feds hadn't taken action -- saving your company from imminent bankruptcy -- it's conceivable the entire financial system may have gone down with it, taking you, me, and maybe the rest of the American people along for the ride.
Standing up to Maurice Greenberg probably wasn't easy. He's unmistakably a big-shot investor, and someone who knows the company inside and out. A force to be reckoned with, to be sure, and the kind of person who could potentially turn his legal hit men back onto you for not listening to the "legitimate concerns of shareholders" if you didn't kowtow to his wishes. Way to show some chutzpah, yourself. Greenberg was CEO of AIG for nearly 40 years, I understand, right up until 2005, when he resigned in the midst of an accounting scandal.
So, the man who drove AIG to the edge of bankruptcy with this credit-default-swap nonsense -- who had to jump unceremoniously out of the company just a few years before the crash -- has the nerve to suddenly reappear and use allegedly abused shareholder rights as the pretense for initiating the frivolous lawsuit of all frivolous lawsuits? "Chutzpah" doesn't begin to cover it.
I get that you, as board members, had to entertain this lawsuit. That you had to sit through Greenberg's 45-minute presentation, no matter how odious the whole affair seemed. That it was part of your fiduciary duty to shareholders to hear him and his high-powered attorney out. And not only that, you had to endure the shrieks of outrage from the press when this special board meeting was announced -- who now think you only declined to join the suit because of them. I gave you more credit than that, and so did one of my favorite Motley Fool writers, who covered this story in depth a few days ago.
Speaking of the press, I really enjoyed this quote from CEO Robert Benmosche, which I found in yesterday's New York Times: "The board was legally required to consider the [Greenberg] demand -- the law and the courts required it -- and we did so thoughtfully, weighing all the appropriate factors. That is what sound corporate governance and properly undertaking our responsibilities and obligations to our shareholders are all about."
Well put, Mr. Benmosche. I don't know if you said that with a wink and a nod, but I'm more than OK if you did. Kudos to you in general for doing an admirable job in getting AIG back on track, back to what it used to be -- a successful insurance company, not an insurance company with a hedge fund attached, as Fed chairman Ben Bernanke so wryly put it back in the dark days of the crisis. And more kudos for not only repaying the bailout in full, but for generating a profit for Uncle Sam in the process.
A lot of companies came out of the financial crash reeling, including Bank of America (BAC +0.71%) and Citigroup (C +0.52%), who only survived due to massive capital injections courtesy of Uncle Sam. But none, frankly, were in straights as dire as AIG's.
Someone else quoted in the Times article, whose remarks I thoroughly agree with and which I shall leave you with as my own parting remarks, is University of Texas law school professor Henry T.C. Hu, who had this to say about the whole sordid affair: "The speed of the board decision today suggests that the remarkably unusual and expensive mock trial was a waste of time, besides insulting to the public and regulators."
Mock trial. A spot-on turn of phrase. Good job, gentlemen. And thanks again: I knew you had it in you.
Sincerely,
One happy American taxpayer
