The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [353]
Two other things got Buffett’s attention. Maughan did not ask him for protection against being sued. And Buffett—who, as much as he hated admitting it, did not enjoy paying people—was mightily impressed that Maughan did not ask how much the job would pay.
Maughan and two others were told to come to the office for the board meeting the next day. That afternoon, Buffett taxied back uptown to Graham’s UN Plaza apartment, where the arb boys met him to plead “with passion and logic” for Meriwether’s job. If J.M. left, Buffett knew, there had to be a risk that the arb boys would eventually join him.78 Without Meriwether, the main source of Salomon’s profits would drain away. Buffett’s investment in Salomon could become worth far less. Then Meriwether himself arrived, shaken. He did not want to resign, and he talked to Buffett at length. Buffett began to waver. He focused on Meriwether’s straightforwardness in reporting the problem.
“After listening to all of this, my reaction was not to ask for his resignation. As best I knew at the time, and this is still my belief, when he had heard of his subordinate’s misdeeds, he had gone straight upstairs to his superiors and the general counsel and had reported it. It seemed to me that it was the job of his superiors and the general counsel of the firm to then take action. No one, at this point, was suggesting that the general counsel should resign.”
Then Gutfreund called. His flight to Nantucket had been thwarted by Hurricane Bob and he was headed back to New York. “I have no future,” he said, agitated.79 They made plans to go to dinner. Gutfreund insisted that first they talk to his newly hired lawyer, Philip Howard, about severance pay.
Buffett and Munger called Howard, with Munger doing most of the talking. Gutfreund felt the firm owed him $35 million.
“As he was laying all this out, I was listening like the Japanese, saying, ‘Yes, I understand your position.’ Not ‘Yes, I agree with you.’ We had no interest whatsoever in trying to arrange a compensation agreement with anyone who was in the middle of a scandal of this proportion without knowing the full facts.”
Buffett then said that they could not agree upon an overall number, because no matter what the figure was, “Salomon Gives $XX Severance Package to Gutfreund” would “be the headline,” rather than the break with former management.80 They laid on praise of Gutfreund’s character, however; they told Howard that Gutfreund would be treated fairly, that they had the power to make it happen and had never broken a promise before. Buffett said, “The only way this won’t happen is if both Charlie and I die.” He later explained that this was a way of avoiding confrontation; that is, “deflecting Mr. Howard and getting him off this kick” because it would be a “little abrupt” to say they didn’t want to reach a settlement because “we don’t know the full facts” yet.
Buffett and Munger then went out for a steak with Gutfreund at Christ Cella. Gutfreund offered to stay on as a consultant at no charge in the days ahead. “I’m going to need all the help I can get,” Buffett said fervently. They talked about the problems of the firm, and Gutfreund said he thought Deryck Maughan was the right guy to run Salomon.
At one point, however, Gutfreund—who still knew a number of facts of which Buffett was not yet aware—said something that contradicted the warm and cozy scene of a few minutes before. “You guys are smarter than I am,” he told them. “You guys are going to fuck me.”81
It was with relief that Buffett and Munger escaped and went back to Kay Graham’s apartment. A large suite filled with Asian art, it had many happy associations for Buffett. Graham always kept the kitchen stocked with his favorite foods. He, Carol Loomis, and George Gillespie often got together there for a bridge game, ordering in deli sandwiches on the side.