Posts Tagged ‘credit risk of private companies’
Billionaire Warren Buffett, in his annual letter to shareholders, advise companies to create severe penalties for executives who reap trouble for risky investments. The letter was circulated on Saturday (27/2/2010) from Omaha.
Buffett’s company, Berkshire Hathaway Inc., recorded a net income increase of 61 percent because the value of investments and derivatives rose rapidly in 2009. Residential construction business in helping the performance of Berkshire’s performance exceeded the S & P 500 for the first time since 2004.
Buffett to write this letter to many repeat business base that has made the company a giant. However, the letter does not convey how companies should conduct risk management.
Buffett said, CEOs and boards that have hired him to pay a high price if the company they are stuck in trouble because of risky investments. Buffett complained about, not the CEO or director who suffer most because of the failure of the company during the economic crisis, but the shareholders.
“In my view, the board of directors from financial institutions failed in his duty if the CEO can not urge her to bear the full burden of risk controls,” wrote Buffett. “If he was not able to do that, he must find a new job,” said Buffett.
Buffett told shareholders, he was responsible for the risk taken by Berkshire. He also has 98 percent of his net worth is associated with Berkshire shares that he would personally shocked if the company hit problems.
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