Buffett says chiefs must be held to account,/b>
By Justin Baer in New York
Warren Buffett implored boards to hold chief executives accountable for their companies’ risk management failures, noting that top managers of financial institutions that collapsed during the credit crisis “have largely gone unscathed” for the mess they helped create.
“In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control,” Mr Buffett wrote in his annual letter to shareholders of Berkshire Hathaway, the conglomerate he controls.
“If he’s incapable of handling the job, he should look for other employment.”
The financial crisis overwhelmed venerable institutions such as Lehman Brothers and forced many others, including American International Group and Citigroup, to seek government support to avoid a similar fate.
According to Mr Buffett, the CEOs of these companies got off too easily.
“Their fortunes may have diminished by the disasters they oversaw but they still live in grand style,” he wrote.
In his letter, which was shared with the public on Saturday, Mr Buffett said those responsible “should pay a heavy price, one not reimbursible by the companies they’ve damaged nor by insurance”.
While the downturn weakened the performance of many Berkshire businesses – the conglomerate in 2008 turned in its worst performance of Mr Buffett’s 43-year run – it presented the billionaire investor with unprecedented opportunities to buy companies and other assets at bargain prices.
“We’ve put a lot of money to work during the chaos of the last two years,” Mr Buffett wrote.
“It’s been an ideal period for investors. A climate of fear is their best friend.”
Berkshire closed 2009 with $30.6bn in cash, down from $44.3bn. Another $8bn is earmarked for Burlington Northern Santa Fe, the US railway it agreed to buy last year in the biggest deal of Mr Buffett’s career.
The value of Berkshire’s portfolio of derivatives rebounded last year, helping lift the company’s net income to $8.1bn, or $5,193 a share, from $5bn, or $3,224, in 2008.
The company’s per-share book value jumped 19.8 per cent last year. |
