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Health check

Jeffrey Goldfarb / April 19, 2012, 0:11 IST

Warren Buffett seems to have learnt something from a fellow corporate titan. The 81-year-old investing icon disclosed on Tuesday he was diagnosed with early-stage prostate cancer last week and pledged to keep shareholders updated about his health. The candour is a refreshing contrast to the way Steve Jobs guarded details of the illness that eventually killed him. Unfortunately, Buffett is shrouding his succession plan in the same sort of mystery the Apple boss did.



The prognosis sounds good for the Oracle of Omaha. Doctors have told him his life isn’t in any danger from the cancer, which isn’t an uncommon form for men his age, and it hasn’t spread to other parts of his body. He plans to keep running Berkshire Hathaway as he undergoes two months of radiation treatment over the summer. The cheeseburger and root beer float-loving Buffett doesn’t expect any further change in his condition for a good long while.

Jobs, though younger, confronted a more insidious disease. Yet, in the years following the diagnosis, he was reluctant to keep shareholders informed much about his treatment, or, as it turned out, the lack thereof. Jobs’ biographer wrote that for months he refused surgery for his pancreatic cancer and came to regret it. Apple insisted his health was a private matter. It may well have been, but Jobs’ gaunt appearance fuelled endless media and market speculation, as did substitute appearances at conferences by his lieutenants.

Unfortunately, Buffett’s candour doesn’t extend to identifying his replacement. He said rather bizarrely a couple months ago that he knew who it was but the chosen one didn’t. That leaves open the possibility the individual may not want the job managing the $200-billion conglomerate, a task even Buffett and his partner, Charlie Munger, have struggled with in recent years. And, given that a man once on the shortlist, David Sokol, left amid a scandal last year, shareholders shouldn’t necessarily put full faith in Buffett’s selection skills.

Buffett expects to stick around for a while. Here’s hoping it’s long enough to realise he should reveal who will step into his big shoes.

Payback time

Antony Currie / April 19, 2012, 0:09 IST

Citi’s say-on-pay defeat puts bank bosses and their boards on notice. Some 55 per cent of the mega-bank’s shareholders voted against its executive compensation plan on Tuesday. That’s a stark change from last year, when virtually all of them approved the bank’s payouts. It’s a good sign that ballots are starting to be used to send a strong message.

Two things have changed. First, 2011 was the first full year Citi operated without taxpayer-funded capital. That meant it was free of the final restraints on paying the top brass. Since the bank had returned to profitability in 2010, chief executive Vikram Pandit received a proper salary and bonus after two years of pocketing a symbolic $1.

Citi did pay senior executives a tad too much. Pandit, for example, took home almost $15 million. That’s a slightly bigger cut of net income than for either JPMorgan’s Jamie Dimon or Wells Fargo’s John Stumpf, both of whom led their banks to better returns on equity than Pandit.

But, the difference wasn’t big enough to warrant the uprising. It’s probably the generous retention package Citi gave Pandit last May that grated. It makes available at least $16.5 million over four years. The targets for him earning $10 million in stock are either vague or woolly, non-financial measures like promoting a culture of responsible finance.

To get the rest – in cash – Pandit need only preside over a combined $12 billion of pre-tax earnings this year and next. The calculation excludes any losses from Citi Holdings, the division being wound down. It would take some kind of calamity for Pandit to miss out. The core business racked up $6.4 billion in the first quarter alone.



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