Berkshire Hathaway

It’s the Woodstock of Capitalism, the investors’ Super Bowl, the Lollapalooza of lolly…

Tens of thousands of Berkshire Hathaway shareholders converged on Omaha, Nebraska, for the $300bn conglomerate’s annual meeting and the chance to hear in person from its legendary founder, Warren Buffett (and his droll sidekick Charlie Munger).

Stephen Foley, the FT’s US investment correspondent was there, too, to capture the wit, wisdom and sometimes wackiness on display. 

Andrew Hill

Sir Alex Ferguson’s retirement as manager of Manchester United gives the management world another example of how to bow out when you are, frankly, getting a bit elderly.

On this topic, we now have four great templates – the Pope, the Queen of England, Warren Buffett and Sir Alex – each of which could be applied by organisations whose leaders are grappling with questions about the frailty and mortality of their leaders. 

Andrew Hill

Warren Buffett’s early stage prostate cancer is so commonplace and treatable that you might legitimately ask whether it was worth declaring. But there is no question that it was better for Berkshire Hathaway’s chairman to make his statement than to conceal the condition.

While there are good reasons to respect the privacy of patients, Apple’s failure to detail Steve Jobs’ condition during his leave of absence for health reasons in 2009 spread unnecessary uncertainty about the future of the company and its succession planning.

If Mr Buffett had any doubts about whether to make his statement, he could have asked a fellow senior citizen: Rupert Murdoch. 

Andrew Hill

I have met Debbie Bosanek. I’ve also met her boss Warren Buffett. But as far as this week’s US political news is concerned, the more important figure is Ms Bosanek, the billionaire investor’s secretary. She’s important because she’s met Barack Obama, who gave her a high-profile spot in the audience for his State of the Union address this week, transforming her into a symbol of tax inequality in America.

Mr Buffett started this, of course. In a New York Times op-ed last August he attacked a system that allows him to pay a lower tax rate than any of the other people in his Omaha office. This has spawned the “Buffett rule”, the benchmark that Barack Obama is using to promise that the richest Americans will not pay tax at a lower rate than their secretaries.

Ms Bosanek is both an obvious and an odd choice to become – as an ABC interviewer put it this week – “the poster woman” for this campaign. Obvious, because she is the gatekeeper for Mr Buffett. Odd, because she is far from a typical secretary (in her polite but terse emails, she actually styles herself, in the modern way, as “Assistant to Warren Buffett”). 

John Gapper

Warren Buffett

Warren Buffett in July 2011. Image by Getty.

Today’s story about Warren Buffett hiring the hedge fund manager who paid more than $5m to have two lunches with him in Omaha, Nebraska does nothing to diminish my questions about corporate governance at Berkshire Hathaway.

At any other company, the fact that Ted Weschler, the hedge fund manager in question, paid for access to the chief executive and was hired as a result would be unthinkable. Yet Mr Buffett and his partner Charlie Munger appear to run the top echelon of Berkshire more or less as they wish. 

John Gapper

The annual shareholders’ meeting of Berkshire Hathaway in Omaha, Nebraska produced a modest mea culpa about how Mr Buffett had initially handled the David Sokol affair, but little sign that the company’s corporate governance or approach to leadership succession will change hugely.

Perhaps it is the wrong venue to expect something radical since, as Dan McCrum reports for the FT, most of the attendees were happy with Mr Buffett’s record as an investor and are not demanding significant changes.

Still, I find it disappointing that Berkshire’s board has so far given no indication of taking a clearer role in selecting Mr Buffett’s successor. He said in a CNBC interview that the board regularly discusses the issue, and that Mr Sokol was not the only (or even the leading) candidate:

“It is a subject that board spends a majority of its time on and people express themselves very vocally at board meetings on the pros and cons of various candidates.”

 

John Gapper

The first thing that strikes me in the scathing report of the Berkshire Hathaway audit committee on David Sokol, the senior executive who resigned last month, is that the thin defence of his conduct offered by Warren Buffett at the time has evaporated.

The second is that it makes Warren Buffett’s initial press release on Mr Sokol look distinctly economical with the truth. It will make for an interesting question and answer session at Berkshire’s annual shareholders’ meeting this weekend.

Here is my column at the time on the subject of Mr Sokol’s trading in Lubrizol shares before the company was acquired by Berkshire:

Mr Buffett provided a pre-emptive judgment on Mr Sokol’s behaviour last year in a memo to Berkshire’s managers and directors, including Mr Sokol. “If you see anything whose propriety or legality causes you to hesitate, give me a call,” he wrote. “If it’s questionable whether some action is close to the line, just assume it is outside and forget it.”

That is clearer than the mealy-mouthed half-defence of Mr Sokol offered by Mr Buffett in the statement announcing his departure. “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign.” Not unlawful? When Mr Buffett fails to mention ethics, something is up.

 

Andrew Hill

It bears repeating: top managers rarely leave Warren Buffett’s Berkshire Hathaway.