I wonder if Ed Liddy misses retirement.And I'll bet he's kind of nostalgic for those relatively mellow days of overseeing Allstate's response to Hurricane Katrina claimants. That's because Liddy, former CEO of Allstate Insurance, can't be having a whole lot of fun in his current role as CEO of American International Group.
It's gotten so bad that his name has become a laugh line. It seems as if no matter how hard Liddy tries to do the right thing -- committing to transparency, cancelling conferences, restructuring operations, putting respected, high-profile executives in place to oversee the restructuring -- it either backfires, or another mind-boggling development emerges from the erstwhile industry-leading AIG.
The latest outrage came this week when Liddy reported in a letter to the Treasury Department that AIG planned to pay $165 million in bonuses to executives from the company's now notorious Financial Products group. As insurance professionals know only too well, the activities of this non-insurance unit led to the financial crisis that has resulted in taxpayer aid to AIG of at least $170 billion. Not long after the news broke, President Obama declared he had asked Treasury Secretary Timothy Geithner "to use that leverage and pursue every single legal avenue to block the bonuses and make the American taxpayers whole."
It may be that Liddy sincerely believes he has no alternative -- that AIG is contractually obligated to pay the bonuses. I have no way of knowing if he's actually surprised by the public reaction. But couldn't he have called Secretary Geithner -- I'm sure they have each other's phone numbers -- and said, "Tim, I've got a problem. The lawyers are telling me I've got to pay out these bonuses, but that stinks. Can you help me do the right thing?"
I think Liddy, who Insurance & Technology recognized in 2003 as a Tech-Savvy CEO, actually deserves a lot of credit for taking on the AIG job. After all, he could have taken the path of another past I&T Tech-Savvy CEO, Bob Benmosche of MetLife, who planned to retire to his vineyards in Dubrovnik, Croatia, when he left the company in 2006. Liddy did not create the AIG mess and stepping in as CEO is actually an act of public service. That he has so quickly become a target of scorn and derision shows that even the most seasoned and savvy executives can underestimate not only the scope of the global financial services meltdown, but also the anger of the public about the wide-ranging and possibly permanent consequences of poor corporate judgment and performance.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio