CEOs,boards responsible for cos problems: Buffett

Billionaire investor Warren Buffett,whose Berkshire Hathaway recorded 61 per cent rise in full-year profit largely due to gains from derivatives investments....

Billionaire investor Warren Buffett,whose Berkshire Hathaway recorded 61 per cent rise in full-year profit largely due to gains from derivatives investments,has said that CEOs and boards of the companies should be penalised for failing in their job. The companys net earnings surged to 8.06 billion at the end of December 31,from 5 billion at the end of 2008,Berkshire said in its 2009 annual report.

In a letter to the shareholders,Buffett said: 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 hes 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, he added.

The companys net earnings rose to 3.06 billion in the fourth quarter ended December 31,from 117 million in the corresponding period a year ago,the annual report said.

We are delighted that we hold the derivatives contracts that we do. To date we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts, the report added.

Berkshires investment in derivative bets reaped a total gain of 787 million in 2009,against a loss of 7.4 billion in 2008.

The companys total revenue,including from subsidiaries,increased for the third consecutive quarter to 112 billion at the end of December 2009. We have put a lot of money to work during the chaos of the last two years. Its been an ideal period for investors: A climate of fear is their best friend, Buffet said in his letter to the shareholders.

Berkshires cash balance at the end of 2009 stood 30.6 billion. Anticipating that Berkshire will generate ever-increasing amounts of cash,we are today quite willing to enter businesses that regularly require large capital expenditures. We expect only that these businesses have reasonable expectations of earning decent returns on the incremental sums they invest, the annual report said.

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The firm said its investments in residential and commercial construction suffered severely in 2009. Earnings in 2009 of most of our diverse group of manufacturing,service and retailing businesses declined compared to the prior year. The effects from the economic recession resulted in lower sales volume,revenues and profit margins as consumers have significantly curtailed spending, the company said.