'Goodbye and good riddance' AIG directors!
Taxpayers oust the majority of AIG's board, to the delight of many long-time shareholders. But the government will hold its stake for awhile.
NEW YORK (CNNMoney.com) -- AIG shareholders, a.k.a. U.S. taxpayers, ousted the majority of the company's leadership at AIG's annual shareholders meeting Tuesday, removing the overseers of one of the biggest corporate unravelings in American history.
Just three of the 11 directors that oversaw the company's downward spiral in September remained on AIG's board. Two directors who were placed on the board after the company came undone, including Chief Executive and Chairman Edward Liddy, also stayed in place.
AIG's three trustees, who represent the government's near-80% controlling interest in the company, elected the new directors on behalf of the taxpayers.
The six directors who did not stand for re-election were not in attendance at the annual meeting.
The company's longer-term shareholders stood before Liddy and a small group of about 150 other shareholders, voicing loud objections to the old board. Many tied irresponsible management by AIG's board to the near-catastrophic losses of shareholders' stakes in the company.
"I notice none of the [outgoing] directors are here today," said one shareholder, Kenneth Steiner. "They left like rats leaving a sinking ship. Well, goodbye and good riddance."
AIG's new leadership will oversee AIG's repayment of more than $80 billion in debt owed to taxpayers as well as the company's roadmap to recovery, nicknamed "Project Destiny."
The new board includes former executives from American Express (AXP, Fortune 500), Boeing (BA, Fortune 500), KPMG, Delphi, Sears (SHLD, Fortune 500) and Northwest Airlines (DAL, Fortune 500). Liddy called them all "extremely talented," and suggested they they were well suited to help oversee the company's transition over the next several years.
Liddy, who announced last month that he would relinquish his two positions, said that he expects the new board will find a replacements "soon." The CEO and chairman positions are expected to be split.
Taxpayers to hold onto AIG for a while. The company has previously said that it could take up to five years before the government is fully repaid. Liddy said Tuesday that there is "an excellent chance" the company will be able to repay the taxpayers.
For long-time AIG shareholders, the government's stake has been an onerous burden, vastly reducing the value of their holdings. One shareholder, Jon Levin, suggested that AIG lobby the government to cut taxpayers' 80% stake in the company as the government begins to pay the insurer back, calling the large stake "a disaster suffered by the shareholders."
But Liddy said he could give no assurances that the government will ever reduce its stake in the company.
Shares of AIG (AIG, Fortune 500) tumbled Tuesday afternoon after shareholders ratified a 20-1 reverse stock split, which will take effect at 5 p.m. ET. The stock was trading at about $1.15 a share in afternoon trading, down 14% from Monday's close. Though shares have nearly quadrupled in the recent near four-month stock market rally, AIG's stock is still down more than 90% from the day before the company's bailout was announced in September.
Angry shareholders. A number of times throughout the 45-minute meeting, Liddy said he felt bad for the many shareholders whose holdings were nearly wiped out by the company's collapse.
In response to one unidentified shareholder who was looking for guidance after telling Liddy that her AIG shares were worth just 2% of their peak value, Liddy conceded that though AIG's stock "could recover, the question is, will another stock recover faster?"
"I'm sorry for what's happened to you," added Liddy. "I wish you luck."
In an effort to prevent future collapses of the company, groups of shareholders proposed three motions for adoption, including curbs on executive compensation, reincorporation in shareholder-friendly North Dakota and the ability to hold special meetings to elect a new board of directors mid-term.
"Perhaps we could have avoided the problems we are facing now by putting a new board in place" through special elections, said Steiner, who proposed the latter two motions. "We lost 99% of our money, and no one is being held accountable," he added.