Memo to the Board of AIG

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Even though AIG's corporate governance guidelines provide that the CEO can sit on one other board, surely this is not the time for the CEO to be doing so. A veteran of four boards, including Goldman Sachs (GS) and Kroger (KR), Liddy doesn't need to learn more about governance by sitting in another boardroom. And if Liddy successfully navigates AIG through its current crisis, he'll have no shortage of new board invitations down the road.

Other AIG Directors Who've "Gone Overboard"?

Last week, AIG added a new director with some impressive credentials, Dennis Dammerman, the retired Chairman and CEO of GE Capital Services (GE). The press release touting Dammerman's recruitment to the AIG board trumpeted the fact that he sits on three other boards and plays leadership roles on two of them: He is chairman of the board of Discover Financial Services (DFS), lead director of Capmark Financial Group, and a director of BlackRock (BLK). How can someone with all of those commitments already on his plate make the time to serve effectively on the board of a company awash in a crisis and a government-funded bailout?

AIG board member Suzanne Nora Johnson also serves on three other boards: Pfizer (PFE), Intuit (INTU), and Visa (V). The former Goldman Sachs executive joined all three boards in 2007 and serves as a member of the audit committees for both Pfizer and Intuit. Those committees met 14 and 12 times last year, respectively. She joined the board of AIG in July 2008. Most directors experience their steepest learning curve in their first two years of board service. As well-qualified as Johnson clearly is, should she, who is is early in her tenure on other boards, be serving on the board of AIG right now? Or should Johnson shed some of her other board commitments to allow her to focus on AIG?

Perhaps the AIG's Nominating & Corporate Governance Committee,which recruits directors to the AIG board, barely batted an eye at Dammerman's and Johnson's other board commitments because George Miles, AIG's committee chair, sits on even more boards than they do. In addition to AIG, he serves on the audit committee of Harley-Davidson (HOG), chairs the governance committees of Wesco (WCC) and Equitable (EQT) Resources, and chairs the Audit Committee of HFF (HF).

An AIG Governance Overhaul

In addition to rethinking the commitments of his own board portfolio, George Miles should also initiate a comprehensive review of AIG's corporate governance as chair of its Nominating & Corporate Governance Committee. New policies they might consider include:

• Board Committees: Should AIG really maintain six board committees amidst a crisis when most U.S. boards have only three or four? According to data from the Corporate Library, AIG held more than 40 board committee meetings last year. Is a Public Policy & Social Responsibility Committee necessary at this juncture? Probably the most socially responsible thing AIG's board could do right now is save the company and repay $150 billion back to U.S. taxpayers. You can always reactivate any disbanded board committee later.

• Board Composition: Is it appropriate for two inside directors to serve on the board of AIG? Or should Edmund Tse, an AIG executive who's been sitting at the board table for 12 years, be asked to tender his resignation?

• Board and Director Evaluation: There is no better time than now to do a comprehensive evaluation of the board of AIG: one that includes confidential third-party interviews with all of the board members, a peer review of individual director performance, and all of the real "best practices" that should be demanded of—and provided by—any board that's just cashed a $150 billion check from the U.S. government.

Beverly Behan is the managing director of the Board Effectiveness Practice of the Hay Group and co-author of Building Better Boards: A Blueprint for Effective Governance.