Criticizing Warren Buffett For Doing His Job

I read Frank Ryan’s op-ed piece in the September 6 Harrisburg Patriot-News. Here is a link to it:  http://www.pennlive.com/editorials/index.ssf/2011/09/warren_buffett_complains_about.html

After cutting through the accounting-ese, his main point seems to be that Warren Buffett is a hypocrite because he first criticizes the current federal tax code but then uses it to benefit his company, Berkshire Hathaway. My reaction is “Huh?” I wonder if Mr. Ryan has ever practiced accounting in a business setting, as opposed to serving in the Marine Corp Reserves and lecturing on ethics.

It’s not the least bit hypocritical or unethical for Mr. Buffett to use the federal tax code to the advantage of his company while competing in the marketplace with all of the other companies that are undoubtedly doing the same thing. In fact, if Mr. Buffett were to ignore the benefits of structuring that the government allows companies to take advantage of, he would be violating his fiduciary duty to his company. Because Berkshire Hathaway is a public company with millions of shareholders, he would probably be liable for damages to these very shareholders. As the CEO of a public company, Buffett is not free to ignore tax code provisions that would benefit his company just because he doesn’t agree with them.

Warren Buffett believes that our tax code should be changed so that the rich pay their fair share. Many of us would like to see the laws changed so that companies will be more focused on whether a particular transaction will be profitable over the long term, rather than whether it will be beneficial under the tax code. But, neither Mr. Buffett nor any other CEO of a public company is about to unilaterally disarm and refuse to take advantage of these provisions, while they are still in effect. To accuse him of being hypocritical is just silly.