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NEW YORK (CNN/Money) -
American International Group's ousted Chairman and CEO Maurice "Hank" Greenberg and the man who assumed the interim chairman title in March, Frank Zarb, have seen a long-time close personal friendship shattered by the upheaval at the company, according to a published report.
The Wall Street Journal reported Friday that the men had been long-time close friends, sometimes traveling together with their wives and having regular lunches. But Zarb supported the board's demand in March that Greenberg resign. And it said the two have not spoken since a phone call shortly after Greenberg's ouster.
"Hank's very upset with Frank," said Edward Matthews, a longtime AIG executive who has left the company to work with Greenberg. "After all Hank's done for him, he thought at least Frank would give him the chance to present his side to the board."
The newspaper quotes an unnamed source familiar with the March phone call that Zarb told Greenberg, "You've built a great company. I understand your anger." The newspaper reported that Zarb added that "you have to face the new reality, my friend. You need to talk to your advisers."
Among other signs of their friendship, Greenberg recommended Zarb to be CEO of insurer Alexander & Alexander, into which AIG had made an investment. He also directed a $3.5 million donation from a charitable entity set up by AIG's founder for a building at the Hofstra University business school that is named after Zarb. He also had the charity endow a faculty position there for $500,000.
The split between the former friends is a sign "that professional responsibility as a director trumps personal relationships," said Charles Elson, corporate-governance professor at the University of Delaware, who calls this "a positive change."
"Years ago, directors were likely to be loyal to management no matter what," he said. "Now their loyalty and potential liability run to the shareholders."
An investigation into accounting practices at the insurer has delayed its annual report and is expected to reduce its net worth by at least $2.7 billion.
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