How Much is Benmosche Really Worth to AIG? (AIG, MET)

American International Group, Inc. (NYSE: AIG) is under pressure today after its new CEO Robert Benmosche, who has not even had a full three months yet on the job, has effectively threatened to walk out as CEO of AIG. The reasoning is over the intense restrictions of being under the government, particularly as it pertains to compensation limits.  What is interesting is that this may be a strong CEO throwing the gauntlet at the government.  But we also want to explore what Benmosche is actually worth in real dollar terms to AIG today.  Chances are it is far more than just this 4% we have seen the stock drop today.

Benmosche had to count on what would happen when he took over.  First and foremost, he stood up to the Obama administration and said he would not take the job with a compensation package that resembled the President’s salary.  He got the exception and his pay is $3 million in cash and roughly $4 million in common stock, plus what appears to be as much as $3.5 million per year in a long-term incentive award.  He also had to know that the entire legacy team at AIG was going to have to work at severely depressed salary and compensation levels under the government restrictions.  Benmosche might not have been part of the problem, yet that is not true for the legacy executives and ‘performers’ at AIG who have been there for years.

There is an area of government supervision that has to drive an executive trying to stop their ship from sinking: daily demands to produce documents and answer questions.  Benmosche might have underestimated how many “urgent” telephone calls he was going to get from the likes of Barney Frank, Elijah Cummings and other Congressmen and Senators.  He probably found out very fast that he (or his staff) would have to spend a much larger amount of time each day merely reporting progress and dealing with politicians and regulators.

What value Benmosche really added was that he stopped what Ed Liddy had started in just offering every single unit up for sale in the current climate.  He effectively followed what Hank Greenberg’s comments had been all along… Stop giving away units of the company at depressed fire-sale prices at a time when the only buyers are effectively stealing the units.  He specifically noted that he’d stop the sales processes of many units just to pay the government back a token repayment.

Benmosche retired in 2006 as the Chairman and CEO of MetLife Inc. (NYSE: MET), and he is the one largely credited for demutualizing MetLife to allow it to be more aggressive and more competitive.  While he is one of the few who could step back in and take the helm, we wondered from the start why he would even want this challenge with very limited upside. He was living extremely well with no pressure like the AIG conundrum would demand.

Moody’s was just out in recent days with the note that AIG would likely be able to pay its government obligations back if the government support stays in place and if the financial markets are stabilized.  What was not addressed is that this Moody’s call also probably factors in the Benmosche plans of building back up all of these units and THEN determining whether to use the units as sale items or whether to use them as cash flow instruments that can all be used to repay Uncle Sam.

AIG is 80% owned by you and me, assuming you are a US citizen.  The exact tally varies on what AIG really has taken, but the unofficial-official figure everyone uses is $180 billion in government aid.

Where this gets very interesting is that if Benmosche walks out, then AIG is going to be that much more unlikely to attract an industry veteran that can turn chopped liver into a steak.  We really wondered why Mr. Benmosche took this job in the first place.  But if he can’t take it anymore, then a new CEO with a new agenda is going to come in after the first of the year and no one inside is going to have the fire in their belly anymore.  No one has been able to effectively run this ship.  Hank Greenberg is too controversial to most, and frankly he is just too old for what needs to be done now.

Benmosche is worth more than 4% to AIG.  He is worth more than $10 million.  But he is also at a point in his life where this may have been too large of a task for someone who might be more content growing wine.  Moody’s won’t be issuing anymore favorable comments if a yes-man to the administration gets in and just starts parceling out pieces of the company for a song.  And anyone worth their salt will probably want to go work elsewhere rather than deal with an AIG headache.

JON C. OGG
NOVEMBER 11, 2009