The Berkshire Hathaway Corporate Governance Performance

The Berkshire Hathaway Corporate Governance Performance

Warren Buffet carefully cultivates a CEO-savant persona.

Most media enable him.

His latest stunt, ostensibly meant to save Bank of America while closing a savvy deal for Berkshire Hathaway, garnered laudatory headlines. Bank of America spun Buffett's $5 billion investment for maximum effect.

Buffett supposedly came up with the idea in the bath. Several journalists added to his repertoire of folkways by reporting it.

Unfortunately, Bank of America is going to need more the $5 billion and temporary use of Warren Buffett's aura to solve their problems.

The Wall Street Journal, September 2, 2011: U.S. regulators have pushed Bank of America Corp. to show what measures it could take if conditions worsen for the Charlotte, N.C., lender, according to people familiar with the situation.

Executives of the bank recently responded to the unusual request from the Federal Reserve with a list of options that includes the issuance of a separate class of shares tied to the performance of its Merrill Lynch securities unit, these people said. Bank of America purchased Merrill Lynch in 2009, and it has become the bank's most profitable division.

It's easy to forget that Buffett is the CEO and Chairman of a publicly held company when he's seen scurrying around like Mighty Mouse, nibbling at failing banks and pulling billions from his fanny pack. Berkshire is a big company with some shareholders that aren't him, his family, or his ego-stroking entourage otherwise known as the Board of Directors.

Buffett's Bank of America move is not the kind you see most fiduciaries, bound by duty and good faith, make. It's a public relations coup as performance, designed to leave a refreshing aftertaste.

Instead, investors are often stuck with a bitter one.

The next time something goes terribly wrong at a Berkshire Hathaway company, there's a strong possibility no one will hear about it. Warren Buffett and Charlie Munger won't be held directly responsible either. That's the beauty of Buffett's version of a conglomerate corporate structure, decentralized to such an obscene level such that its minimalism is brandished as a feature not a bug.

Read this article in its entirety at the re: The Auditors, a blog by Francine McKenna.

For more information about LexisNexis products and solutions connect with us through our corporate site.