AIG CEO didn’t hesitate to slash compensation at Allstate

(This is from a book I am writing)
Federal regulators found another celebrity CEO to take over failing AIG. In September, 2008, the U.S. government gave AIG a loan of $85 billion to save it from doom and they installed Edward M. Liddy, the former chief executive of Allstate. Liddy is credited with shaking up Allstate’s rigid, conservative culture, and expanded it into new businesses like banking. Shortly before he became CEO in 1999, he told a roomful of the company’s 200 top managers that a number of them would be gone within the year. About 6,400 Allstate agents sued the insurer the next year, after Mr. Liddy reclassified them as independent contractors, ending their health and pension benefits. The lawsuit eventually collapsed (Walsh, 2008). Liddy retired from Allstate in the spring of 2008, leaving the company on top of the list as the worse insurance company in America in a report published by American Association for Justice (AAJ). According to DiCello (2008), the AAJ’s report states, “there is no greater poster child for insurance industry greed than Allstate.” He states, “AAJ’s investigation revealed that when Allstate policyholders file a claim, they are often offered an unreasonably low payment for their injuries. This offer is generated by a secretive claim-evaluation computer program called Colossus. Those who refuse the low offer usually get the “boxing gloves” treatment; an aggressive litigation strategy aimed at denying the insured’s claim at any cost. Allstate implemented this unconscionable practice while Edward Liddy was at the helm from 1999 to 2006 when he retired, receiving more than $25 million in benefits. Liddy was paid almost $19 million in salary for 2006.” (DiCello, 2008). .” For his efforts, the Board of AIG appointed Liddy CEO in September, 2008.