June 14, 2011

Shareholder Capitalists

It’s Saturday, April 30th, and 40,000 shareholders are lined up for blocks outside the Berkshire Hathaway Annual Meeting, some since 3 a.m., hoping to get a front row seat. At the Qwest Center, a marquee for upcoming events shows rock stars and superheroes, which seems appropriate for the world’s largest gathering of shareholder capitalists. Once inside the arena, people stumble over themselves to shake hands and bask in the aura of Warren Buffett, 80, and his partner, Charlie Munger, 87, as they step smartly onto the floor. They look impossibly vigorous and energized. For board directors at large, the distilled wisdom of Buffett and Munger is the Berkshire equivalent of a Harvard MBA.

Boardroom Etiquette
The Berkshire Annual Meeting will be open, provocative and orderly. Unlike other public companies’ AGM, there will be no gadflies or noisy activists. Nor will there be protestors unless you consider those spouses who skipped the chance to buy jewelry directly from Warren Buffett at Borsheim’s. Why aren’t protestors and activist rabble-rousers here? Because Berkshire’s shareholders would rally for the company. Courtesy prevails, aided by the fact that no other company is so focused on ethical behavior and corporate performance, and so not focused on personal enrichment or compensation, yet is so very rich and very well compensated.

No other company is so transparent— even on issues such as executive compensation, scandal and succession. Yet it is notoriously private. Therein lies the irony. For Berkshire shareholders, irony is preferable to the agony that greets so many public company annual meetings.

What makes the Berkshire meeting so riveting is the chance to watch Buffett and Munger spend as many as nine hours answering unrehearsed questions from shareholders that have been selected by three outstanding financial journalists— Carol Loomis of Fortune magazine, Andrew Ross Sorkin of The New York Times and Becky Quick of CNBC. The meeting and its full-day questionand- answer format requires the Berkshire leaders to have unfathomable resources of energy for one purpose: to demonstrate their total commitment to the shareholder. There is a reason why See’s Peanut Brittle shares the dais with their microphones.

What’s in it for these two billionaires? It’s how they learn. The prodding and questioning sharpen them and focus their attention. Nothing is opaque and transparency rules. Finally, Buffett has an unshakable faith that telling the complete truth is the only way to ensure you won’t be testifying against someone else’s version years later.

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