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.”