I once wrote a column headlined “Buffett deserves his D-grade”. It prompted a one-line e-mail from Jim Cramer, the CNBC investment pundit: “You have cojones.”
Not that my assessment was particularly ballsy: the D was Warren Buffett’s own self-critical grade in March 2000 for his capital allocation decisions the previous year. And, of course, I was wrong. Publication of that annual letter to shareholders called the trough in the share price of his Berkshire Hathaway and the peak of the internet bubble. As Mr Buffett pointed out in the same letter, he and vice-chairman Charlie Munger had avoided technology sector investments because they had “no insights into which participants in the tech field possess a truly durable competitive advantage”. It turned out they weren’t alone.
The financial sector should be a laboratory for sensible new ideas about incentives – rather than a morgue for dead bonus programmes. So it’s distressing to read that investment banks are lagging behind insurers and retail banks in their efforts to design effective new rewards for their chief risk officers.
CROs are supposed to be the linchpin of tighter self-regulation of post-crisis institutions, at least according to the blueprint prepared by Sir David Walker, the City of London panjandrum. He drew up a report in 2009 on how governance at financial institutions should be improved. But research by Hedley May, a City headhunter, points to a lack of consistency among investment banks in the UK about how to tackle risk officers’ remuneration – and to a worrying lack of individuals who can fulfil all the Walker report’s requirements. Read more
The Oscars were last night, and my first prediction for 2011 was utterly wrong. Not only did The King’s Speech, a classic independent drama of the kind the Academy loves, win best picture but Tom Hooper, its director, achieved an upset by being named best director.
Here was the first of my predictions in an end-of-year column: Read more