Hank Greenberg, Act II

Hank Greenberg, Act II

Originally published to NACD. Now the chairman and CEO of C.V. Starr, Maurice R. (Hank) Greenberg spent 40 years building AIG…


Originally published to NACD. Now the chairman and CEO of C.V. Starr, Maurice R. (Hank) Greenberg spent 40 years building AIG into a global insurance powerhouse. He was forced into retirement in 2005 by a then newly independent board from the company that under his leadership pioneered global trade in insurance products and grew from $300 million to $180 billion in market value at the time of his departure. The now 85-year-old executive who Directorship described as “Mr. Unrepentant” in a 2006 cover story, continues to do battle in a case originally filed by former New York Attorney General Eliot Spitzer that is now being pursued by Spitzer’s successor, Andrew Cuomo. This interview was conducted in late April.

How do you keep so fit?

Exercise mostly every day.

Were you pleased that Attorney General Cuomo announced he was dropping the charges brought by former Governor Elliot Spitzer?

The fact is that we have won most of everything, but one or two issues are left hanging.  But this attorney general is not that different from Spitzer. Why he is keeping this alive, I can’t imagine. I find it outrageous. I have some hopes it will be resolved shortly.

You have always been a builder of businesses so what are you doing now that gets you excited?

Both CV Starr and Starr International are our private companies, both are very significant enterprises and they go back a long way. CV Starr, of course, is named after the founder of AIG, and as a matter of record, we operate a number of general insurance agencies that predate AIG. Since I left AIG, we have been building a very global organization, and have created operations across the U.S., Europe and Asia. We have a new venture in China we are really excited about.

Anything outside insurance that interests you?

We have a significant investment business outside of traditional insurance. We operate a private equity portfolio as well as make direct investments. We operate as a private merchant bank that has been the model for successful investing since JP Morgan.

How did you finally fare with your AIG holdings?

We lost a great deal of money after the collapse as we were the largest shareholder. While that was unpleasant in the extreme, there may be a misconception about our position. When we sold our shares, the media neglected to mention that we maintained the right to repurchase our shares at the same price plus two-percent interest.

In perpetuity?

Let’s say for a long time.

What about the intrusion of government into your business under the former Attorney General?

Our story is straightforward. It became convenient for Eliot Spitzer to try to destroy a business publicly in order to further his own political career, and he took the opportunity. We pride ourselves on preaching the rule of law to everyone around the world. We should be looking in a mirror. This should trouble people; I know it does me.

Why does the New York attorney general hold such power over the financial service industry?

New York’s Martin Law gives the state’s attorney general the broadest law-enforcement powers without any need for proof of intentional or negligent activity. There is a serious question as to whether the law is even constitutional.

Could you start over and rebuild a similar organization today?

I don’t see how it could be done today. Remember, AIG operated in 130 countries many of which we basically opened. China, Russia, many of the emerging markets, you can’t do that a second time. And it is my belief the business environment that encouraged entrepreneurship doesn’t exist any more.

What other factors under your leadership played a major role in the company’s success?

We had an organization with the best compensation structure in the industry. It is the model the investment activists are talking about today. No one made a lot of cash compensation, we all had shares, and we kept them until retirement. In effect, we had the best of all worlds. The entrepreneurship you usually find in a private company where management is an owner but with the responsibility of a public company to its broader shareholders.

So without high cash compensation–which most companies claim they need for retention –how did you manage to keep people?

First, I set the example. I did not have a contract, nor did anyone else in management. Our contract was with the company as shareholders. Then let’s not forget the intangibles. We had an entrepreneurial spirit that attracted the right kind of people. It was an exciting and prestigious place to work. People came there because of our tradition of innovating new products all the time, opening new markets. We were trailblazers.

Aggressive?

Of course. We managed our aggressiveness rationally.

How did you manage to keep tabs on all the risk activity?

Let’s establish that there is a great difference between a company that is managed properly versus a one-man show. We had a process that evolved over the years but which came to provide real transparency into the company’s workings. Every Monday, I held a meeting of the top 15 leaders in the company. Every fact of our business was discussed. Everyone left that meeting, including me, knowing what was happening in the company worldwide. Then monthly, we had a larger meeting of roughly 30-40 people and discussed everything from business regulation to new products, acquisitions, new markets, everything that could be known was discussed, and every question that could be asked was asked. Everyone was informed. I shudder to think about the stories of these investment banks where the CEO delegated all of risk management to mid-level employees and traders. Not on my watch.

Much has been written about the London subsidiary.

Too much has been made of the fact that there was this smaller group on London acting apart from the company. We always had a subsidiary in London. After I left, the company lost its AAA rating. The CEO was Martin Sullivan who was in the job to make sure risk management was functioning as it had previously. The significant move into credit default swaps was both unfortunate in terms of timing as well as volume. When I was there, our business in these instruments was smaller but, more importantly, closely supervised by senior management.

As for financial services, what’s the verdict, more regulation?

We had sufficient regulation in place before. The problem was that regulators failed to do their job, not too little regulation. That’s just a convenient excuse.

What have you learned about dealing with adversity?

Be stubborn, I suppose. Everyone handles it differently. I am just unable to choose expediency over integrity, which is what I was asked to do. I just can’t settle an issue when it is about something I did not do. So I am willing to fight an uphill battle, and I happen to have the courage and tenacity to do so. I think that is the right thing – the only thing – that I can do for myself, my family, and frankly, my country. I will never give in to get out of the way.

How much a factor was your AIG wealth in going into battle against the attorney general?

I never sold a share of AIG stock while I was at AIG.

What did you do to get through some of the more frustrating periods?

Exercise. Tennis. It is possible I even argued once or twice with my wife.