AIG Ouster Offers Two Lessons, No Hope

Normally, when a high-profile CEO flames out, investors can reliably draw a single lasting lesson from the misfortune. Never a normal company, when American International Group(AIG Quote), God Bless it, dumped its second CEO in recent times this weekend, it imparted two lasting lessons.

The first is an old stand-by: Don't believe nice stuff written about a new CEO right when he is appointed, especially if he replaces a discredited leader and especially if he served for years as a lackey for that discredited leader. The times probably ain't a changin' if the creepy old guard handpicks their creepy successor.

Just before his appointment, Forbes wrote a Valentine to Martin Sullivan's resume and all the seasoning he got from Maurice Greenberg, who got canned because of regulatory and accounting trouble:

"Since then, Sullivan has been exposed to more operations at the company, as well as to Greenberg's political ties around the world...He has served in many capacities, including executive vice president, foreign general insurance and president of AIG's international property-casualty organization. Prior to that, he held a number of executive, underwriting, marketing and management positions with subsidiaries of AIG in the United Kingdom and Ireland. Sullivan's extensive international experience will come in handy, as AIG has operations in more than 130 countries and jurisdictions."

Considering how Greenberg left office in disgrace, most would not be caught dead with so much experience bouncing on his knee. But Forbes was dutifully impressed.

They Just Don't Get AIG!

Worse, Sullivan was lucky enough (no CEO is this good) that his first quarter in power happened to be good. But here is one of many headlines -- this one from The New York Times -- that rang in this coincidence with trumpets and approving nods: A.I.G. Posts 44% Earnings Rise Under New Leader.

And the lead:

"American International Group yesterday reported a 44 percent increase in first-quarter earnings, the company's first results under the leadership of its new chief executive, Martin J. Sullivan, and the first indication of how its insurance businesses have survived the turmoil of prolonged regulatory investigations and lawsuits."

Never mind that the business media should have been telling investors to still keep minding the accounting. The business media, those personality driven little devils, always see the world through the lens of people. When people change, circumstances automatically do.

Speaking of personalities, a big story line with Sullivan had to do with the fact that Greenberg was always lurking in the background, saying snide things. The business media speculated endlessly on this Oedipal story line of whether Sullivan would be able to supplant his overbearing father figure. It never occurred to them that these were simply to birds of a feather, who would fail in the same way, joining each other in disgrace. Look at this headline about the fatherly feud: A.I.G. Chief Can't Stop Looking Over His Shoulder. And the lead:

"When Martin J. Sullivan, now 53, took over the world's largest insurer, the American International Group, three years ago, the company was the target of multiple criminal and civil investigations and its books were in such disarray that its auditors refused to endorse them. During Mr. Sullivan's first 18 months on the job, A.I.G.'s bottom line was successively pounded by three huge hurricanes and a South Asian earthquake. Then came an equally costly disaster, though one of human origin: the subprime credit market meltdown. `The only thing I have missed is a plague of locusts,' Mr. Sullivan says."