Buffett Chides CEOs Searching for Cocker Spaniels Over Pit Bulls

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Warren Buffett, who’s served as a director at 21 publicly traded companies over the years, said that too many companies add board members who won’t challenge a chief executive officer’s decisions.

“When seeking directors, CEOs don’t look for pit bulls,” Buffett said Saturday in his annual letter toBerkshire Hathaway Inc. shareholders. “It’s the cocker spaniel that gets taken home.”

Buffett spent part of his closely scrutinized letter wading into issues of corporate governance — both the independence of directors, and diversity on boards.Goldman Sachs Group Inc., which counts Berkshire as an investor,said last month that it won’t take a company public unless there’s at least one board member who’s not a white male.

Adding women to boards “remains a work in progress,” Buffett said Saturday. At his company, three of the 16 directors are women.

The billionaire investor, who’s been on the boards of companies including Coca-Cola Co. and Washington Post Co., praised audit committees for working harder than ever, but warned that they’re “no match for managers who wish to game numbers.” The addition of regular board meetings without the CEO present has helped drive “truly frank” discussions about a chief executive’s skills, acquisition decisions and compensation, Buffett said in the letter.

Still, takeovers remain a “vexing problem” for boards, according to Buffett, as the “deck is stacked” in favor of deals coveted by a CEO.

“I have yet to see a CEO who craves an acquisition bring in an informed and articulate critic to argue against it. And yes, include me among the guilty,” Buffett said, adding that “advisers and other professionals who feast on deals” can’t be trusted to assess acquisitions fairly. “A venerable caution will forever be true when advice from Wall Street is contemplated: Don’t ask the barber whether you need a haircut.”

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