Buffett Says CEOs Should Lead Disclosure
By Greg Cresci
Monday March 4, 8:39 pm Eastern Time
NEW YORK (Reuters) - Billionaire investor Warren Buffett on Monday joined the debate surrounding corporate accounting, advocating better disclosure and blasting chief executives who claim they aren't responsible for the details of their company's financial reports.
``I would suggest that the CEO regard himself as the chief disclosure officer of the company,'' Buffett said at a Securities and Exchange Commission conference in New York. ``I think the owners can discipline him. We own 100 percent of some companies and believe me, we can discipline the CEO if he doesn't tell us what's going on.''
Buffett railed against the type of ignorance that executives who presided over the collapse of energy giant Enron Corp. have claimed.
``I think the CEO knows when something material has happened,'' Buffett said at a panel including SEC Chairman Harvey Pitt and New York Stock Exchange Chairman Richard Grasso. ``In the end it's the CEO who determines the qualitative aspect of disclosure, and that's all-important,'' Buffett said.
Proposals to combat the opaque accounting methods epitomized by Enron were at the center of the four-hour discussion, which also included professors, lawyers and Wall Street money managers.
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The SEC is proposing faster, fuller disclosure from companies in the wake of Enron's demise. The Houston company's bankruptcy filing in December was the largest ever and was related to obscure financial partnerships used to keep debt off the company's books.
NYSE Chairman Grasso dismissed the idea that new laws can solve the problems behind Enron's collapse, saying: ``You've got to start with the premise that you cannot legislate honesty.''
Grasso made a plea for plain language financial reports and said some accounting procedures, while technically correct, can often mislead investors.
``It is the role and responsibility of a transparent public company not only to have everything out there but to have it in a digestible manner to a very broad audience,'' Grasso said.
Proposals to clamp down on the accounting industry aren't likely to be finalized for some time, however. The SEC plans to continue to convene similar panels in the future, with another meeting scheduled for next Wednesday in Washington, D.C.
Speaking with reporters after the conference, Pitt echoed Grasso's skepticism about lawmakers' capacity to successfully address accounting and disclosure issues.
``I think the critical problem stems from questions of ethics and competence,'' Pitt said. ``Those are areas where I don't think legislation can do the trick.''
He said he supported oversight through a private sector body that would ``impose obligations'' on the accounting industry.
Pitt, who took copious notes during the conference, has proposed an accounting oversight group comprised of accountants and non-accountants that would replace a widely ignored oversight board that dissolved itself last month.
``The one thing we won't do is let anybody dictate to us how we will resolve problems,'' Pitt said, when asked about how the SEC will interact with other regulatory agencies.
Buffett, for his part, came out in opposition to proposals that would force companies to rotate auditors periodically, saying such a measure ``would be a mistake.''
Buffett said a company's internal auditors should ask its hired accountants straightforward questions about the accuracy of quarterly results. Most audit committees, he said, fail to aggressively probe the quality of bookkeeping that investors depend on. |
