Press-shy Charlie Munger, vice chairman of Berkshire Hathaway, generally appears in public only once a year, sipping Cokes at a table with Warren Buffett, fielding shareholder questions at the company’s annual meeting in Omaha, Nebraska.
Directors’ College attendees enjoyed a rare private session with Munger to kick off their second day. By turns witty and provocative, Munger, a Harvard-educated lawyer, left no doubt where he stands on issues of corporate governance.
ON NEWSPAPERS: “For years I have read the morning paper and harrumphed. There’s a lot to harrumph about now.”
ON ACCOUNTING STANDARDS: “Proper accounting is like engineering. You need a margin of safety. Thank God we don’t design bridges and airplanes the way we do accounting.”
ON THE ARGUMENTS AGAINST EXPENSING STOCK OPTIONS: “Quoting Demosthenes, ‘For what each man wishes, that he also believes to be true,’ I would rather make money playing a piano in a whorehouse than arguing that no cost is incurred when employees are paid in stock options instead of cash. I am not kidding.”
ON THE TRANSPARENCY OF MODERN FINANCIAL REPORTING FOR TRADING DERIVATIVES: “No CEO examining books today understands what the hell is going on.”
ON ENRON: “I think Enron is the first shoe to drop. There’s a kind of Gresham’s Law, where bad conduct drives out good conduct.”
ON INDIVIDUAL GREED: “It’s amazing the way people have sold out. It’s insane.”
ON ACCOUNTING FIRMS: “Accounting has steadily degraded over the past 30 years, and accounting firms have sold out time after time.”