Reports that ailing insurer


(AIG) - Get Report

owes some $10 billion due to soured speculative trades are a reminder that the legacies of the rock star CEOs who built companies like it are sometimes difficult to overcome.

AIG, which has seen a hole in its balance sheet continue to expand since it received a government bailout in September, saw shares fall 9.3% Wednesday following a report in

The Wall Street Journal

that it has about $10 billion in previously undisclosed obligations. AIG issued a statement Wednesday challenging aspects of the report, but it did not appear to stem the selloff.

Many AIG watchers believe the giant insurer was simply not built to withstand the loss of legendary CEO Maurice "Hank" Greenberg. Greenberg was forced to leave the company in 2005 following a fraud investigation by then-crusading New York Attorney General Eliot Spitzer. Charges were eventually dropped.

One ordinarily sober hedge fund manager says Greenberg practically defied the laws of time and space in his ability to understand in excruciating detail every aspect of the sprawling company's operations. No successor could possibly replicate that kind of mastery, and the complexity of the institution became unmanageable, the manager says.

Sure, Hank Greenberg,


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Sandy Weill and

General Electric's

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Jack Welch made a lot of money for shareholders of the companies with which they will forever be identified, but clearly Greenberg and Weill, at least, get failing grades for succession planning. Welch's final grade may still be pending, but shareholders would certainly have done well to sell their GE stock following Welch's retirement in September 2001.

GE and Welch are famous for grooming managers, and GE stars often go on to lead other companies. But Welch's hand-picked successor, Jeff Immelt, has struggled, and Bob Nardelli, another Welch protégé, has drawn fire for his stewardship of both

Home Depot

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"You don't want to be the guy who takes over for a Bear Bryant or a John Wooden," says Tom Brown, head of financial services investor Second Curve Capital, referring to the legendary college football and basketball coaches, respectively.

Succession planning is more complicated than merely appointing a "number two," who shadows the CEO and sits beside him at board meetings, says Harvard Business School professor Joseph Bower, author of

The CEO Within: Why Inside Outsiders Are The Key To Succession Planning


"A lot of insiders, even if they're very good, have drunk the Kool-Aid and they may see the need for incremental change, but they're not really addressing the fundamental changes in the environment in which the company is operating," Bower says.

Bower notes that strong CEO successors often benefit from being at a certain distance from their predecessors. As examples, he cites

Procter & Gamble's

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A.G. Lafley and

Emerson Electric's

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David Farr, both of whom held high-level posts overseeing the Asian operations of the companies they now run.

But when the sitting CEO is a living legend, he can get in the way of finding such a candidate, Bower says.

"Guys like that can be very domineering, and if they're at all insecure, they tend to value loyalty over competition," he says. "We saw a little of that on Wall Street. The board can come to think the performance of a company is because of the great capabilities of the CEO and not the whole organization."

Both Bower and Brown give high marks to

JPMorgan Chase

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CEO Jamie Dimon, who of course was Weill's protégé at Citi until the two had a falling out.

Bower takes Dimon at his word when the CEO says he enjoys having his views challenged.

"Jamie Dimon is famous for saying you've always got to have at least one guy in the room who's willing to disagree with you, but I heard him asked about that statement and he said it's terrible if it's only one guy," Bower says.

Brown says Dimon has surrounded himself with lots of talented executives who show strong leadership potential. "At the top of that list I'd put Charlie Scharf," Brown says, referring to the head of JPMorgan retail banking business.

But a highly regarded CEO, even one who is supposedly training potential successors, also poses a risk, argues Ken Crawford, portfolio manager at Argent Capital in St. Louis, which owns JPMorgan shares.

"We're probably paying a premium for JPMorgan because its run by Jamie Dimon, and if he gets hit by a bus, or if he does something that changes that view of him, that can quickly turn into a negative for the share price," Crawford says.