Sullivan out at AIG

This weekend, the board of directors at AIG fired its CEO, Martin Sullivan, and replaced him with its chairman, Robert Willumstad.

This runs counter to the general trend in "good corporate governance" these days. The trend is to separate the two posts of chairman and CEO, on the theory (as it is often expressed) that the same person shouldn't be quarterback and head coach.

This particular team has just fired its quarterback and the head coach, with the consent of the other coaches, has just sent himself in to QB. We'll see how the team does.

Stockholders are probably happy to think that there is a strong hand at the helm, though (and yes, I'm aware of the abruptness of my switch to a nautical metaphor) because AIG has been caught in some pretty nasty seas.

On Friday, a story in the Wall Street Journal said that AIG is under investigation at both the SEC and the Department of Justice on the possibility that the financial products division may have intentionally overstated the value of contracts linked to subprime mortgages.

This comes in addition to the litigation by private plaintiffs I've discussed in earlier posts, and it comes at a time when the price of a share of AIG stock is near its 11-year nadir.

For the record, AIG is saying nice things about Mr. Sullivan while he is on his way out the door. Board member George Miles said, "On behalf of the board and the entire organization, I want to thank Martin Sullivan for his extraordinary dedication and service to AIG for over 35 years."

Bye bye.