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Scandal taints Buffett’s status as American hero


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OMAHA, Nebraska: There is nothing in the world quite like Berkshire Hathaway’s annual shareholder meeting. Part investment seminar, part stand-up comedy, it is above all a festival dedicated to capitalism and the firm’s CEO, Warren Buffett.

On Saturday, as many as 40,000 Buffett groupies, many of whom became rich through the firm, packed into a cavernous stadium in the rural state of Nebraska, listening with rapt attention to the pronouncements of the “Oracle of Omaha”.

If a nation sometimes sees itself reflected in one individual – India in Gandhi or Britain in Winston Churchill – then at least for these tens-of-thousands of Americans, that embodiment is Warren Buffett.

The ethos is “get up in the morning, work hard and hope for the best,” according to Chuck Doane, who has lived in Omaha since the 1950s and went to school with some of Buffett’s relatives before buying stock. “He’s a down to earth individual, upfront, forward with a lot of integrity,” he said of Buffett, while tucking into a sandwich.

At a time when profit-gouging Wall Street executives are still reviled for plunging the global economy into crisis, Buffett’s supporters see him as carrying the torch for responsible capitalism.

Despite being a multi-billionaire he takes home a salary of just $100,000 a year, has had the same house since the 1950s and prefers Cherry Coke over a chateau-made claret. “He’s got an evocation of the spirit of America,” said Lawrence Cunningham, a shareholder and 14-year meeting veteran who travelled with his pregnant wife to Omaha, to hear Buffett’s responses to questions from the crowd, which lasted nearly seven hours.

Cunningham, who has also compiled a book of Buffett’s writings, likens him to a modern day Will Rogers, the cowboy and entertainer of the 1920s, who became as famous for is self-depreciating modesty and witty aphorisms. “Countries all have their heroes, and the model of the hero in this country is very much home-spun wit, self-deprecation and modesty,” said Cunningham.

“And melting complex ideas into very memorable lessons for living, that’s very, sort-of, American.”

For decades Buffett has been doling out pithy business advice at Berkshire’s general meetings, and this year was no different. Amid questions from shareholders who had named their kids after him, Buffett offered advice on everything from buying gold (maybe not the greatest idea) to how to raise kids if you are rich (it’s your fault not theirs).

But at this year’s Buffett-fest, it was something the Oracle had not foreseen that drew the focus of the faithful. The meeting came just weeks after one of Buffett’s top lieutenants David Sokol resigned amid a share-trading scandal, a rare chink in the firm’s ethical armour.

Sokol bought $10 million worth of shares in chemicals firm Lubrizol before recommending Buffett snap up the company. Just what Buffett knew about the deal, and when he knew it, has drawn the interest of market watchdogs and the press. But most shareholders appeared much more concerned about what it meant for the Berkshire project and Buffett’s judgment.

According to Cunningham, “it might lead people to this anxiety, that there is no hero on the planet, even this guy, even this wonderful company, led by this halo-wearing fella has creeps at senior levels.” According to some, with Buffett approaching his 81st birthday, it also raised questions about who leads next, and whether Buffett’s choice will be the right one.

“The Sokol situation raises the succession question,” according to LJ Rittenhouse, who was attending her 14th meeting: “How could someone who was named as a possible successor turn out to have done something like this? And how do you replace a Warren Buffett?”

If it is any evidence the crowd still seemed content to lap up video skits portraying Buffett and his trusty sidekick Munger as action heroes, along with Buffett-branded peanut brittle, tee-shirts and books.

But part of the problem may be company’s own success, growing from a small investment company into a network of at least 52 firms that is listed on the S&P 500. “It is part of the growing pain,” according to Rittenhouse, who said Berkshire’s sheer size might make it difficult to always be a standard bearer for responsible capitalism, and one that cares about every employee and customer.

“The challenge he has now is running that kind of a business when you are a multi-billion dollar conglomerate,” she said.


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