After scandal, Buffett's reputation remains intact

The investor has endured controversy over the years but has managed to save face.

By TheStreet Staff Jun 10, 2011 10:43AM

By Don Dion, TheStreet


"It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently." -- Warren Buffett


Although his successful, multi-decade investing career has drawn followers, the roots of Warren Buffett's appeal can be traced back to more than just his ability to make money.

Thanks to his extensive philanthropic work, optimistic outlook and folksy, grandfather-like charm, the world-famous investor has managed to construct a nearly bulletproof positive reputation.


That's not to say that this reputation has not been tested. On the contrary, over the past few years, a number of his actions have been greeted with ample criticism from market commentators and Buffett followers.


For instance, around this time last year, fans were likely shaking their heads after his peculiar remarks before the Federal Crisis Inquiry Commission regarding Moody's actions leading up to the financial crisis. Although he had been consistently reducing his exposure to the troubled ratings agency, Buffett was seen defending the company, explaining that no one had seen the crisis coming.

This wasn't the first time Buffett defended a controversial company. Goldman Sachs (GS) has received the Oracle of Omaha's praise on a number of occasions. In late 2009 the billionaire investor was even called upon to be an adviser for its philanthropic program, called 10,000 Small Businesses.


More recently, Buffett drew flak after the unexpected resignation of former Berkshire Hathaway (BRK.A) notable David Sokol.


Although Sokol claimed to be stepping down to focus on his family's investments and his philanthropic efforts, the financial media immediately began to question Sokol's decision to purchase shares of Lubrizol (LZ) in the months leading up to Berkshire Hathaway's acquisition. Buffett faced heat for his limited comments and initial defense of Sokol.


It is important to note that in the following weeks, Buffett offered up a harsher criticism for Sokol's actions and a Berkshire Hathaway committee found that the trades violated the company's code of ethics.


Interestingly, in the face of these controversies, Buffett's stellar reputation has largely held strong.


Observers looking for evidence of the investor's unwavering charisma can turn their attention to eBay (EBAY). Friday, bidding for the Warren Buffett Power Lunch is slated to close at 7 p.m. PDT. As in previous years, the winner of the auction, along with up to seven friends, will get the chance to wine and dine with Buffett. All proceeds will go to The Glide Foundation, a San Francisco charity.

As of Thursday afternoon, bidding stood at $2.3 million. Many people have pointed out that this year's bidding is moving along at a faster pace than in previous years. With the hours winding down, it will be interesting to see how high the price will go. Last year's winner, who chose to remain anonymous, offered a record-breaking $2.63 million for the opportunity.


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