Warren Buffett on Corporate Governance

"The Berkshire annual meeting is the best show in the world. Shareholders come from all over the globe to learn about their business."

"Audit committees can't audit. The key job of the audit committee is to get the auditors to divulge what they know."

"The auditor should be the guardian of the shareholder. Too often, auditors have remained silent in the face of management deception."

"At Berkshire, when we use incentives, they are always tied to the operating results for which a given CEO has authority."

"Too often, executive compensation in the U.S. is ridiculously out of line with performance. The deck is stacked against investors."

"When a CEO is hailed as a genius for quadrupling earnings without examining whether the gain came from retained earnings and compound interest, the system is broken."

"We believe that the company's money is the owners' money. Therefore, charitable decisions should reflect the owners' preferences."

"Culture is more important than rules. At Berkshire, the culture ensures that managers act like owners."

"Perks at one company are quickly copied elsewhere. Consultants use the 'all the other kids have one' argument in the boardroom."

"The standard of independence for directors should be: would this person bring an independent mind to the boardroom beyond what their financial ties suggest?"

"The responsibility of a corporation is to earn good returns on capital while operating ethically. Social responsibility starts with being a good business."

"Rationality frequently wilts when the institutional imperative comes into play. The behaviour of peer companies will be mindlessly imitated."

"Directors should be paid in stock, not cash, so that they think like owners."

"The primary job of a director is to see that the right CEO is running the business. If the CEO isn't the right person, the director must act."

"Many directors are independent of the company but dependent on the CEO for their position. That is not true independence."

"Dividends make sense when a company cannot deploy retained earnings at returns that exceed the shareholder's opportunity cost."

"If stock-based compensation isn't an expense, what is it? Compensation is always an expense."

"When you hire good people and give them room to run, you can make mistakes in hiring but it's important to correct them fast."

"Directors must think and act like thoughtful owners. If they don't have skin in the game, they won't think like owners."

"At Berkshire, we delegate almost to the point of abdication. We hire good people and let them run their businesses."

"Remuneration committees too often approve whatever the CEO wants. The system is designed to ratchet compensation upward."

"We want shareholders who think of themselves as owners of a business, not as people who own a stock that will be sold tomorrow."

"The succession question has been resolved. The directors know who would be CEO if I were to die tonight."