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Originally published Tuesday, May 19, 2009 at 1:26 PM

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6 independent AIG directors to stand for election

CHARLOTTE, N.C. - Embattled insurer American International Group Inc. said Tuesday it will reconfigure its board to include six new independent directors.

AP Business Writer

CHARLOTTE, N.C. - Embattled insurer American International Group Inc. said Tuesday it will reconfigure its board to include six new independent directors.

Six new nominees will be up for election at the New York-based company's annual meeting on June 30. AIG's Web site lists nine current board directors, including Ed Liddy, the company's chairman and chief executive.

It wasn't immediately known if any current directors are up for re-election. The company's full slate for board nominees will be disclosed in the company's forthcoming proxy statement, AIG spokeswoman Christina Pretto said.

AIG's corporate governance practices have come under intense scrutiny after the company admitted it paid out millions in bonuses after having received $182.5 billion in financial support from the government since September.

Last week, trustees overseeing the government's nearly 80 percent stake in AIG asked for a thorough review of AIG's compensation programs and to develop a new one. They also said they were seeking new board members for the company.

"I think we should not be surprised that they are making changes at the board level," said James Post, a professor of corporate governance and ethics at Boston University. "The current governance failed. The company had tremendous losses and the need for taxpayers to come in with billions of dollars of support ... it's almost a given that there has to be new leadership at the top."

The six nominees are Harvey Golub, former chairman and chief executive of American Express Co.; Laurette Koellner, former executive with Boeing Co.; Christopher Lynch, an independent consultant; Arthur Martinez, former CEO of Sears Roebuck and Co.; Robert Miller, executive chairman of Delphi Corp., and Douglas Steenland, former CEO of Northwest Airlines Corp.

Separately, The Wall Street Journal reported Tuesday on its Web site that Stephen Bollenbach, AIG's lead independent director, will not stand for re-election, citing people familiar with the matter.

Pretto declined to comment on the report.

Bollenbach, a former CEO of Hilton Hotels Corp., is relatively new to the AIG board. He joined in January 2008, eight months before the government rescued AIG from potential bankruptcy.

Federal officials have been paying closer attention to governance at corporations that have received bailout funds.

Bank of America Corp. is revamping its board and bringing in directors with more banking experience. A shareholder revolt last month at the Charlotte, N.C.-based bank's annual meeting stripped Chief Executive Ken Lewis of his chairman title. The bank has received $45 billion in government funds.

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Post said AIG's board failed to fulfill its oversight role.

"It's the senior management team, including the CEO and CFO, who is responsible for strategies that are successful and make money," Post said. "But it's the board that's responsible for oversight when it comes to financial integrity, legal integrity ... that's where they failed."

The U.S. government provided AIG with an $85 billion loan in September. As market conditions worsened and losses piled up at the insurer, the government revised and expanded the loan package several times.

The loans now total more than $180 billion after being increased in March when AIG reported a fourth-quarter loss of $61.7 billion, the largest ever quarterly corporate loss in U.S. history. AIG reported a narrower loss of $4.35 billion in the first quarter, versus a loss of $7.81 billion in the same period a year ago.

As part of the loan package, the government has also taken a roughly 80 percent stake in the huge insurance company.

AIG was devastated not by its traditional insurance operations, but by its financial products business, which underwrote risky credit derivatives contracts known as credit default swaps. The swaps are essentially insurance contracts protecting an investor against default on an underlying investment, such as mortgage-backed securities.

Rising defaults in the investments that AIG's contracts were insuring led to worries that the company would not be able to cover all of its obligations and that the ripple effects would touch of a new, even more intense phase of the credit crisis. That's when the government stepped in, fearing that without its help, AIG's collapse would cripple financial markets in the U.S. and around the world.

Shares of AIG rose 5 cents, or 2.7 percent, to $1.88 in afternoon trading.

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