AIG Benmosche Fallout: Reuters Deems Him to Be Dispensable

There is a simply intriguing piece up at Reuters, which may signal a shift in the media version of the zeitgeist as more details of l’affaire Benmosche leak out.

By way of background, a very good article at the Financial Times underscores a pet theory of mine: that the board knew exactly what it was doing when it picked an arrogant preening CEO like Benmosche, that they were choosing to tangle with Uncle Sam. A general rule is never pick a fight with someone bigger than you unless you have good reason to think you will prevail. And the board apparently tried to escalate the row in a three hour meeting last week. The idea that a company on government life support can act as if it can make it own rules, like a normal, self-sustaining private business, is just delusional, but nothing from AIG should come as a surprise at this point.

Readers of the financial media probably know full well that that when a CEO leaves (particularly when it is sudden) the default story line is how difficult they will be to replace.

This is wildly exaggerated. It is no doubt disruptive losing a senior executive; the replacement process takes time. And running a big company is a big job. But there is a lot of executive level talent on the sidelines (mergers, losing out in the succession beauty show, or just retiring early and having second thoughts) who would be very eager to get back in the saddle.

But in the last decade (if not longer) they way people are hired for jobs has gotten to be peculiar. Job specs are written in such a narrow way, as in someone has to done virtually the identical job somewhere else to be a candidate. I’ve seen this work again and again against people I know personally who are very able and adaptable. Frankly, there is a lot of merit in bringing someone in who has considerable related expertise, but also experience that might give him a fresh view.

And that tendency operates at all levels. For instance, I got a note from the assistant of a very prominent author looking for a lead research assistant. The job specs called for extensive journalistic experience. Now that may all sound well and good, but I had a pure math grad student (Harvard, just finishing his PhD) volunteer via the blog who did a far better job (he got pretty extensively involved in the crunch phase) than I can imagine someone who would fit the background would have (FYI, theoretical math at Harvard requires off the chart smarts, and I am a big believer that there is no substitute for raw intellectual horsepower, and he has the requisite writing skills in spades). But were he to be interested in the job (he has an altruistic streak, and the book itself could appeal to him), I wonder whether they’d have the savvy to recognize how lucky they would be to have him consider them.

And when I was in big institutions (back the days of mastodons), I was struck by how leery they would often be of people who very bright and a tad unusual (and I do mean only a tad). It never ceases to amaze me how attachment to convention leads people to hire lesser “talent” (that word has been so abused by Wall Street that I am a bit loath to use it) than what they might otherwise have.

So the striking, and overt message of this story is that it challenges, frontally, the two messages that have been oft featured in other AIG coverage: that the CEO job is hugely difficult to fill, and many of the senior and mid-level people are similarly indispensable.

I’m glad to see the old party line be challenged. I just hope this isn’t a PR counterattack from Feinberg’s, office, that the press might be developing some selective independence of thought.

From Reuters:

Robert Benmosche threatened to quit AIG (AIG.N) in part because he complains he cannot pay employees enough…

But if Benmosche, the well regarded former CEO of MetLife Inc (MET.N) makes good on his reported threats to leave AIG, it would hardly be a tragedy for the company, analysts said. He has been at the insurer for only about three months, which is not enough time for him to have become essential for its daily operations. And Wall Street is full of competent executives looking for work.

“The loss of one chief executive won’t change too much for AIG,” said Sean Egan, principal of ratings agency Egan-Jones Ratings Co in Haverford, Pennsylvania. “There are plenty of other people who can fill the role.”…

“He’s [pay czar Kenneth Feinberg] thinking he can limit pay and that an insufficient number of people will leave for better opportunities to really harm the companies,” said Robert Sedgwick, a partner in executive compensation and benefits at law firm Morrison Cohen in New York.

To some analysts, that is a reasonable bet. The pool of talent for hire is likely fairly deep now, as financial companies have announced about 400,000 layoffs since the credit crunch really accelerated in mid-2007, according to outplacement firm Challenger, Gray & Christmas. So even if people leave, others can replace them.

“There are a lot of qualified people out there who would love to work at AIG,” said Bill Fitzpatrick, equity research analyst at Optique Capital Management in Milwaukee, Wisconsin.

And if it were not for several bailouts that left the government on the hook for some $180 billion of potential exposure to AIG, the insurer would be out of business now. Some argue employees should be grateful they still have jobs.

“If it weren’t for government support, this firm would be gone many times over. So this is the cost of being propped up by the government,” said Campbell Harvey, finance professor focusing on risk management at Duke University.

Yves here. How long has it taken for a MSM article to state the obvious? Back to the article:

Steven Eckhaus, a compensation lawyer with Katten Muchin Rosenman LLP, said a “staggering” number of high-level people who work for publicly traded financial companies are already looking to leave, if they have not already.

“People are tired of the uncertainly about what they are going to be paid, about disclosure and tax issues,” Eckhaus said.

But others are not convinced compensation limits are a big problem for AIG. Feinberg is only influencing compensation for the top 100 employees at AIG, but the company has a total of nearly 100,000.

“The prospect of the top 100 people leaving in the near term is probably relatively low,” said David Roberts, chief executive of Verus Research, which provides compensation analysis.

Now this may be Treasury preparing the ground for Benmosche’s ouster, or simply hedging against the possibility that he will refuse to back down and will quit instead. But regardless of how this story came about, the general point stands. As Clemenceau said, the graveyards are full of indispensable men.