With personal relationships so central to an international business, and the AIG commitment of managers engaging with counterparts, travel schedules were grueling. Throughout the 1960s and into the early 1970s, the preferred method of global travel for business executives was on Pan Am—like AIG, an American company pioneering the opening of global markets at a time when there were few multinational companies in the world. Many flights were satisfactory, but long-haul trips from New York to Moscow, Tokyo, or Beijing invariably entailed stops along the way. In that period, hotels for international business travelers were scarce, so Greenberg stayed in the guest homes that Starr had established in the cities where his companies did substantial business.
Starr had flown Pan Am for global flights, though for shorter and domestic flights he acquired, in 1952, the company’s first corporate airplane, which traveled at 230 miles per hour, carried six and could fly for six hours, then a nonstop flight from New York to Chicago.1 Range and speed were the most important features AIG looked for in corporate aircraft, which it needed for its executives in pretty much the same way that working Americans need a car: to get to work. AIG’s early planes, in the 1970s, not only had limited range and speed, but were also cramped. This often meant that Greenberg and his wife, Corinne, who invariably accompanied him, slept head-to-toe on a pair of seats as they crossed the Aleutian Islands. When necessary, they would stop at the facetiously named “World Famous Weathered Inn” in Cold Bay, Alaska, an aptly named town that often seemed populated by as many polar bears as people.
Throughout the 1970s, on numerous lengthy international business trips, Greenberg developed relationships with government and business leaders vital to opening markets and building businesses abroad. He nurtured many of these into friendships and forged some of those into an impressive brain trust for AIG that constituted its International Advisory Board (IAB). Officially formed in 1981, the IAB boasted many active luminaries in foreign governments and international business who met annually with AIG’s corporate directors and periodically with management.2 Early members included Aritoshi Soejim, former Japanese finance minister and president of the leading Japanese corporate group, Nippon Hilton; Edwin Stopper, president of the prominent Swiss banking firm, Banque Leu; Yuet-Keung Kan, chairman of the Bank of East Asia; and Baron Leon Lambert, descendant of Baron James de Rothschild, and a pioneer of modern international banking.3
Greenberg tapped Henry A. Kissinger to be the chairman of the IAB. Kissinger was a fellow internationalist, a former professor who had served as both national security adviser and secretary of state for President Richard M. Nixon, before returning to civilian life to write books on international affairs and manage an advisory firm. Secretary Kissinger led IAB’s formal meetings, held annually over two days, beginning with his overview of the world. Never using notes as he canvassed with penetrating lucidity, Secretary Kissinger would first explain how he saw the world, identify issues and trends, and compare how he would address contemporary challenges with how the incumbent U.S. government was approaching them. In his inimitable gravelly and accented voice, Kissinger would then turn to someone around the table, say Buck Freeman, and ask, “Buck, what do you think?” Freeman would opine. Then John Roberts, for instance, would comment and the dialogue was off and running on the subject of U.S. foreign policy.
IAB meetings often featured distinguished guest speakers, who included many notables from the worlds of international finance, diplomacy, and business. Among the most memorable speeches was that given by Richard Nixon. The former U.S. president surveyed every region of the world in a riveting lecture that lasted more than one hour. Speaking without notes, Nixon demonstrated his unmatched ability to articulate a clear vision of his country’s national interests, offering insights of value to all those assembled.
Another speaker was Ratan N. Tata, the prominent Indian businessman. Greenberg’s relationship with Tata included the creation of a joint venture in India between Tata’s companies and AIG.4 India restricts foreign ownership of insurance operations, so it has always been difficult for AIG and other U.S. insurers to do business there. The joint venture with Tata opened the door for AIG to have high-level discussions, including with the country’s prime minister, to change that. As a result, AIG received the first foreign insurance license from India, though with limited ownership. It received assurances that if and when the restrictions on foreign ownership were relaxed, AIG would be the first entitled to take advantage.
All IAB members were available to AIG for a wide range of consultations and other engagements to help solve problems or open doors. A good example involved the efforts of IAB member Moeen Qureshi, the international financier who once served as interim prime minister of Pakistan. One problem he helped AIG resolve had seeds sown on January 2, 1972. Zulfikar Ali Bhutto, newly installed prime minister of Pakistan, announced the nationalization of the country’s banking and insurance sectors, including AIG’s life insurance business run by its ALICO unit. Pakistan did not propose to pay any compensation for the taking, though the vast business representing nearly one million policies through 8,000 agents was valuable.
Negotiations for a fair price, begun by ALICO’s senior executive in Pakistan, stalled. Other senior AIG executives from New York went to Islamabad to add pressure. They met with a stonewalling bureaucracy. After a month of fruitless efforts, the pursuit seemed futile. A few months later, Bhutto appeared in New York to give a speech to a meeting of the Foreign Policy Association, whose members include international business leaders with deep interest in U.S. foreign affairs, Greenberg among them. Advance copies of Bhutto’s text indicated that topics would include an appeal to the gathering for making direct financial investments in Pakistan. Ahead of the speech, Greenberg ambled up to the speakers’ table for a word with the prime minister.
“I’m Hank Greenberg, head of AIG, the company that used to own ALICO in your country. Your government recently nationalized my company, but we have not yet been compensated. I understand that you plan to appeal in your speech tonight for direct foreign investment from this audience. Knowing what I know, it will be difficult for me not to rise during the Q&A and share that information.”5
Bhutto summoned an aide to his side and asked after the status of the AIG compensation determinations. The aide said he did not know the status but would look into it promptly. Greenberg thanked the gentlemen. The speech went off as prepared, and the government of Pakistan soon paid AIG for its confiscated assets. Bhutto, a controversial figure, was overthrown in 1977 and executed two years later at the direction of the country’s Supreme Court. He had been found guilty of politically motivated crimes, including murder. After years of upheaval, Bhutto’s daughter, Benazir Bhutto, in 1988 was elected prime minister, the first woman elected to head the government of a Muslim country, and a staunch ally of the United States.
Political turmoil consumed Pakistan, however, and Benazir Bhutto was turned out of office for an interim period. Throughout this turbulent time, AIG’s executives remained in touch with Pakistani officials, expressing continued interest in reopening for business there. Benazir Bhutto was restored to office in 1993. As a member of the IAB, Greenberg asked Qureshi for help in reopening the country to AIG for business. Thanks to Qureshi, Greenberg met with Benazir Bhutto on one of her visits to the United States and repeated AIG’s interest. The government returned ALICO’s insurance license to AIG and the company resumed operations.
Greenberg saw early in his career the influential role that nongovernmental organizations, such as the Council on Foreign Relations and the Center for Strategic and International Studies, could play in international relations. In addition to gathering internationalists together to discuss global affairs, such organizations conduct research and host discussion forums. Greenberg joined these in the 1970s and provided leadership and financial support throughout his career. Among those he eventually led were the Asia Society, which he chaired for many years; the Council on Foreign Relations, where he served as vice chairman for many years alongside Peter G. Peterson as chairman, where the two developed a close relationship; the Peterson Institute for International Economics, on whose board he served for more than a decade; and the Center for the National Interest, which he helped to found and has chaired for many years.6
As a pioneering internationalist, Greenberg anticipated the influence such organizations could have, well before other international business executives did.7 Thereafter, he tried to shape that influence.8 In the 1970s, these organizations were of great utility to a dynamic international business organization such as AIG, whose leadership must have an abiding interest in the foreign policy of the United States, an active appreciation of international economics, and a deep curiosity about other cultures. These “think tanks” ascended into the role they have today at the pinnacle of policy formulation.
Greenberg’s intense business and civic leadership resulted in numerous invitations to join advisory boards or committees formed by many governments and business organizations. U.S. presidents and cabinet members of both parties named him to boards concerning finance, intelligence, national defense, and trade. Abroad, he headed advisory boards to Hong Kong, the Philippines, and the mayor of Shanghai, and served on boards for the China Development Forum, the mayor of Seoul, and Tsinghua University. Among business organizations, he was chairman or vice chairman of many U.S.-foreign business councils, including those with ASEAN, China, and Korea.9 The service, in which Greenberg remains very active, is a two-way street, where Greenberg contributes substantial knowledge and gains useful business information in return.
Frequent high-level international business trips yield valuable information about foreign policy issues and geoeconomic conditions. This is of great use not only to business executives and policy researchers but to government leaders. Dating to the 1970s, the U.S. government regularly debriefed Greenberg, on behalf of senior government officials, before and after many of his foreign trips.
Greenberg also perceived that while the foreign policy establishment of the 1970s in the United States tended to think of the world in geopolitical terms, the world would increasingly be defined in geoeconomic terms. With that inspiration, he created a research center within the Council on Foreign Relations devoted to the study of geoeconomic phenomena, which still today offers cutting-edge thought about topics such as energy, exchange rates, immigration, and trade. Much of that research, like much of AIG’s entrepreneurship, focuses on thinking about contingencies: what would happen if . . . .
For an international business, such efforts to look around corners are crucial, though it is impossible for a business or consortium to prevent such events as war, nationalization, or expropriation. In a dramatic example, in early 1978, armed officials appeared at AIG’s local office in Lagos, Nigeria. They announced that the government was seizing control of the company and would pay, as compensation, the par value of its shares of common stock. As any businessperson knows, however, par value, often merely $1 per share, is a nominal sum stated mostly for bookkeeping purposes. The actual value of the shares of a prosperous company, such as AIG in Nigeria, is vastly higher. The proposed compensation was a subterfuge, in violation of international law, which required paying a reasonable compensation for the nationalized assets.
The officials also took custody of Louis D. LeFevre, general manager in the Lagos office. His colleagues promptly reported this to AIG’s New York office, where Greenberg immediately enlisted American diplomats for aid. His first call went to the office of Secretary of State Cyrus Vance and one of his top aides, Matthew Nimetz, who at once assigned staff to contact counterparts in Nigeria to assure LeFevre’s safety and secure his release. President Jimmy Carter was planning a state visit to Nigeria, set for March 31 to April 3, 1978, to meet in Lagos with President Obasanjo. In an insightful measure, President Carter, a Georgia native, tapped for assistance an insurance executive from Atlanta, an African American whom Carter thought stood a greater chance of success negotiating the release and payment. It worked. Nigerian officials freed LeFevre and settled AIG’s claim. AIG could not prevent such nationalization, but it could act quickly to mitigate losses and deter other governments from following similar courses of action.
AIG’s leadership in international business and policy, and such battles against nationalization that it fought for itself on a number of occasions, equipped it to wage similar battles for customers. These customers were the hundreds of U.S. businesses that rapidly expanded internationally beginning in the late 1970s and early 1980s. They put substantial assets at risk abroad, often in developing countries lacking a history of private enterprise, commercial codes, or the rule of law. Political risk was great and these clients needed insurance against it. While other insurance companies were withdrawing from the market for political risk insurance, AIG widened its commitment.
Political risk insurance was a lousy business for companies with poor underwriting discipline. Yet it was a lucrative business for those, like AIG, that excel at assessing and pricing risk—as well as recovering losses—in environments where it had substantial direct experience. It was a delicate balance, akin to “underwriting a politician’s mind,” as some in the field described it. But AIG had long-standing operations in scores of countries run by employees—mobile overseas personnel (MOPs) and otherwise—who cultivated abiding relationships with national leaders. Using that knowledge, AIG wrote policies in many diverse countries covering risks ranging from government default on contracts to losses from expropriation of private assets. In those cases, AIG would first pay the customer’s loss and then seek reimbursement from the foreign government. In the days before “globalization,” enforcing such rights often required educating foreign officials and executives about contractual promises and commercial obligations.
An instance with international significance occurred in Peru in 1985. In July 1985, Alan García was elected president, after running on a nationalization platform. The next month, the Peruvian army stormed the facilities of Belco Petroleum, an American oil company. The troops seized its assets and ousted its personnel, putting them on planes bound for America. Total losses ran to $250 million, and the company filed a claim with AIG under its insurance policy covering political risks for a large portion. AIG paid Belco and then, exercising its rights under the policy, filed a claim with the government of Peru. AIG contended that the government’s seizure was an expropriation under international and U.S. law entitling it, as successor under the policy, to fair compensation.
To enlist the powers of the U.S. government in such an exercise, AIG had to persuade several federal officials that the government’s action was indeed an expropriation. If so, under American law then in effect, the United States could sanction Peru. Getting such a declaration was a protracted process that required sustained arm twisting. AIG had many supporters in the cause, in Congress, the White House, and industry, among insurers, and cabinet officials, but the politically charged nature of the episode limited their freedom of action. In the end, the U.S. government agreed with AIG and supported its right to sue the government of Peru.
The U.S. government also supported other formal sanctions, including blocking Peru’s access to world capital markets, interfering with its right to participate in international events, seizing Peruvian assets held in the United States, and so on. The result was high-level pressure from the president of the United States and the secretaries of treasury and state. Though the pressure did not persuade García to relent, his immediate successor, Alberto Fujimori, was more ready to see the light.
At that point, several years after the initial taking, the International Monetary Fund and World Bank added pressure. They stressed that the Belco battle was a blemish on Peru’s record. It had to be cleared up if Peru was to access financial capital in world markets. President Fujimori dispatched a delegation to meet with Greenberg and other AIG executives in New York, where they negotiated a deal in which Peru would repay AIG over several years. AIG’s pact enabled the government and international banking authorities to resume ordinary economic relations with the country.
By surrounding himself with informed and intelligent internationalists and maintaining many reliable sources—within AIG, on the IAB, at the Council on Foreign Relations, and in other such organizations—Greenberg developed a sophisticated perspective on how to do business internationally. This was characteristic of only a small number of American executives during the period before globalization, confined to the few truly multinational companies of the period. AIG insured many ventures, in which companies often stumbled in analyzing risks, costing both themselves and AIG, directly under policies written and indirectly due to international frictions that follow costly mistakes. AIG underwriters around the world tried informally to educate customers in analyzing political risk and assessing international relations. But Greenberg eventually perceived the need to develop formal dynamic guidance for America’s chief executives.
AIG hired Gerald Komisar, a U.S. government official whom Greenberg had known for many years to have good sources around the world. Komisar had been stationed in many different countries in a long career and was fluent in several languages, including Chinese. Greenberg asked Komisar to help educate customers AIG had insured to help them avoid making mistakes that lead to business disruption, insurance losses, and adverse political consequences. The idea was to assemble something like the “President’s Daily Brief,” the national security document provided to the U.S. president. Komisar came up with a budget and a plan and began publishing the Executive Briefing Book.
AIG distributed copies, usually published weekly with occasional special editions featuring hot topics, to top executives of its largest customers. They also gave it to members of the IAB, to which Komisar also made a presentation about the background of the project and the methods used in developing it. Komisar created the book by maintaining his contacts with government officials and business leaders around the world. He would respond to particular questions AIG’s largest insurance customers might pose, as well as develop topic ideas himself—all geared to providing advice about how to do international business in light of unfolding global developments.
Political risk is not the only risk of operating an overseas business, of course, which also presents quotidian risks facing any business. Chief among these is foreign currency exchange risk, whose fluctuations can offset profits, as well as the risks of internal financial misreporting or human resources lapses. An example of the latter arose in Turkey. AIG had formed a joint venture, orchestrated by Greenberg, Manton, and Roberts, to write property and casualty policies with a local insurance business. Partners included a prominent family, and the president was a reputable man and former government regulatory official.
Barely a year into the venture, however, the financial reports submitted to 70 Pine seemed askew. The relationships among premiums written, earnings, and reserves did not match up. On a trip to the Middle East, Greenberg dispatched his internal auditors to Turkey ahead of his visit to discuss the matter. He and Roberts arrived in Ankara later in the evening. They were dining at a favorite spot when the auditors rushed in. The joint venture’s building was afire—along with the accounting records. By the time emergency rescue teams arrived, the joint venture’s Turkish president had fled and was hiding in his home and would not come out. The story suggests a sad truth: it is difficult to rely on a person’s reputation as a basis for predicting future performance, though there is not much else to go on.
Some content for AIG’s Executive Briefing Book came from Greenberg, of course, based on his extensive travels. Greenberg had always stressed to his chief pilot, Franklin Davis, the importance of speed and range for his international trips, and Davis, characteristic of AIG employees, worked hard to deliver on the goals. Above all, however, the crew put a premium on safety. Given the amount of flying Greenberg’s business philosophy required him to do, it is unsurprising that there were many harrowing encounters, near-misses, and brushes with fate. But, throughout, Greenberg gave a standing order to Captain Davis that could never be countermanded: the pilots were in charge of all aviation decisions, no matter what Greenberg might say once airborne.
Overseas assignments for AIG employees offered the excitement of opening markets, addressing foreign cultural mores, and tackling unusual problems. Underwriting presented peculiar challenges because every country’s political system is unique. Doing business in Rhode Island is not all that different from doing business in Virginia; doing business in Russia, however, is very different from doing business in Vietnam.10 Thanks to Starr’s pioneering endeavors, many of the early companies within AIG were first and foremost international businesses. Greenberg expanded on that legacy, tirelessly traveling the world in the era before globalization to open new markets for AIG.
In an interview for this book, Charlene Barshefsky, the former U.S. trade representative, quipped that “Greenberg traveled more and knew more foreign dignitaries than nearly any U.S. secretary of state.”11 When asked in an interview for this book to comment, former secretary of state Henry Kissinger said: “I concur and I would be among his rivals.”12
Notes
1. Contact (November/December 2002): 11.
2. Founding AIG IAB members in 1981 (and their years of service) included: Kenneth H. J. Clarke (1981–1987); Yuet-Keung Kan (1981–1995); Baron Leon Lambert, (1981–1987); Hong-koo Lee (1981–1987) (a Korean scholar who served as South Korea’s minister of national unification and prime minister); Aritoshi Soejim (1981–1989); Edwin Stopper (1981–1987); and Washington Sycip (1981–1996) (a Chinese-Filipino accountant, founder of the Asian Institute of Management, and chairman of the prestigious Filipino professional services firm, Sycip Gorres Velayo).
Over the years, Greenberg added to the IAB such energetic internationalists as Lord James Prior, who had been a deputy secretary of state in the United Kingdom, chairman of England’s General Electric Company, and chancellor of Oxford University; Dr. Pierre Languetin, former chairman of the Governing Board of the Swiss National Bank; Otto Graf Lambsdorff, an influential German political figure and economist; and Jacques de Larosière, adviser to the French bank, BNP Paribas, and distinguished head of the World Bank for many years.
3. See “Baron Leon Lambert; Banker Collected Art,” New York Times (June 1, 1987).
4. “Tata AIG Risk Management Services Ltd. Is Formed in India,” Contact (November/December 1998): 3.
5. See Guaazardi, Grose, et al., “Worth the Risk,” chap. 15, p. 12.
6. All these organizations are discussed further in Chapter 16.
7. Cunningham interview with Peter G. Peterson, New York, November 4, 2011.
8. Cunningham interview with Dimitri Simes, Washington, January 24, 2012.
9. In more recent years, Greenberg became an active member of the board of BENS—Business Executives for National Security.
10. See Thomas J. Neff and James M. Citrin, Lessons from the Top (New York: Currency Doubleday, 1999), 161 (quoting Greenberg).
11. Cunningham interview with Charlene Barshefsky, Washington, August 31, 2011.
12. Cunningham interview with Henry A. Kissinger, New York, December 6, 2011.