CEO Porn Loses Allure After Buffett Revelation

NEW YORK (TheStreet) -- Warren Buffett held his annual "Woodstock for capitalists" this weekend in Omaha, Neb. The imagery is apt. The annual meeting should really be held in Bethel, N.Y., and his investors should hitchhike up the New York Thruway and then strip naked in the mud. It is that kind of event, if not worse. Just as Woodstock was an homage to sex, drugs and rock 'n' roll, the annual pilgrimage to the Berkshire Hathaway (BRK.A) annual meeting is an homage to making money, more money and still more money.

The annual "we love Warren" extravaganza long ago acquired many of the aspects of a cult ritual, and we in the media were right there with the shareholders, sipping the Kool-Aid. But this year's Buffett-fest was different. For the first time, the adulatory press coverage soured a bit. The media isn't negative by any means, but this time -- and it was long overdue -- the tenor of the coverage was skeptical. For example, good takedowns of the annual Buffett love-fest were written by Joe Nocera of the New York Times and Allan Dodds Frank of the Daily Beast, and there was solid work throughout the Omaha press corps. Good work, guys. Keep it up.

I mean it. Let's keep this non-honeymoon going on forever. As a matter of fact, the adulation directed at Buffett, who repaid it with a tawdry insider trading scandal, is a lesson to us all. Sure, CEO porn is alluring. Sure, rich people are inherently fascinating, virtuous and fantastic individuals. Sure, billionaire investors can do no wrong. The media acted that way before the financial crisis of 2008 and still does. I don't expect that to change everywhere, but I do think that Buffett is a good place to start.

The reason the Buffett Kiss-Up is such a seminal event in the investment calendar is that the media made it so. We hang on his every word, treat Buffett and his sidekick Charlie Munger like demigods, ignoring their flaws, to an extent that is sometimes a little creepy. Thank heavens Buffett has stumbled. Perhaps henceforth he will be treated just the way he deserves to be treated: as a money manager who is capable of making mistakes, sometimes big ones.

Now, I don't want to go overboard. Buffett is still Buffett, he handled the David Sokol Affair with aplomb. He threw his errant deputy under the bus so fast that you'd think the poor sap was coated with Lubrizol or some other fine lubricant. Everybody else on the planet thought it was insider trading when Sokol pitched the company to Buffett even though he owned shares of the company, but the Oracle of Omaha thought it wasn't such a terrible thing. He said so initially. It was a bad move, and he knows it, at least now.

"I don't hold myself to a standard of perfection or I'd have committed suicide a long time ago," he said. Aw shucks. Don't you just love the guy? After all, according to Reuters, he pointed out that there are 260,000 people working for his company. Got to be a few mistakes buried in there somewhere.

What made his fumbling of the Sokol trade so phenomenal is that Buffett has made a big deal of employee integrity. Buffett has been quoted as saying that integrity is like oxygen, and that if you don't have it, "you have nothing." He has also been quoted as saying that losing money is forgivable, but staining one's reputation is not.

He said that in the context of the Salomon Brothers fiasco in 1991, when some traders were caught cornering the market for the two-year Treasury note. Buffett was brought in as a white-knight chairman after the scandal broke. I remember that he was a white-knight chairman because I was covering Salomon at the time, and I probably characterized him that way. I also recall asking Buffett a mildly challenging question at a Salomon press conference, and that it was answered not by Buffett but by another member of the press, anxious to spare the Oracle the necessity of doing so.

See, we in the media have a stake in Buffett's reputation. It's not just those of us who have written books about him, but that Buffett is as much of a symbol as he is an actual money manager. With his cheap suits and down-home manner, he is a living symbol of the warm and humane side of capitalism. Hell, if all capitalists were SOBs we'd be the ones committing suicide, not Buffett.

Buffett is keenly aware of his public image so he feeds this perception, and that allows us to overlook stuff -- like the Sokol trade. He overreached there, but in other areas he has kept the media on his side to an extent that is remarkable even by CEO porn standards. And the media hasn't much cared one way or the other.

For years before his wife's death in 2004, for example, Buffett lived with a woman who wasn't his wife. It was Buffett, so no one made much of a fuss. A prominent journalist has ghostwritten his letter to investors for years. Ditto. No big deal. These are petty details, so it doesn't matter, and the same live-and-let-live attitude has carried over to non-petty details.

His management of Berkshire is hardly a model of good corporate governance. As Joe Nocera pointed out over the weekend, the holding company is thinly staffed and his board of directors is dominated by cronies. Shareholders let him because he is Warren Buffett -- and so does the media. In fact, shareholders were feeling so warm and fuzzy about their guru at the annual meeting that nobody asked him if Sokol had acquired shares in other Berkshire deal stocks (as Allan Dodds Frank pointed out yesterday).

Hopefully that will change because of the Sokol scandal. Hopefully the media, and his cult of shareholders, has learned its lesson. I doubt it, so hopefully a few rotten apples in the press corps will continue to hold Buffett's feet to the fire.

Gary Weiss has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, �The Mob on Wall Street,� which exposed mob infiltration of brokerages. He uncovered the Salomon Brothers bond-trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Porfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book "Born to Steal" (Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s. "Wall Street Versus America" (Portfolio: 2006) was an account of investor rip-offs. He blogs at garyweiss.blogspot.com.

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