AIG Gives Sullivan the Boot, Replaces Him With Former Citibank Executive Willumstad

AIG's board took decisive action over the weekend in order to quell anger from its largest investors.  In a three hour meeting, AIG's board axed CEO Martin Sullivan and replaced him with Chairman Robert Willumstad, a former President and COO of Citibank.  Mr. Willumstad, who left Citibank after being passed over for the CEO position for Charles Prince (who has since been booted), is highly regarded by many in the banking industry and will hold both Chairman and CEO posts at the insurance company.  While I agree that it is impressive that Mr. Willumstad left Citigroup about two years before the former financial bellweather began its rapid unraveling, I have to wonder how useful his consumer finance experience will be in managing AIG's enormous credit default swap portfolio, the source of AIG's significant losses from past two quarters.  Furthermore, Mr. Willumstad has been Chairman of AIG's board since 2006.  One has to wonder yet again what corporate boards are supposed to do, other than approve excessive executive compensation packages, if they are somehow not aware of what lies on their own company's balance sheets.  Why did AIG's board need to wait for regulatory probes and angry letters from shareholders before taking "decisive" action?  Mr. Willumstad's focus will now shift to deciphering and paring down the risks embedded in AIG's $1 trillion balance sheet.  Something tells me that AIG's investors are in for more surprises in the near future.