AIG CEO Benmosche Threatens to Quit; Just How Valuable Is He?

Robbie, we hardly knew ye. Just when American International Group appears to be turning the corner with dynamic leadership and the chance to repay the $87 billion it owes taxpayers, according to Moody's Investors Service, CEO Robert Benmosche is threatening to quit.

His timing couldn't be worse ... or better, depending on your point of view. The threat is apparently very real and means that the feisty Benmosche, who's only been CEO for three months, is willing to cross swords with President Obama's pay czar Kenneth Feinberg. It also raises the question of whether or not government can dictate the salaries of corporate executives, even if it owns the company.

The short answer is that it can try, and Feinberg did. The public was outraged by the $170 million given out in bonuses to AIG executives earlier this year, many of them in the unit that caused AIG to fail. That anger was reflected in Feinberg's decision in October to cap AIG executive salaries at $500,000 a year.

Benmosche isn't in that category and would earn $10.5 million in his first year. But he is speaking out, at least to his own board, saying he can't run a company where executives' salaries are restricted. And, while $500,000 seems like a lot of money, consider that Goldman Sachs is likely to give out $23 billion in bonuses this year.

Benmosche has a lot of leverage in that AIG has had five CEO's in recent years. Two, Hank Greenberg and Martin Sullivan, were ousted. One, Robert Willumstad, stayed for only three months and the one prior to Benmosche, Ed Liddy, served less than a year, during which time he became a virtual punching bag for all the company's ills. Liddy received only a dollar for his services, but most executives can't, or won't, work for that sum.

So can AIG afford to lose Benmosche? Given AIG's troubled track record with CEOs, it could put the insurer, once worth $1 trillion, under ground for good. And is Benmosche playing a high-stakes game of chicken with Feinberg, thinking the pay czar will back down?

Not necessarily. At 65, Benmosche has wealth, had a brilliant career as CEO of MetLife in its glory days, and owns the famous villa in Croatia where he spent the month after being named CEO of AIG. If you had been a fly on the wall at the AIG board meeting you might have heard him say, "I don't need this."

Mr. Feinberg, the ball's in your court.