Change Management Disaster at AIG

By Lance Winslow

For those who study cases in change management, they are often taught about the worst change management disasters in corporate American history. And there are plenty to study. However, there has been quite a bit of a recent history with regard to change management that no one is talking about quite yet.

After the subprime mortgage fallout and banking crisis in the United States in 2008, some researchers have backtracked what caused some of this. Believe it or not change management is some of the cause. In fact at AIG, Hank Greenberg, the company's founder was forced to resign from his own company and pay a fine nearly $1 Billion Dollars by the then New York State Attorneys General Elliot Spitzer. (we will not go into the Elliot Spitzer prostitution case or abuses of power here).

What followed is now history, but it is a great lesson in change management and a good case study to follow. You see after Hank Greenberg had left the company he was replaced by two gentlemen who decided it was a good financial move for the company to guarantee a giant bundled mortgages. By ensuring these bundled mortgages it put AIG at significant risk.

It also enabled investment banking companies to sell bundled bad mortgages, which were not worth the paper they were written on. Had a Greenberg not left the company, he certainly would not have allowed those loans to be insured by AIG.

This would have slowed down the abuse in the mortgage subprime lending sector and probably curtailed the financial fiasco. When Hank Greenberg left the company, he left with his ethical values and standards of integrity, which were not transfer to the new president and CEO. Think on this.

Lance Winslow - Lance Winslow's Bio. If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/.

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