American International Group Inc. (AIG:US)’s punishment of its plane-leasing chief executive officer for a relationship with an employee is the latest setback for the insurer as it seeks to take the unit public.
AIG named ex-Boeing Co. (BA:US) executive Laurette Koellner to oversee International Lease Finance Corp., putting her in charge of CEO Henri Courpron and cutting his pay after he had a personal relationship with an employee, AIG said yesterday.
AIG is seeking to prepare Los Angeles-based ILFC for an initial public offering as the insurer works to raise funds to repay a U.S. bailout that swelled to $182.3 billion. Courpron, 49, a former Airbus SAS manager, was named to lead ILFC in 2010. Two other executives led the unit between the departure of founder Steven Udvar-Hazy that year and Courpron’s arrival.
“Courpron has significant technical knowledge and skills and was hired for a reason,” said George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia. “How people view Henri Courpron as a result of this, that’s unpredictable and personal. There may be some people who think less of him.”
Courpron’s stock salary was cut by $1 million to $3.43 million after his conduct was found to be “contrary to AIG’s expectations,” the company said. Courpron and the employee acknowledged a voluntary relationship that had ended, according to New York-based AIG.
“I apologize for my mistake,” Courpron said in the statement. “I am committed to keep moving forward with the ILFC team and Laurette.”
The Courpron probe followed an anonymous complaint that also alleged that the relationship involved improper use of company assets and inappropriate personnel decisions, according to AIG. Those claims were found to be unsubstantiated after a review conducted with outside counsel (AIG:US), the insurer said.
“Management misbehavior could cloud the IPO,” said Clark Troy, an independent consultant in Chapel Hill, North Carolina. “He was a potential risk to the IPO, so they’re dealing with that.” Jim Ankner, an AIG spokesman, declined to comment on the IPO prospects.
The shuffle means ILFC will have new leadership for next month’s Farnborough International Air Show. The U.K. expo is held every other year, rotating with a Paris event. Together they constitute aerospace’s largest trade event and a forum for planemakers to showcase products and announce orders.
“Sadly, it’s been a few Farnboroughs since ILFC has had much of an impact,” said Richard Aboulafia, vice president of the Teal Group, an aviation forecaster in Fairfax, Virginia. “It’s been the smaller guys that have grabbed all the headlines at the past few air shows.”
AIG has explored selling ILFC since at least 2009, when it solicited bids from private-equity groups. The insurer filed in September to take the company public and has said financial- markets volatility delayed the sale.
Koellner, 57, worked at planemaker Boeing from 1997 through 2008, becoming president of Boeing International. Before that she spent 19 years at McDonnell Douglas Corp., AIG said. Her experience in aviation and finance “will make her a valuable resource,” ILFC said in a filing.
She is stepping down from AIG’s board of directors because she no longer meets the panel’s requirement for independence, the insurer said. As head of ILFC, reporting to AIG CEO Robert Benmosche, she’ll be paid a salary of $950,000 and is eligible for bonuses. The position will require about 60 percent of her working time, ILFC said in a filing.
Koellner has been an AIG director since 2009, when she was one of six candidates in the first nomination since the trustees managing the U.S. stake vowed to overhaul the board. She’s also on the boards of Sara Lee Corp. (SLE:US) and Celestica Inc. (CLS)
Douglas Steenland, who led ILFC’s board, will remain a director while relinquishing the chairmanship. He was involved in discussions about creating the executive chairman post and asked not to be considered for the role, said a person familiar with the situation who asked not to be identified because the matter is private.
AIG has sought to increase stability among the ranks of its top managers. Benmosche is the insurer’s fifth CEO since 2005.
The company said in February that it was reviewing its succession planning after Chairman Steve Miller was named CEO of jet maker Hawker Beechcraft Inc. Miller, the insurer’s sixth chairman since 2005, had been designated in 2010 as the executive who would become interim CEO in the event that Benmosche had to step down while fighting cancer.
ILFC owns or manages more than 1,000 planes that it leases to operators in Europe, Asia and North America, according to a company filing.
ILFC was founded in 1973 by Udvar-Hazy, who built it into the world’s biggest such lessor and sold it to AIG in 1990. The insurer was able to borrow funds at attractive rates for plane purchases when it had a top credit rating.
Downgrades of the insurer and its 2008 bailout squeezed ILFC’s access to private funding and the unit took writedowns in 2010 as competition from newer, more fuel-efficient engines reduced demand for some of its planes.
Udvar-Hazy left in 2010 and started Los Angeles-based Air Lease Corp. (AL:US) AIG filed a complaint in April accusing Udvar-Hazy and other former ILFC executives of breach of fiduciary duty and stealing trade secrets. Air Lease said that ILFC resorted to a lawsuit because it hadn’t been able to compete and considered the new rival a growing threat.
Courpron, a former executive at Airbus SAS and president of aviation advisory firm Seabury Group who speaks French and English, has worked to improve liquidity and upgrade the fleet, signing a contract in 2011 for 100 Airbus A320neo aircraft. Moody’s Investors Service upgraded ILFC’s debt to Ba3 on June 15, citing reduced leverage.
Courpron is the latest executive to be punished after a relationship with an employee was revealed. Best Buy Co. CEO Brian Dunn resigned this year after a probe found he was having an inappropriate relationship with an employee.
Mark Hurd stepped down as CEO of computer-maker Hewlett- Packard Co. in 2010 after an investigation found he had a personal relationship with a contractor. Boeing’s Harry Stonecipher was replaced as CEO in 2005 after an affair with an employee.
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