AIG Ex-Chief Hank Greenberg Sounds Off

(page 2 of 2)

Here are some of Greenberg's other criticisms, along with responses from AIG's Winans:

Employment

Greenberg: AIG has added 24,000 employees in the last three years. "That's the equivalent of two Army divisions." The extra employees have raised AIG's ratio of expenses to premiums. (to 24.7% in 2007 from 19.6% in 2003, according to company reports).

AIG: "A big chunk" of the additional employees were added through acquisitions.

Director Fees

Greenberg: AIG used to pay members of the board of directors $50,000 to $100,000, but now directors are getting paid $250,000 to $435,000.

AIG: "When directors' fees were a lot lower, that was a rubber stamp board. It's logical compensation to directors should go up when their responsibilities become real." (By comparison, Citigroup directors earn from $43,000 to $260,000 a year; Bank of America directors last year earned $210,000 to $290,000.)

Nan Shan Life

Greenberg: He notes that AIG has said it might need to pump $500 million to $1 billion into the Taiwanese life insurer, which it owns, to bolster its capital. "I was kind of staggered by that." He says he wants to know whether Nan Shan got into trouble by failing to hedge the exposure to its investments from the falling U.S. dollar.

AIG: Nan Shan needs more capital because of regulatory changes as well as unfavorable investment returns. Winans says he doesn't know of hedging problems.

Lawyers

Greenberg: AIG's lawyers are giving bad advice to AIG management by telling them they have a fiduciary duty to try to capture the AIG shares held by Starr. The lawsuits are distracting attention from running the company and increasing the share price. "AIG is in the hands of the lawyers."

AIG: "We have people who are charged with running their businesses and we have people who are in charge of managing litigation. The people who are running the businesses aren't the least bit distracted."

On Other Topics:

• Greenberg declined an opportunity to gloat over the fall of New York Governor Eliot Spitzer, who resigned after he was caught patronizing prostitutes. As state Attorney General, Spitzer brought the accounting fraud case that led to Greenberg's downfall, even though Greenberg himself has never been charged. Asked about Spitzer, he said only, "I just feel sorry for his family."

• Greenberg argued that morale at AIG was strong under his leadership. "I think I built a great company and I'm proud of what I did. I think we had great morale. I never asked anyone to do what I wouldn't do. It was a winning culture."

• Asked about the fraudulent transaction with Gen Re that led to convictions of employees of both firms, Greenberg said, "I may have spent all of 10 minutes on that transaction." Boies stopped Greenberg from getting into the details of the case, saying "the courts sometimes get cross when they think you're debating the factual issues."

• On China, Greenberg said, "I don't think in the history of the world has there been so much change. … They've got enormous problems, just enormous problems. … We shouldn't think of them as the next enemy because they're not, unless we make them so."

• "You'll see the Chinese banks begin to expand outside of China. They're on a learning curve but they're coming up very quickly."

• On Republican Presidential candidate John McCain: "He's a man of character and undisputed courage. He understands the foreign policy issues very well. I think he'll have a strong economic team around him."

Coy is BusinessWeek's Economics editor.