Memo to the Board of AIG

AIG owes it to the taxpayers who gave them a $150 billion bailout to review its board, some of whose members are dangerously overstretched

By Beverly Behan

With the company embarrassed by media stories of spa retreats, partridge hunting expeditions, and the like, AIG's (AIG) board ought to recognize by now that when you take a $150 billion bailout from U.S. taxpayers, this is not "business as usual." In fact, it's tough to think of any situation where a company needs all hands more firmly on the boardroom deck than at AIG. Here are some of the demands that government check-writers should be making of the AIG board—or, preferably, that the AIG board should itself initiate to demonstrate leadership and commitment at the top of the house. (AIG did not respond to requests to comment for this column.)

Board Leadership Starts with the Lead Director

Unlike many governance pundits, I'm not one who necessarily favors as doctrine the separation of chairman and CEO roles. In fact, I've seen many highly effective lead directors provide outstanding leadership. They can have more impact than a titular chairman who may lack the will to step up to tough issues. AIG, after, all split its chairman and CEO roles when Hank Greenberg stepped down and former CEO Martin Sullivan took the reigns sans the chairman title.

Lead directors can be effective only if they have the time and share of mind to commit to this important job, particularly amidst a crisis. The former CFO of Walt Disney (DIS) and former Chairman and CEO of Hilton Hotels, Stephen Bollenbach, has some terrific credentials to be the lead director of AIG and help this company and its board get the place back on track. But can he give AIG the level of attention that its taxpayer shareholders should be able to expect?

Bollenbach is currently sitting on three other boards in addition to that of AIG: Time Warner (TWX), Macy's (M), and KB Home (KBH). Moreover, he serves as non-executive Chairman of KB Home (KBH), a company that has recently become the subject of a Securities & Exchange Commission investigation into stock option back-dating. How could anyone—even someone as experienced and capable as Bollenbach—realistically devote the time and attention to serve on three boards and provide the leadership that AIG shareholders and taxpayers deserve?

Should $150 Billion Buy a CEO's Full-Time Attention?

Edward Liddy, the former Chairman and CEO of Allstate (ALL) who was parachuted from the AIG boardroom to its corner office on Sept. 18, clearly knows his way around the insurance business—and that's a big plus for taxpayers who cut him a $150 billion check. When he took the helm at AIG, Liddy was sitting on the boards of two other companies: Boeing (BA) and 3M (MMM).

A press release indicated that Liddy had offered his resignation from the board of Boeing on Oct. 27 due to concerns about NYSE independence rules, given the business relationship between AIG's aircraft leasing subsidiary and Boeing, not because he felt it was important to devote his full-time attention to AIG as its new Chairman and CEO. To date, there's been no indication that Edward Liddy plans to step down from the board of 3M, where he serves as chairman of the audit committee, one of the most time-intensive roles on any board.