Admittedly I’ve been hit and miss when it comes to posting the past couple of weeks and frankly, I haven’t been able to read as much as usual either. So, when I say that it seems that Warren Buffett’s annual letter seems to have received less play than in the past, it might be that I just missed some commentary. Nevertheless, it does seem as if he wasn’t as highly quoted as he has been.

That’s a shame in a way because I thought that one passage in particular deserved a wider airing than it has received. Barbara Kiviat at the Curious Capitalist highlighted it but that seems to be about the extent of the coverage that I’ve seen.

I’m referring to his thoughts on the credit crisis and the apparent absence of repercussions for the managers of the financial firms that managed to gut their companies. Here are his thoughts:

In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe.

It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.

The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.

A cynic might suggest that the reason this received so little attention is that it Buffett seems to propose that the best way to avoid future crises is to hold management, particularly the most senior managers, accountable and make them pay a price for failure. A novel idea which obviously runs counter to the current fascination with elaborate government oversight regimes designed to protect us from any and all calamities.

The reality is probably that whatever new regulatory scheme emerges from the current fiasco it will like its predecessors gradually become covered with dust on the shelf upon which it will sit as the regulated and the regulators allow business to move in directions which serve the best self-interests of both parties.

The game is now obvious. There is no downside for the employees of the banks. Even if new regulation envisions a liquidation protocol in lieu of too big to fail, it’s ultimate application will be viewed as problematic at best. And were it to be invoked, those responsible for placing their firms and the economy at risk once more will simply count the money they have already banked and rotate into the survivors as they have this time. Make as much money as you can and leave the mess for others to attend to.

Buffett’s sticks need to be part of the solution. If bankers realize that the next time they could lose a piece of their BSD, religion may not be so hard for them to come to.