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.
13 comments
Comments are closed.
I recall reading an newspaper article — in the NY Times I think it was — a few years ago on the topic of experience and job performance.
Someone had hired a group of homeless men and trained them to be salesmen at a firm who’s product (which I can’t recall) wasn’t trivial.
Several rose to become top producers, surpassing the productivity of many long-time employees. The article’s thesis was that experience is vastly over-rated as an indication of fitness for many forms of employment, which to the thinking person is self-evident but runs counter to the cynical self-preservation that bureaucrats specialize in.
This notion of “experience” for most jobs in business as about as solid as the notion of “talent”. It’s an excuse for entrenched bureaucrats not to have to think.
Our recent financial collapse is only more twigs into that bonfire. No doubt Mr. B could be replaced by an number of avaricious and manipulative hacks who can make a speech on demand (OK that was a bit harsh :) but I’m a populist).
Seriously though, there’s a Llama at the Bronx Zoo that stands around and eats most of the time. I think he’s availble to run AIG. And he’d work for under a $ million a year, which would save the taxpayers a bit of cash flow. He wouldn’t be able to make a speech, but then, that would cut down on the number of meetings, and raise productivity.
I’ve said all along, and only half-facetiously, that you could randomly select bums off the street to do a lot of these management jobs.
You could definitely find no end of adequate people at a fraction of the cost.
So there’s the obnoxious rent collected by this small old-boy’s network of connected, made men. The parasitic premium it imposes on the real people.
Once again we see finance capitalism’s vaunted “efficiency” at work. There is no other system, political or economic, which has anything remotely resembling this fetish of particular “indispensible” individuals. We’d have to go back to divinely anointed monarchs to find the equivalent.
I’ve had a weird life — with some exalted positions and some miserable ditch digging. And I’ve noticed one rule of thumb that pervades white collar environments — generally speaking the higher the salary and power, the lower the intelligence and integrity.
It may be nature or nurture, or some complex that arises separately from the combination of both, like a chemical reaction.
There are some breathtaking exceptions to that rule and when one sees them it reaffirms the tenuous faith in the possibility of some transcendence for humanity — an enlightened Eschaton.
Of course it may just be a Judgement Day like on the Sistine Chapel. Can you imagine Jesus with those muscles and that facial expression. Holy Shit! It must have scared the Cardinal’s straight when they first saw it, at least for a few weeks anyway. Bowahahahahahahah!
In the 17th century a pope, I forget which, had to be talked out of having the Last Judgement fresco painted over because he found it so disturbing.
Also, when Michelangelo was painting it, one of the cardinals did criticize its unconventional depiction of Jesus, so M painted him in as one of the damned sinners.
When the cardinal complained to the pope, the pope replied “I can release you from purgatory, but even I can’t get you out of Hell”.
“…generally speaking the higher the salary and power, the lower the intelligence and integrity.” While I definitely agree there is a kernel of truth here, in my experience, I think it is much more applicable on the integrity side than the intelligence side.
Of course, with respect to integrity, this is what you should expect. A participant in any competition is going to have an advantage is he or she is willing to sacrifice more than the other participants, integrity included (especially if the participant can keep secret the lack of integrity from the other participants and those who make the rules of the competition). It is hard to argue that our business system is not set up for those with less integrity to have a competitive advantage.
I have a theory that Obama Administration is trying to shrink the companies on government support by capping pay. This will lead to “top” talent leaving the company and thus shrinking the size and risk taking at these institutions.
Super article,however,I believe it was Balzac who
suggested that “Graveyards are full of indespensibe people”
Yves, you have a good point, and you don’t need to lie to make it stronger. “MSM” articles habitually point out that AIG only exists because of a $182 billion taxpayer bailout and would otherwise face bankruptcy. Stupid and unfair asides like that just diminish your point. Anybody reading the “MSM” is totally, totally aware that AIG only exists because of taxpayer support.
It’s like when it’s an obvious point you agree with you want the MSM to make it a headline every day of the week, and when it’s an obvious point you disagree with (like the FACT that AIG is losing a lot of its staff because of these comp requirements) you blast the MSM for mentioning it. Like I said, unfair and stupid, and I think you’re smart enough you don’t need to use such tactics to get your (very good) points across.
Maybe Balzac said something about “indespensibe” people, but the (wonderful) quote “Graveyards are full of indispensable men” is usually attributed to de Gaulle (as one can see quickly by googling the quote.) However, at http://quotationsbook.com/quote/19783/ one reads:
“From Dave to QB: I believe it was actually the French finance minister who said this, on the lamenting of Giscard D’estang about the death of De Gaulle and how he was indispensable to France. At least, I read this recently in a De Gaulle biography”
The only de Gaulle biography on Amazon that is full-text searchable does not return any hits for “graveyard”.
According to Wikipedia, de Gaulle’s finance ministers were René Pleven, and Antoine Pinay. Wikipedia page on Giscard d’Estaing doesn’t say who was his finance minister, but it does mention these three as finance ministers: Wilfrid Baumgartner, Giscard d’Estaing, and Michel Debré. Mystery!
We need a good technician/slash caretaker to wind down AIG. A technician who can understand, correct, or at least report on scams like internal reinsurance and a caretaker whose primary brief is to look out for the interests of taxpayers, not AIG execs. If we don’t have anyone like that we are in even worse shape than I thought.
The original quote I found googling is: “Les cimetières sont pleins d’hommes indispensables.” It is attributed to both de Gaulle and Clemenceau.
Someone please take that company out behind the barn…
BANG!!!
Yes, the kids will cry, but we have a farm to run.
this “indispensable” CEO had a rather checkered past at MET–ask Mr Spitzer about how they “smoothed” earnings and about the rather sudden departure of Mr BenMo when the board started asking uncomfortable questions. BenMo also shifted the MET bond portfolio into a ton of toxic crap when they went public in 1999—current 2009 operating year they had a $15B unrealized loss which has been bouncing up and down in value.
AIG really could do well without this type of “leadership”…