AIG Chief is Out

At its most fundamental, management is about responsibility. It all flows uphill, so, when you’re the big boss, you tend to take the fall when things go bad. Such is the case of AIG, the embattled financial group that has not been able to pull out of a nosedive since the worst of the Great Depression.

Recently, Peter Hancock, the current CEO of American International Group, announced he would be resigning after about two-and-a-half years unsuccessfully attempting to set the company to rights. Hancock is the fifth chief executive since Maurice Greenberg was fired back in 2005. That’s a roughly two-year average per CEO … not a good record.

Hancock will leave on better terms than Greenberg, volunteering to stick around until the board chooses a successor. That’s not to say he will be leaving on good terms. On Hancock’s watch, AIG lost more than $3 billion last quarter alone, a drop that shocked investors and chiseled the writing on the wall.

When he came on board, Hancock vowed to do his best to streamline the massive investment company, that was hamstrung by paying back the huge federal bailout that kept them in business through the Great Recession. When he wasn’t able to meet that mission, some investors threatened to force AIG to split its holdings. The principles were able to reach a compromise, agreeing to a plan, suggested by Hancock, to sell assets in an attempt to cut costs.

Now the group that threatened to split the company up says they’re happy with the announcement to show Hancock the door, “We fully support the actions taken today,” the group’s spokesman tweeted.

While share prices bumped slightly on the news, they were down later in the day, and are down about three percent on the year.

Perhaps the toughest aspect of this scenario is the loss of reputation AIG has suffered since the Recession. There was a time when AIG was the standard bearer, the insurance company other insurance companies wanted to be when they grew up. Then came the financial crisis and the ouster of Greenberg. Even a $185-plus billion government bailout couldn’t right the ship, and AIG’s flower began to wilt.

As the company’s reputation began to fade, confidence also fell. Investors, especially those who were deeply invested in the future of the company, felt desperation creeping in. AIG had become huge, untenable and difficult to manage. Even when drastic action was called for, it was tough to get all the principles to agree. This perception of status quo when investors wanted decisive action turned the seat at the head of the table into a virtual revolving door. Now, no matter who succeeds Hancock, he will have more than fixing a tough financial situation on his or her to-do list. There’s also a reputation to resurrect.