Billionaire investor Warren Buffett said shareholders such as mutual fund managers must stop supporting bad chief executives out of fear they'll find the spotlight turned on their own pay and performance.
"Getting rid of mediocre CEOs and eliminating overreaching by the able ones requires action by owners -- big owners," Buffett wrote in his annual letter to shareholders of Berkshire Hathaway Inc, his investment company. "Unfortunately, certain major investing institutions have `glass house' problems in arguing for better governance elsewhere."
Buffett's views on the obligations of corporate directors gained prominence last year after accounting scandals at WorldCom Inc and Enron Corp, the two biggest bankruptcies in history, shook investors' confidence in financial reporting. Regulators and corporate executives turned to Buffett, 72, the largest shareholder of companies including Coca-Cola Co and American Express Co, for advice on issues such as accounting for employee stock options as an operating expense and dealing with auditors.
The "acid test" for corporate reform is executive pay, said Buffett, who reported Berkshire's fourth-quarter net income soared 12-fold to US$1.18 billion as the company's insurance businesses raised prices and wrote more policies. Buffett was paid US$356,400 in 2001, the most recent year reported. That includes US$100,000 in salary, and US$256,400 in other compensation. Berkshire shares owned by Buffett and his wife Susan are worth about US$33 billion.
"Managers will cheerfully agree to board `diversity,' attest to SEC filings and adopt meaningless proposals relating to process," Buffett wrote. "What many will fight, however, is a hard look at their own pay and perks."
Too many CEOs are "otherwise decent people" who have "behaved badly at the office" in recent years, Buffett wrote.
They "simply followed the career path of Mae West: `I was Snow White, but I drifted.'"
The bull market of the 1990s encouraged abuses by executives, Buffett wrote.
"As stock prices went up, the behavioral norms of managers went down. By the late 1990s, as a result, CEOs who traveled the high road did not encounter heavy traffic."
Buffett said to be wary of companies that don't count stock options as an expense or have "fanciful" pensions assumptions.
Tropical Storm Gaemi strengthened into a typhoon at 2pm yesterday, and could make landfall in Yilan County tomorrow, the Central Weather Administration (CWA) said yesterday. The agency was scheduled to issue a sea warning at 11:30pm yesterday, and could issue a land warning later today. Gaemi was moving north-northwest at 4kph, carrying maximum sustained winds near its center of up to 118.8kph and gusts of 154.8kph. The circumference is forecast to reach eastern Taiwan tomorrow morning, with the center making landfall in Yilan County later that night before departing from the north coast, CWA weather forecaster Kuan Shin-ping (官欣平) said yesterday. Uncertainty remains and
SEA WARNING LIKELY: The storm, named Gaemi, could become a moderate typhoon on Wednesday or Thursday, with the Taipei City Government preparing for flooding A tropical depression east of the Philippines developed into a tropical storm named Gaemi at 2pm yesterday, and was moving toward eastern Taiwan, the Central Weather Administration (CWA) said. Gaemi could begin to affect Taiwan proper on Tuesday, lasting until Friday, and could develop into a moderate typhoon on Wednesday or Thursday, it said. A sea warning for Gaemi could be issued as early as Tuesday morning, it added. Gaemi, the third tropical storm in the Pacific Ocean this typhoon season, is projected to begin moving northwest today, and be closest to Taiwan on Wednesday or Thursday, the agency said. Today, there would likely
DISRUPTIONS: The high-speed rail is to operate as normal, while several airlines either canceled flights or announced early departures or late arrivals Schools and offices in 15 cities and counties are to be closed today due to Typhoon Gaemi, local governments announced last night. The 15 are: Taipei, New Taipei City, Taoyuan, Tainan, Keelung, Hsinchu and Kaohsiung, as well as Yilan, Hualien, Hsinchu, Miaoli, Chiayi, Pingtung, Penghu and Lienchiang counties. People should brace for torrential rainfall brought by the storm, with its center forecast to make landfall on the east coast between tonight and tomorrow morning, the Central Weather Administration (CWA) said. The agency issued a sea warning for the typhoon at 11:30pm on Monday, followed by a land warning at 11:30am yesterday. As of
CASUALTY: A 70-year-old woman was killed by a falling tree in Kaohsiung as the premier warned all government agencies to remain on high alert for the next 24 hours Schools and offices nationwide are to be closed for a second day today as Typhoon Gaemi crosses over the nation, bringing torrential rain and whipping winds. Gaemi was forecast to make landfall late last night. From Tuesday night, its outer band brought substantial rainfall and strong winds to the nation. As of 6:15pm last night, the typhoon’s center was 20km southeast of Hualien County, Central Weather Administration (CWA) data showed. It was moving at 19kph and had a radius of 250km. As of 3pm yesterday, one woman had died, while 58 people were injured, the Central Emergency Operation Center said. The 70-year-old