Stephen Bollenbach, who was named to AIG’s board earlier this year, will become lead director, according to a report in The Wall Street Journal. Bollenbach is favoured by some of AIG’s most critical shareholders, including billionaire Eli Broad.

Broad, a former director who founded SunAmerica, a life insurer that AIG bought several years ago, and fund managers Shelby Davis of Davis Selected Advisers LP and Bill Miller of Legg Mason wrote in a letter obtained by Reuters last week that "significant and immediate changes at both the management and board level are clearly called for."

The same group sent another letter to the board last month, also expressing concern over Sullivan’s management.

Separately, former Chief Executive Officer Maurice "Hank" Greenberg, who remains a large shareholder, has also been critical of management and AIG’s board.

Sullivan, 53, replaced Greenberg as chief executive in 2005, after then-New York Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission accused Greenberg and the company of financial misconduct.

Greenberg, an octogenarian, is still fighting civil charges. Sullivan, an affable Englishman who is a 36-year company veteran, ushered AIG through the difficult process of reaching a settlement with regulators, paying $1.64 billion to settle charges of fraud, bid rigging and improper accounting, one of the largest regulatory settlements in U.S. history.

Sullivan initially won investor favour by seeing AIG through the regulatory probe, but more recently saw his reputation become tarnished as losses mounted and AIG’s stock fell precipitously.

The stock’s price has been than halved over the last year, closing on Friday at $34.18. A year ago, shares were trading at $72.91.

(Reporting by Lilla Zuill and Dan Wilchins, Editing by Jonathan Oatis)