How can Benmosche be tamed?
Robert Benmosche is probably the highest-paid public-sector employee in America: his $10.5 million salary means that he takes home Barack Obama’s $400,000 annual pay every two weeks. And yes, Obama is his ultimate boss.
Along with his outsize remuneration, Benmosche gets lots of other privileges normally denied to civil servants, especially in this administration. He’s allowed to throw regular diva fits, he’s allowed to bully his own board into submission, and he’s even, it seems, allowed to fire his boss against the board’s wishes. In other words, AIG is not controlled by its 80% shareholder: instead, it’s the Benmosche show, with the rest of us just spectators.
This is, needless to say, a novel way of running a state-owned company. Historically the problem with such companies has been that they were hobbled by interference from above; in this case, the problem is exactly the opposite, that the government seems to have no control over the company at all. Yes, it can appoint board members, but the board members wanted Golub to stay on as chairman and he resigned anyway, and they also seem to be incapable of giving Benmosche any kind of strategic guidance. He does what he wants, and if there’s any pushback from the board, he simply threatens to quit.
All of this is complicated by the fact that you can’t look at AIG’s share price to give any kind of indication of how Benmosche is doing: it’s something out of a Borges novel, a security which gets traded at $37.50 per share but which doesn’t really have any value. The important part of AIG’s capital structure is the billions of dollars in debt owed to Treasury: the question there is not whether it will be repaid (it won’t) but how much of it will be repaid. If that number is going up — if the expected amount that the Treasury is going to get back from AIG is rising — then Benmosche is ultimately doing a good job. If it’s going down, then Benmosche is doing a bad job.
So I’m thinking that Treasury should securitize some small portion of what it’s owed by AIG — just a couple of billion dollars, not so much as to make a big difference, but enough to create a liquid market. Then we can look at the market price of those securities, and judge Benmosche much more easily. Without such an indication, he’ll continue to make a mockery of AIG’s corporate governance, and his bosses, American taxpayers.