AIG's board must consider the shareholder lawsuit, because it is charged with acting in the best interests of shareholders. But it doesn't have to agree to sue the U.S. for bailing out the company at the start of the financial crisis. - 

The board of insurance giant American International Group is set to meet today, to consider whether the company should join a $25 billion shareholder lawsuit against the U.S. government. The lawsuit claims AIG shareholders didn't receive adequate compensation when the federal government stepped in to rescue the firm.

AIG's former chief Hank Greenberg, who is still a major stockholder, insists the company got a raw deal and wants the firm to join in his lawsuit against the government. Uncle Sam's attorneys will be presenting their case for why the company shouldn't sue.

"It really is very much like a court proceeding, where the AIG board will be the arbiter of this dispute," says Jacob Frenkel, a corporate law attorney and former federal prosecutor. He points out that AIG's directors have a legal duty to consider significant shareholder requests like this.  

"A board that fully deliberates all the issues surrounding a particular shareholder demand," Frenkel explains, "ultimately is protected for its decision."

Indeed. AIG issued a statement late Tuesday saying its board has an "obligation and intention to consider seriously" Greenberg's demand "under applicable law." The statement said the board anticipates making its decision "in the next several weeks."

Columbia University law professor John Coffee says the AIG directors could be looking to head off further legal action against themseleves, by demonstrating that they've given Greenberg due consideration.

"That would mean that they would be immune from liability if Greenberg subsequently sued them for not suing the U.S. government," Coffee says.

Could Greenberg really turn on the company he led into a crisis? Coffee points out: Take a look at what he's already done.

"It takes a lot of gall to sue the country that bailed you out when you went into bankruptcy because of your own basic recklessness," says Coffee. 

AIG, in its statement, quoted current CEO Robert Benmosche as saying, "AIG has paid back its debt to America with a profit, and we mean it when we say thank you to the American people."