Billionaire Warren E. Buffett called on major investors to stop supporting bad chief executives and said the acid test for corporate reform is whether executives' pay will be cut.

"Managers will cheerfully agree to board 'diversity,' attest to SEC filings and adopt meaningless proposals relating to process," Buffett wrote in his widely followed annual letter to shareholders of his company, Berkshire Hathaway Inc. "What many will fight, however, is a hard look at their own pay and perks."

Too many chief executives are "otherwise decent people" who have "behaved badly at the office," wrote Buffett, whose compensation in 2001 was $356,400. They "simply followed the career path of Mae West: 'I was Snow White but I drifted.' "

Buffett's views on corporate governance gained prominence last year after accounting scandals at WorldCom Inc. and Enron Corp. shook investors' confidence in financial reporting. Regulators and corporate executives turned to Buffett, 72, who holds major stakes in Coca-Cola Co. and The Washington Post Co., for advice on issues such as accounting for employee stock options and dealing with auditors.

Getting rid of poorly performing chief executives must be done "no matter how likable he may be," Buffett said. "Directors must react as did the chorus-girl bride of an 85-year-old multimillionaire when he asked whether she would love him if he lost his money. 'Of course,' the young beauty replied, 'I would miss you, but I would still love you.' "

Regulators should look at directors' pay, which averages $50,000 a year at public companies, he said.

"A director whose moderate income is heavily dependent on directors' fees -- and who hopes mightily to be invited to join other boards in order to earn more fees -- is highly unlikely to offend a CEO or fellow directors, who in a major way will determine his reputation in corporate circles," he wrote.

Buffett advised investors to be wary of companies that do not count stock options as an expense, have "fanciful" pension assumptions, or include complicated footnotes in financial reports. "If you can't understand a footnote . . . it's usually because the CEO doesn't want you to," he wrote.