AIG investors step up fight to shake up board
Sunday, 22 June 2008
Matthew Garrahan in Los Angeles and Francesco Guerrera in New York
FT Syndication Service
Three leading shareholders in AIG have stepped up their campaign to shake up the board of the company, calling for "significant and immediate changes" to the management of the US insurance group.
Eli Broad, the Los Angeles-based billionaire who is a former director of the company; Shelby Davis, a fund manager; and Bill Miller, of fund manager Legg Mason, control more than 100m shares in AIG and have been agitating for a change of direction since last month.
In their letter to the board, sent recently and seen by the Financial Times, they call for the formation of a search committee to identify a new management team.
They cite a litany of complaints, saying AIG has lost more than $20bn of shareholder equity since 2006 and nearly $100bn of market capitalisation over the same period.
They also point to the ongoing regulatory probes into AIG from the Securities and Exchange Commission (SEC) and the US Department of Justice relating to its valuation of subprime-related derivatives.
The recent letter follows another deeply critical letter from the trio, which was sent in May a few days before AIG's annual shareholder meeting. In the first letter, they expressed concern about the direction of the company, saying there had been a "staggering breakdown of risk controls" and an "unequivocal loss of investor confidence".
The three men were apparently angered at the company's response to the first letter.
At the annual meeting, Martin Sullivan, who replaced Maurice "Hank" Greenberg as chief executive in 2005, was given the board's backing and support. Bob Willumstad, AIG's chairman, has backed Mr Sullivan, saying he is "the right guy" to lead the company out of its crisis.
In the latest letter, the three men say that "although the current management team and the majority of the directors have been in place for more than three years, they continue to blame their predecessors for every adverse development".
The trio list other complaints, including the poor performance of AIG shares, which are trading at an 11-year low, and the fact that the company has been "downgraded by all of the major rating agencies".
AIG said it had received the letter but declined to comment further.
A new chief executive should come from outside the board, the three men said in the letter.
The poor performance of the company, they said, precludes "any individual who was in a position of significant responsibility and oversight during the last three years from having the credibility to lead this company on a permanent basis".
FT Syndication Service
Three leading shareholders in AIG have stepped up their campaign to shake up the board of the company, calling for "significant and immediate changes" to the management of the US insurance group.
Eli Broad, the Los Angeles-based billionaire who is a former director of the company; Shelby Davis, a fund manager; and Bill Miller, of fund manager Legg Mason, control more than 100m shares in AIG and have been agitating for a change of direction since last month.
In their letter to the board, sent recently and seen by the Financial Times, they call for the formation of a search committee to identify a new management team.
They cite a litany of complaints, saying AIG has lost more than $20bn of shareholder equity since 2006 and nearly $100bn of market capitalisation over the same period.
They also point to the ongoing regulatory probes into AIG from the Securities and Exchange Commission (SEC) and the US Department of Justice relating to its valuation of subprime-related derivatives.
The recent letter follows another deeply critical letter from the trio, which was sent in May a few days before AIG's annual shareholder meeting. In the first letter, they expressed concern about the direction of the company, saying there had been a "staggering breakdown of risk controls" and an "unequivocal loss of investor confidence".
The three men were apparently angered at the company's response to the first letter.
At the annual meeting, Martin Sullivan, who replaced Maurice "Hank" Greenberg as chief executive in 2005, was given the board's backing and support. Bob Willumstad, AIG's chairman, has backed Mr Sullivan, saying he is "the right guy" to lead the company out of its crisis.
In the latest letter, the three men say that "although the current management team and the majority of the directors have been in place for more than three years, they continue to blame their predecessors for every adverse development".
The trio list other complaints, including the poor performance of AIG shares, which are trading at an 11-year low, and the fact that the company has been "downgraded by all of the major rating agencies".
AIG said it had received the letter but declined to comment further.
A new chief executive should come from outside the board, the three men said in the letter.
The poor performance of the company, they said, precludes "any individual who was in a position of significant responsibility and oversight during the last three years from having the credibility to lead this company on a permanent basis".