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American International Group, Inc. Message Board

  • rogerabc100 rogerabc100 Oct 13, 2008 1:22 PM Flag

    AIG had the same accounting as Enron? (WSJ article)

    Think twice and then another time before you buy AIG !

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    • roger, you seem to forget or are knowingly trying to blindside others here, Again , if AIG were to go down and out theway of enron.. it would impact every american life savings program on the planet! think about that before posting again.


      As the financial crisis continues to pummel the markets, the question we need to ask is: "Where were the boards of directors of Lehman, AIG, Bear Stearns, Countrywide Financial, Merrill Lynch, Wachovia, Washington Mutual, Fannie Mae and Freddie Mac?"

      The first job of the board of directors is to ensure the viability โ€“ indeed, the survivability โ€“ of the firm. By this criterion, these boards failed miserably.
      About the Author

      Bill George, author of "True North," is a management professor at Harvard Business School and the former chairman and CEO of Medtronic. He is a member of the boards of directors of ExxonMobil, Goldman Sachs, and Novartis.

      Were they lulled into complacency by their CEOs? Or did they lack the insight to see that their firms had placed themselves in great peril if there were major disruptions in financial markets? Or were they looking at computer models rather than applying the judgments they were selected to make?

      Regardless of the reasons, the boards of directors of these firms are directly responsible to their shareholders for the firm's viability and survivability, and they should be held accountable for their failures. Yet no one is focusing on how these boards failed to exercise the fiduciary duties they assumed when elected by the shareholders.

      If history teaches us anything, it is that financial markets can and will gyrate wildly from time to time. Of all corporations, financial institutions must keep their balance sheets and cash balances in line to weather the kind of storms we are currently experiencing. The bursting of the housing bubble was predicted back in 2006 and the excessive debt consumers were holding was also evident. Yet, the directors of these firms kept approving higher and higher levels of leverage as the storm clouds grew ever darker on the horizon.

      Even the early signs that the housing bubble had burst in early 2007 were ignored. Didn't anyone notice the filing for bankruptcy protection of mortgage lender New Century Financial? By taking on the same kind of mortgages, wasn't it obvious that Countrywide Financial would be next โ€“ forced to sell itself to Bank of America after its stock declined 85% -- and would drag down the banks that were repackaging these mortgages as AAA securities?

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