Chief Executive honors Greenberg: CEO of the Year Hank Greenberg warns against 'regulatory overexuberance' and calls U.S. capital markets the 'envy of the world.'.

As Citigroup's Sandy Weill was getting ready to hand off the CEO of the Year award to AIG's Maurice "Hank" Greenberg, Weill joked that he wished Greenberg a better reign. "There is no way that I would wish him a year like I had," said the 70-year-old Weill, who days earlier announced he was stepping down and ceding the top post at Citigroup to Chief Operating Officer Charles Prince.

Weill, of course, was referring to a year characterized by intense media scrutiny, a year in which all CEOs were held to the fire for the sins of a few--and during which Citigroup's chief had personally felt much of the heat. Greenberg, whose leadership at AIG for more than three decades earned him the 2003 CEO of the Year" title, wasted no time in delivering a pointed message to 200 business leaders and their guests attending the award dinner at the New York Stock Exchange.

Acknowledging that the gross misdeeds of companies like Enron, WorldCom, Tyro and HealthSouth have shaken public trust--and that "if even just one of these events had taken place it would have been one too many"--Greenberg expressed con cern that the rash of legislative, regulatory and enforcement actions that came in the wake of these corporate scandals have had a "chilling effect" on the nation's economy. "The success of the American capitalist system has been built on innovation and risk-taking," he pointed out. "Corporate governance distractions have resulted in some top managers becoming reluctant to take risks today, yet that is what we're paid to do. Many are spending more time responding to the new requirements than developing the strategies that lead our businesses down new paths of growth."

While acknowledging that some reforms were called for, Greenberg called on his fellow business leaders to challenge a national climate of "regulatory overexuberance" and defend a capital market that is the "envy of the world" and has historically generated prosperity over long periods. "The problems facing American businesses are real and in most cases self-inflicted by the careless disregard on the part of a few CEOs of the responsibility they carry to create value for all of their constituencies--customers, employers and shareholders," he said. "But in our zeal to correct the inequities of a few, we must not hobble the economic system that creates value for so many.

"No one in business today wants to appear defensive, lean against the strong currents of public opinion or challenge the authority of the regulators," he asserted. "But we must speak out when the backlash from scandals threatens to undermine the ability of good companies to develop and flourish as they have in the past." Some reform, added Oreenberg, was certainly needed. "[But] as we take action to cure a number of serious ills, we have to make certain that the medicine does not kill the patient."

Greenberg went on to question the current predilection for outside board members, pointing out that Enron, WorldCom and Tyco each had an overwhelming majority of independent directors. Noting that AIG has changed its board ratio and audit and governance committee structures in light of prevailing public perception, Greenberg remains unconvinced that an independent-director led board is a prerequisite for good governance.

"In fact, the opposite may be true," he charged, pointing out that to expect directors who spend at best two or three days per month on company affairs to uncover and stop corporate malfeasance is unrealistic. "I strongly believe that the most effective boards are comprised of directors who deeply understand the company and whose own fortunes are tied to the success or failure of the company over the long term. Board members with substantial holdings in the company stock are the best fiduciaries of the broad shareholders' interests."

Ultimately, however, responsibility for delivering the kind of sustained annual growth and irrefutable reputation for corporate values that will soothe today's skittish investors falls to the CEO. "The focus on integrity and building of longterm value must start at the top if it is to permeate through the organization," noted Greenberg. "A successful business cannot be managed by trustees, caretakers or by regulatory flat. It needs handson leaders who have assembled a great team behind them." Greenberg went on to credit his own team at AIG for contributing to the company's impressive track record.

When Greenberg stepped down from the podium to resounding applause, several CEOs seconded his sentiments. "Hank did a phenomenal job of talking about some of the critical problems in the industry that deal with investor confidence," said Joe Moglia, CEO of Ameritrade. "While we need regulations, at the end of the day, you can't legislate business ethics. What it all boils down to is taking the responsibility as a leadership team to do the right thing."

With a leadership tenure that has seen AIG through to a market cap of $150 billion and $62 billion in shareholder equity, Greenberg's promotion of corporate values and performance goes beyond mere speech-making--which is exactly why his peers view him as the ideal CEO of the Year. "He's been a symbol of what you can do by running a great corporation and by sticking to your values and doing the things you know how to do well," said Robert B. Catell, CEO of KeySpan. "Those are the kinds of things people should look up to in CEOs in corporate America today."

Weill Passes The Baton

We honor a person tonight not just as CEO of the Year, but as a person who has been CEO for half a century--somebody who has taken a tiny company and made it an important factor in the financial industry all over the world. Somebody who has created incredible value for all the people that have been part of AIG over the past 30 and 40 years and made changes in their lives that would never have been the same, had Hank not been leading this exercise.

"I remember--and I guess this reflects my age--but I remember when this whole merger with C.V. Starr took place and what's happened since then has been really unbelievable. But Hank has been much more than a person who has built one of the greatest financial services companies in the world. He has used his energy to influence government leaders in many countries in the world to try to make this world of ours a better place. He is a person who has be lieved in openness in world trade and our world coming together and in having AIG be one of those forces that help make it happen.

"But let me tell you what I really most respect Hank for. I think there is no human being alive today who has done more to impact our society, cared more about the education of young people and contributed more to making our health-care system really a better place than Hank. When you look at the new New York Hospital, that building would not be there without I lank and Cornine. He is just a fantastic person--whether you think about New York Hospital, whether you think about the Asia Society, or about any number of things where he's made a difference.

"And if any of you know him as a friend, if you ask him to help you, he's always there to help. I know no other person who gives more and understands and appreciates the value of giving than Corinne and Hank Greenberg. I think for us as CEOs in a time where everybody is criticizing what we are all doing, people should really raise their glasses and say, thank God that there are some CEOs who care about our society and care about giving back to our society and use their brainpower--not just their money--to make this world a better place."