Warren Buffett Says Bail-Out CEOs Should Be Fired

Warren Buffett says the CEOs of companies that received bailout funds from the government ought to lose their jobs. His statement needs little introduction and no explanation. But to put things in context, why is that his directness is such an anomaly in the corporate and financial world?

Here is the substance of his argument, which can be found in his letter to shareholders.

"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. 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.

"It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90 percent or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascoes of the last two years. To say these owners have been “bailed out” is to make a mockery of the term.

"The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price—one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefited from oversize financial carrots; some meaningful sticks now need to be part of their employment picture as well."