Ex-AIG CEO: Don't Blame Me For Bonuses

Early Show - Hank Greenberg - Aig - March 20, 2009
All week, Washington has been hearing and expressing outrage over $165 million in retention bonuses received by employees of American International Group, the insurance giant being kept alive by more than $182 billion in taxpayer bailout money. On Thursday, Early Show co-anchor Maggie Rodriguez sat down with former AIG CEO Maurice "Hank" Greenberg, and talked about those bonuses.

Greenberg built AIG into the largest insurance company in the world. After nearly 40 years at the helm, he was ousted in 2005 in the midst of an accounting scandal. In The Early Show interview, Greenberg said that he doesn't support retention bonuses and would not have paid the bonuses that have caused a symbolic uproar across the country. He also didn't accept any responsibility for AIG's catastrophic meltdown and said that current CEO, Edward Liddy, should be replaced.

The current AIG management countered Greenberg's claims. According to Nicholas Ashooh, senior vice president of communications for AIG, "It's absolutely astounding that Mr. Greenberg would claim that he never put in place retention agreements. His entire long-term management compensation was a retention agreement."

Ashooh goes on to say that Greenberg compensated management in part with awards of AIG stock through Starr International Company, and that, while Greenberg promised repeatedly that the stock was dedicated solely to their compensation, the managers couldn't have it until they retired. Ashooh describes this as a classic retention agreement.

In addition, Greenberg was at the helm of AIG when the Financial Products division was started. This unregulated AIG operation ended up bringing down the company, writing derivatives contracts for foreign and U.S. Banks loaded with mortgage securities, with guarantees of hundred of billions of dollars that had to be paid out when AIG's credit rating was lowered from AAA to AA.

Read the full interview below.

Rodriguez: If you were still CEO, would you have paid out the bonuses?

Greenberg: Absolutely not.

He says retention bonuses started after he left.

Greenberg: When I was there, nobody had a contract in the company, including me. I didn't believe in them. If you didn't do the job, you didn't deserve to be there. There were no contracts."

Rodriguez: No contracts? No guaranteed bonuses?

Greenberg: No, never. We had bonuses based on performance. If you didn't perform, you didn't get a bonus.

Three CEOs followed Greenberg, but he singles out the current one, Edward Liddy, the government-appointed boss who denied blame this week on Capitol Hill.

Liddy told a congressional hearing, "In reviewing how AIG has been run in prior years, I've also seen evidence of its bad side. Mistakes were made at AIG on a scale few could have ever imagined possible."

Rodriguez: Edward Liddy seemed to imply that a lot of the mistakes at AIG were made when you were CEO."

Greenberg laughed at that.

Rodriguez: Do you accept any responsibility?

Greenberg: Absolutely not. It was the greatest company in history. In the insurance industry, there wasn't anything like it. How does a man who ran a small automobile insurance company, a one-line type of insurance company, ever be on anybody's list to run AIG?

Rodriguez: Are you saying Edward Liddy should be fired?

Greenberg: I think he should be replaced. You can call it what you want.

Rodriguez: You make it sound like a bunch of people who had no grip on reality have been running AIG since you left.

Greenberg: You know, that's a pretty good description.

Rodriguez: Do you think that AIG, the managers at AIG since you left, are guilty of something criminal?

Greenberg: I don't know if it's criminal. I think it's stupidity.

Rodriguez: Should they be punished?

Greenberg: Well, do we punish stupidity? I don't know. ... Those who are investigating should determine whether there was stupidity, there was fraud, there was whatever.

In fact, investigators are looking into whether this man committed fraud: Joseph Casano, appointed by Greenberg to run AIG's financial products, the unit responsible for the losses. Casano has hired a lawyer.

Rodriguez: Do you think he should hire a lawyer?

Greenberg: He probably ought to hire two or three.