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Hank’s Shakespearean Tragedy

Hank Greenberg by David Yellen via Fotune In the October 16th issue of Fortune magazine, James Bandler with Roddy Boyd and Doris Burke tell a tale of Shakespearean proportions.  (Both depth and length.) Hank’s Last Stand chronicles the recent goings on of the once king but now deposed ruler of the AIG empire, Maurice “Hank” Greenberg. It’s a fascinating tale of leadership in twilight and the plot twists continue today.

Though never as well known as Warren Buffett or Sam Walton, Hank Greenberg stands as one of the few chief executives of the past quarter-century who could be called legendary. He took the reins of a financially frail and poorly integrated hodgepodge of property-and-casualty and life insurance companies and built it into a powerhouse, with $190 billion in market value and operations in 130 countries. Annual shareholder return during his reign was an impressive 14%. He was one of the country’s most influential globalists, helping open doors for American service companies in Russia, India, China, and elsewhere.

He didn’t run such a leviathan by being cuddly. “The people who report to Hank are put under pressure that could be considered unreal,” one former executive told Fortune in 1980, in an issue that named Greenberg one of America’s Ten Toughest Bosses. “If you consider it a sacrifice, then you’re working at the wrong company,” Greenberg responded. He groomed two sons as successors, then rode them so mercilessly that both left the company. Change was embraced at AIG, but not dissent. Early on, Greenberg dismissed internal resistance to his innovations as “the little thoughts that little men have.”

Bandler, a Fortune editor, spent a considerable amount of time with Greenberg, his wife, Corrine and his closest advisers over the past four months. In addition to the AIG meltdown, during this period Greenberg was defending himself from charges that were originally brought against him by the former US Attorney and disgraced ex-governor of New York Eliot Spitzer, who is himself navigating some legal and reputational challenges.

It’s a long article but definitely worth reading. I found this passage interesting, if not ironic.

Greenberg’s team was led by Boies, one of the most celebrated trial lawyers of the day. …Boies and Greenberg forged a deep friendship, and the lawyer became Greenberg’s closest advisor. Boies figures he has spent 60% to 70% of his time on Greenberg’s legal issues in 2008. Greenberg and his associates have spent an estimated $230 million on legal bills.

The first 20 years of my business career was in the insurance/reinsurance world in New York and it never ceased to amaze me how quarter after quarter and year after year AIG would consistently outperform the market. This conversation from the article hardly comes as a surprise.

Much of the evidence presented by prosecutors involved recordings of telephone calls between Gen Re officials. In one conversation caught on tape, Gen Re’s former general counsel said AIG’s approach to compliance has always been “Pay the speeding ticket.”

“How much of this sort of thing do they do? I mean how much cooking goes on in there?” another Gen Re official asked in a different call. “They’ll do whatever they need to to make their numbers look right.”

We are talking about insurance here; it was supposed to be about as purely competitive a market as there was. A little financial and human capital and subject matter knowledge and your were on your way. It was very difficult , if not impossible, to make outsize profits through underwriting alone. Now we know.

Yes, we are still talking about insurance here; an industry that makes accounting look sexy. But there was one personality/celebrity/rock star that rose above the rest and that was Hank Greenberg. He traveled in circles that were unfamiliar to nearly every other insurance industry executive.

Don’t get me wrong, Greenberg was an extraordinary businessman but his legacy as a leader has suffered serious damage. He is being challenged in the courts on significant alleged ethical issues. In fact, $230 million of legal bills worth. But the real cost of all of this is the toll of watching his kingdom being dismantled.

Much dust will have to settle before the role played by Greenberg – and many others – in the current financial crisis can be fairly judged. Greenberg certainly had a hand in his own company’s demise and is still facing government and private litigation. His view of his own responsibility is entirely without nuance. He says that his biggest error was selecting directors and a successor without backbones. “The biggest disappointment you have in life is in people. To have them act the way they did goes beyond disappointment – it goes to the question of character and courage.” Over his favorite meal, baked scrod with almonds, he says, “I’ve lived a pretty good life. I served my country. I raised a good family. I had the privilege of meeting Mr. Starr.”

But the past several years have been difficult. “What makes it even more painful is this,” he says: “It took 40 years for a group of people who worked together to build this. It was like a band of brothers. And then you look at it three and a half years later, and the company is on the rocks. You see what can be undone in a brief period of time. Never in my wildest dreams did I imagine this could happen at AIG.

“So is it painful?” Greenberg asks. His blue eyes are bright and moist. “Yeah. Bitterly painful.”

Kudos to Bandler and team for a great article on how fragile leadership can be.

Photo credit: David Yellen for Fortune.

About the author

Peter A. Mello, Founder/Editor Founder of Weekly Leader and Sea-Fever Consulting, LLC, a leadership development and strategic communications consultancy. Previously, CEO of an international nonprofit organization and COO of a national insurance/risk management services firm. Peter has been leading people and managing organizations for over 30 years, writes a leadership column for MarineNews magazine and blogs about maritime culture at Sea-Fever. Follow him on Twitter.

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