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Warren Buffett on Business: Principles from the Sage of Omaha by Richard J. Connors

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12.5. A Plan of Action

12.5.1. Change in Leadership

Mozer is fired. Gutfreund and Strauss resign.

On August 18, Buffett is elected to be the interim, unsalaried chairman.

Buffett appoints Deryck Maughan as Chief Operating Officer.

Buffett demands resignation of Donald Feuerstein, and replaces him with Robert Denham, Buffett's lawyer on Berkshire matters for fifteen years. Denham is named Chairman of Salomon.

12.5.2. A Letter and Report to the Shareholders of Salomon

To the Shareholders of Salomon Inc:

In this report, I want not only to tell you about Salomon Inc's third-quarter results but also to give you my thinking as to where the company must head.

From announcements we have made and from the media you have learned about the events that led to my appointment as interim Chairman of Salomon Inc on August 18. We have since continued to investigate Salomon's past actions in the Government securities market and in other areas as well. Our conclusion so far: A few Salomon employees behaved egregiously—a fact that will prove costly to you as shareholders—but the misconduct and misjudgments were limited to those few. In short, I believe that we had an extremely serious problem, but not a pervasive one.

Controls and Compliance

Since August 18, we have installed rules and procedures at Salomon Brothers Inc, our securities subsidiary, that we think set a standard for the industry. In addition, we have begun to monitor what goes on in Salomon Brothers in new ways—for example, by setting ...

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