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business newsRags to Riches CEOs: Ed Liddy
By
Scott Reeves Nov 18, 2009 8:05 am
At one time, the would-be AIG rescuer needed rescuing of his own.
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The former CEO of Allstate (ALL) famously came out of retirement in September 2008 to take over a bankrupt AIG. He was installed by the Federal Reserve and worked for a salary of $1 per year out of a sense of patriotic duty, according to remarks by Liddy and others, including Treasury Secretary Timothy Geithner.
After enduring a public firestorm in March over the now-notorious AIG bonus scandal, when the company handed out employee bonuses totally $165 million after it had accepted $170 billion in government bailout funds, Liddy decided to step down from his perch at AIG.
He announced his decision to leave the insurance firm last May but stayed on until August, when he handed control of the company to his successor, Robert Benmosche, former CEO at MetLife (MET).
Before stepping in at AIG, Liddy was known in Wall Street circles as a well-connected and skilled executive. After graduating from Catholic University of America and later collecting an MBA at George Washington University, he built a lucrative and successful career at several major companies. He earned about $130 million during his eight-year tenure at Allstate, where he had a hand in launching the company’s IPO when it was spun off from Sears (SHLD) in 1995.
But during the bonus scandal, the New Brunswick, New Jersey-born executive revealed some little-reported facts about his early life. Following an exclusive interview with Liddy, BusinessWeek wrote that the CEO “grew up so poor that he, his mother, and sister were thrown out of their homes at times after his father died when he was 12.”
There were days when food was so short, Liddy told the magazine, that “We'd have dinner for three and food for two and my mother would say, 'I don't feel well right now. You two go ahead.' "
"You can believe I know the angst of the American taxpayer and what's happening in economically uncertain times," he added.
But his Horatio Alger-like rise from poverty earned little sympathy from the American public, even after the former CEO suggested that employees who earned more than $100,000 per year and were eligible for bonuses return at least half the payout. In practice, the AIG boss said the company was legally obliged to honor preexisting contracts and pay the employee bonuses, no matter the source of the funds.
Following the bonus brouhaha, Liddy was also berated by Congress for holding stock in Goldman Sachs (GS), valued at about $3 million, because the investment bank did business with AIG. Liddy had been on the board of directors at Goldman Sachs before he took over at AIG.
Earlier this month, AIG said it was profitable for the second quarter in a row as investment losses narrowed and costs declined. Third-quarter net income totaled $455 million, according to reports, compared with a loss of $24.5 billion for the same period a year ago.
Despite the good news, AIG has a long way to go to repay loans made as part of the bailout.
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