Berkshire Hathaway Annual Meeting ‘Full Notes’

Berkshire Hathaway Annual Meeting ‘Full Notes’

by VW StaffMay 10, 2014, 4:36 pm

Notes from Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s annual meeting 2014. We have previously covered more from the annual meeting, Berkshire Hathaway annual meeting extensive notes can be found here.

(Paul Anka and Warren Buffett sing a duet in the opening movie: Warren sings a stanza or two to Debbie Bosanek, his long?time assistant, and then Paul sings, but “but she doesn’t do Dallas…” [Ed note: Debbie doesn’t do Dallas – now that is subtle! Kudos to Debbie, Warren and Paul]

WB: Good morning. Before we start, two very special guests have to stand up. Even though he was on tour, he took quick detour. My friend Paul Anka please stand up. [clapping] With all the talk about my succession I wanted to hook up with someone famous for a possible second career. We’re available for weddings, bar mitzvahs and funerals. We got offered $1000 for Paul and me, which seemed ridiculous.

I was insulted, they said OK, and offered $10,000 for just Paul. We have one other very special guest. This affair doesn’t happen by itself. She even had a baby boy named Brady in September. She organized everything here today, please thank Carrie Sova. [clapping]

Ok now we get to the minor players and will introduce the Board of Directors. We’ll have the shareholders meeting after, then recess for 15min, then at 3:45 begin the shareholder meeting. I’ll introduce the Board, but please hold your applause until I’m finished introducing then you can go crazy. In alphabetical order: Howard Buffett, Steve Burke, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Don Keogh, Charlie Munger, Tom Murphy, Ron Olson, Walter Scott, Meryl Witmer. That is Board of Directors of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). [clapping]

We have a couple slides then we’ll move into questions until noon, back at 1pm, continue until 3:30pm. We released our earnings yesterday. We try to do that on a Friday so you have full weekend to digest the 10q which we make available. Don’t just look at the summary, it makes great reading. This is our summary slide for Q1, operating earnings were down a bit year on year, mainly accountable from our insurance underwriting business. On a quarterly basis, this segment is not very meaningful, often it is foreign exchange related. We have $77bil of float in our insurance business now that is ours to invest.

It is underwriting profit if it doesn’t cost us to hold. Satisfactory in Q1 but down from Q1 last year. It is a liability on the balance sheet, but if cost free, it does as much good as net worth does on the balance sheet. If we average no underwriting profit over the life of the business I’ll be very happy and you should be too. We advise you to pay no attention to quarterly or annual realized gains in securities. We make no attempt to time sales in any quarter. We focus on gains over the longer term. But ignore it in shorter term earnings.

With that I’d like to give you a preview of a vote that was taken, it is remarkable. We had a shareholder resolution to pay a dividend, implying we weren’t paying a dividend because we were living in this grand style to which we are accustomed, and shareholders were living bereft of millions. We have no proxy vote service companies, and we just counted the votes as they come in. Among class A, it was 90:1 against a dividend, but you may think that I stuffed ballot box, which I did. [laughter] So I took out my votes and it was 40:1 among untainted shareholders. But maybe it is Warren and his rich friends and all the plutocrats in the class A shares who voted against it? But among B shareholders, and we may have one million shareholders of class B, and remarkably, they voted against by a ratio of 45:1, and we were not making any calls to get their vote. I’m not sure any company in world would get quite that vote. And one more slide, which is the disturbing part of that vote, among B shareholders, 97% voted for me. It’s a close vote for either getting rid of me or paying a dividend. The number of people that wanted to have a dividend and wanted me to get out of the place were neck and neck. So you can see why I’m adverse to proposing the dividend to the Board of Directors.

With that we’ll do questioning as we always do. Reporters, analysts, and shareholders – we will alternate.

Q1. Carol Loomis. We get hundreds if not thousands of questions. If we don’t get to your question, please excuse us. We haven’t shared with Warren or Charlie, but they read the news so some of the questions may be familiar. The first one is from Will Eldridge in NYC: Coca?Cola recently approved a magnanimous compensation plan. You did not tell shareholders before you voted. After the vote you said it was excessive, but you didn’t say that before. And you did not vote against, you only abstained. I cannot see how they can stand up under examination. This appears very strange un?Buffetlike behavior. Why did you abstain?

WB: Strange behavior is frequently Buffett?like [laughter]. The proposal was made by a shareholder who had held a long time. His calculations on dilution were wildly off. I did talk to Mukthar Kent, and told him we would abstain, but that we admired management, but while similar to other plans, we would abstain because we thought the plan was excessive. We announced that shortly after the vote. It is having an effect on compensation plans. That was the most effective way of behaving for Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B).

We made a clear statement about excess, and we did not go to war with Coca?Cola, and we did not endorse some calculations which were inaccurate. I don’t think going to war is a very good idea and if you ally with someone you have to be very sure of whom you go with. I received some letters on it, after they had been released to press. I think best to be careful of alliances with someone you don’t know. I think we got the best result for The Coca-Cola Company (NYSE:KO). Charlie?

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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