Investors call for new chief at AIG

By Hugh Son  |   2008-6-13  |     NEWSPAPER EDITION

AMERICAN International Group Inc investors holding more than 100 million shares demanded a replacement for Chief Executive Officer Martin Sullivan after the world's largest insurer lost 43 percent of its value this year.

Former AIG director Eli Broad, Shelby Davis of Davis Selected Advisers LP and Bill Miller of Legg Mason Inc asked that a board member be named interim CEO while a search committee finds a new leader for New York-based AIG, according to a letter dated Wednesday. Company spokesman Chris Winans confirmed AIG received the letter.

"Significant and immediate changes at both the management and board level are clearly called for," the investors said in the letter. "The only actions taken by the board with regard to holding senior management accountable have been the public expression of praise and support for the CEO."

Sullivan, 53, may be running out of time to improve results after posting two record quarterly losses totaling more than US$13 billion.

Investors have speculated that Sullivan may join Citigroup Inc's Charles O. "Chuck" Prince and Merrill Lynch & Co's Stan O'Neal as heads of firms felled by the subprime mortgage collapse, according to Bloomberg News.

AIG fell US$1.02, or 3 percent, to US$33.26 on Wednesday in New York Stock Exchange trading. It is the worst performer in the Dow Jones Industrial Average this year.

The interim CEO shouldn't be anyone who had significant responsibility at the company during the last three years, the investors said. The search committee should be led by a director who is relatively new to AIG and doesn't bear "responsibility for the mess created during the last three years."

The letter follows one sent by the investors to AIG directors on May 12, two days before the annual shareholder meeting, complaining that the insurer suffered a "staggering breakdown of risk controls."

Sullivan's predecessor, Maurice "Hank" Greenberg, said on Monday on CNBC that AIG was "falling apart" and called for management and board changes.

Greenberg, 83, controls the biggest stake of AIG stock, more than 11 percent according to Bloomberg data, through two investment firms and personal holdings.