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Collection: Warren Buffett - #294 'Be An Intelligent Owner'



Jonathan Mills (PH) from London, England.

I wondered if you could comment on the views of those people who have stated that, because of so-called conflicts of interest, you should leave the board of Coca-Cola and whether you had any intention of doing so.


That we should do what with the board?


Leave the board. That you personally should leave the board of Coke.


I would say that whoever suggested that should do 500 sit-ups. (Laughter)

Actually, Charlie and I — certainly I have — well, I’ll Charlie speak for himself — we like the idea and we’ve encouraged the idea of shareholders behaving like owners. I mean, shareholders have too often behaved like sheep in this country and they got shorn, in many cases.

And big institutional shareholders have sat on the sidelines while some things that might possibly have been corrected, had they gotten active, took place. So we have — we actually applaud the idea of shareholders behaving like owners.

The question is whether they, you know, can behave like intelligent owners. And I think that in the last year or two, as they’ve sort of woken up, they’ve searched for checklists of one sort or another to determine whether directors are appropriate in a given company or not.

And frankly, checklists are no substitute for thinking. The real job of the directors is to come up with the right CEO for a company and prevent him or her for overreaching. If they do that job well, the rest takes care of itself.

And you have to think some to determine whether that’s taking place. You can’t solve it by just running down a little checklist.

I think it was Bertrand Russell who said, “Most men would rather die than think. Many do.” (Laughter)

And I think we’ve seen a little bit of what he was thinking about in some of the voting. I think it’s absolutely silly, frankly, if Berkshire Hathaway owns 200 million shares of Coca-Cola, $10 billion worth, to not be able — it’s a little silly not to think that the interest that Berkshire Hathaway has in selling some hours of training at FlightSafety or something, would cause me to do something counter to the interests of the shareholders, when we have $10 billion riding on that side of the table. I mean, it’s almost absurd, and somebody doesn’t understand proportionality at all when they come to that sort of conclusion.

I also think it’s absolutely foolish if — just to use Coca-Cola as an example. I think the directors of Coca-Cola haven’t even looked, but I think we probably received something like $100,000 a year.

And if we were to go out into the welfare line and pick somebody out who has no income and say, “We’d like you to become a director,” and that person would get $100,000 a year, which would be their entire income, and to say that person would be independent — you know, while they would be 100 percent dependent on their income — that person would be independent. Whereas Berkshire Hathaway, or myself representing Berkshire Hathaway with 10 billion of stock — and receiving the same $100,000 a year — is not regarded as independent.

So I encourage — I encourage institutional shareholders to — and large owners — to behave like owners. But I also encourage them to really think logically, as owners should think, in determining what causes they take on and how they vote.



Yeah, I think that they, corporate America, needs a fair amount of reform. But the cause of reform is hurt, not helped, when an activist makes an idiotic suggestion — (Laughter) — like the one that having Warren Buffett on the board of the Coca-Cola Company is contrary to the interest of the Coca-Cola Company. Nutty activities do not help the cause for which the person speaks.


It’s a little bit like having a slicing machine in an orchard where you’re gathering together apples but you’re also picking up a lot of rocks in the process and sticks and stones. So you have a slicing machine with a conveyer belt. And the slicing machine is programmed so that every time something is red and round comes down the line, it slices and comes down, but it doesn’t come down on the rocks and everything and ruin the blades.

And, of course, that’s fine until a red balloon comes down the line and then you get a big pop and the machine has followed its little guidelines but it’s not slicing apples anymore.

And I think — I just — actually, institutions are coming new to really thinking about how they behave as owners. And you would hope that, in the evolutionary nature of learning — that not too many years distance — distant — they would actually think about what’s good for the shareholders of the company.

Let’s go to microphone number 2, please.


~ Please visit the site above for full video of Berkshire Hathaway Annual Meeting.


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