Aig Case Essay

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ETHICS AND LEADERSHIP CASE STUDY #6 Coping with Financial and Ethical Risks at American International Group (AIG)* Instructor: Amy Thiele Sayuri Shiguetomi August 2013 INTRODUCTION AIG started in 1919 in Shanghai by CORNELIUS VANDER STARR. The first branch in the United States opened in 1926. AIG began as a representative of American insurance Companies. It provided insurance risk coverage to insurance companies as a way to disperse liabilities. AIG charges insurance companies a premium in order to allow them to spread their risk so that they can sell insurance policies and grow more rapidly. In 1968 Maurice “Hank” Greenberg took over as CEO. By the end of the 1980S the company had become the largest underwriter of commercial and industrial coverage in the United States and the leading international insurance company. In the 1990s it was the first foreign insurance organization granted a license in China. AIG purchased American General Corporation in 2001. Today the four principal business areas of AIG are General insurance, life insurance, financial insurance and asset management. Before its 2008 collapse AIG had revenues of more than $110 billion, total assets of $1 trillion, and 116000 employees around the world. What happened at AIG to cause its demise? * Lacked transparency * AIG provided incentives to take risks Change at AIG: The best way for AIG to restore its credibility will be by increasing its transparency and accountability. 1. Discuss the role that AIG’s corporate culture played in its downfall. In the year of 2008 the American International group collapsed and was saved thanks to a government bailout. According to Ferrell the corporate culture of AIG had been based in a high stakes risk-taking scheme supported and encouraged all employees focused on short-term financial gain. They had no boundaries as to
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