Buffett : CEOs at big corporations should pay penalties for misjudging risky deals

[cal04]

Buffett Criticizes Corporate Risk Management
http://abcnews.go.com/Business/wireStory?id=9963937

Billionaire Warren Buffett said Saturday that CEOs and the boards that hired them should pay a steep price if their companies get into trouble with risky investments.

As part of his annual letter to Berkshire Hathaway Inc. shareholders, Buffett encouraged other corporations to develop meaningful penalties for top executives who misjudge risk so they will be more careful. Buffett lamented that shareholders, not chief executives and directors, have borne most of the burden of company failures during the economic crisis of the past two years.

"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," Buffett wrote. "If he's incapable of handling that job, he should look for other employment. And if he fails at it — with the government thereupon required to step in with funds or guarantees — the financial consequences for him and his board should be severe."

Buffett told his shareholders he initiates and takes full responsibility for every derivative contract Berkshire writes. Those contracts helped deliver a largely unrealized $787 million gain in investments in 2009 after a $7.5 billion loss recorded in 2008.

[Captain Hilts]

1. The 'heads I win, tails you lose' system has worked pretty well for them! nt

[liberal N proud]

2. Absolutely - they should share in the risk

[Catshrink]

3. They should face the same consequences as

"lower" level employees do when they screw up: lose their jobs or their bonuses.

[HughBeaumont]

4. Warren Buffet gets it, why doesn't everyone else?

They get lotteries if they succeed OR fail. Gee, I wish I could get a lottery a year no matter how good or bad I do in life. Hmmmmmmmm, why does THAT sound familiar . . . OH YES! It's the exact same thing the GOP says about poor or unfortunate people.

They say "W'aaall, if you have guaranteed income or entitlements, where's th' lazy bum's incentive to do any better??" Yet the CEO Runaway Salary/Bonus/Perk train regardless of performance is perfectly O.K. with them and they don't see the disconnect.

[DJ13]

5. Great speech Mr. Buffett, but you also rewarded those same people

When you took out a large position in Citi when they were desperate for capital in late 2008.