Buffett's Balancing Act

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Even if Buffett emerges clean, as many believe he will, the concept of a revered, trust-me CEO is RIP. For decades, Wall Street prized corporate leaders who could dip into their financial black box and deliver steady, no-surprise earnings, even if investors had no idea precisely how those magic numbers were reached. That changed after dazzling bookkeeping (later found to be fraud) at Enron and WorldCom led to the destruction of billions of dollars of wealth. In today's regulatory climate, uncanny consistency invites scrutiny.

Greenberg was, until recently, one of the valued CEOs who dutifully hit his numbers. Investors who didn't ask how he did it may wish they had. A broad range of AIG transactions are now being probed by regulators, and AIG's shares have plunged 30%.

Even the generally forthcoming Buffett can be criticized for hiding some things. While Berkshire's accounting record remains spotless, Buffett, 74, has asked shareholders to trust him on the issue of succession. Who will run Berkshire when he moves on? The stock gets a special lift from Buffett's marquee leadership, yet investors must live with a lack of transparency in this area, having only the prognostications of outsiders to rely on. Reportedly on Buffett's short list of CEO candidates is Ajit Jain, who runs National Indemnity Co. and is the only Berkshire unit manager that Buffett speaks to frequently. Yet Jain has come under the regulatory microscope in Australia for direct involvement in a deal that looks a lot like the one between Gen Re and AIG. If he's Berkshire's future, investors should know. "Trust me" doesn't cut it anymore. --With reporting by Eric Roston/Washington