Berkshire’s Proxy Proposals Are Like Whac-A-Mole

During their latest episode of the VALUE: After Hours Podcast, Bloomstran, Taylor, and Carlisle discuss Berkshire’s Proxy Proposals Are Like Whac-A-Mole. Here’s an excerpt from the episode:

Tobias: Before we jumped on, Chris, you said that you had taken a look at the Berkshire proxy. Do you want to let us know what you’ve gleaned from that?

Christopher: Well, since I’ve gone to the annual meeting and you guys have gone a long time as well, we’ll talking about that. I don’t know, I went for the first time in 2000. The business part of the annual meeting, every year you’ve got these proxy proposals by various– Now, ESG-oriented, climate-oriented groups that use Berkshire as a soapbox. You’ve only got to own a share, $2,000 worth of a stock for three years or $25,000 for a single year to have a proxy initiative introduced onto a proxy statement. Mr. Buffett gives those groups time at the annual meeting. Last year’s meeting was a little slow. I think we got through three questions in the morning session.

Jake: [laughs] Yeah.

Christopher: He’s determined to speed up the annual meeting this year and field at least four questions in the morning– [crosstalk]

Jake: It’s like the pitch clock in the MLB. [laughs]

Christopher: But you’ve got CalPERS, and you’ve got the Québec Canadian pension system, they’re back with an identical proposal to last year that wants Berkshire’s parent, the holding company, and then each of its subsidiaries to file their own climate reports. Berkshire’s response is, “I don’t think you people even read our 10k, let alone [Jake laughs] where the energy operation has publicly traded debt. And so, I spent a bunch of time every year with the Qs and the Ks of Berkshire Hathaway Energy. They’ve got deep disclosures on what they’re doing on the carbon front and on greenhouse gas emissions.

Greg Gable had a long section in the 2021 letter that addressed climate, but here these guys are again. You’ve got the Québec system. They invested in failed crypto. They had investments in SBF. Maybe you ought to pay attention to your own investments instead of [Jake laughs] preaching to Berkshire how to run their affairs. If you’re CalPERS, good Lord. They managed to hire a card-carrying member of the CCP, who took the hedge book off just as the stock market was melting down when the pandemic broke out. Literally, look it up. Honest to God, card-carrying member of the CCP that they finally had to fire. Clean up your own house and quit using the Berkshire meeting as a proxy. You got the one lunatic, a lawyer, that’s got a little foundation that wants to separate the role of chairman and CEO. I’m sure you guys are, as well, generally a fan of separation of that role. But this is Berkshire Hathaway.

Warren Buffett still has 35% or 36% of the voting control of the company. It’s his baby. Berkshire has already said when he’s not running the show anymore, those roles will be separated. You’ll have an independent director. But in the time being, you’re going to dare to tell Warren Buffett. So, the guy that runs this proposal, you can look up his 990, his tax return, and he’s got something like $25 million in– I take that back. $2.5 million in revenues of the foundation gifts or grants per year, and they’ve got a whopping million dollars investment assets. Well, this dude pays himself-

Jake: Where is all going?

Christopher: -$250,000 salary. As far as I can tell, he is the chairman and the CEO of this thing.

[laughter]

Jake: Oh, oh, irony.

Christopher: So, it’ll be interesting. I encourage anybody that either is at the meeting or listens in to hang around for the business meeting part, because that’s when Warren last year came out of his chair and really got animated, because it pisses him off. You won’t find better governance at any company in the world better than you have it at Berkshire. You have the chairman, and the CEO, and the vice chairman making $100,000 salaries forever. They’ve never given away a single stock option or restricted share unit. You don’t abuse accounting. You don’t have write off, write down year after year after year. They did write down $10 billion of precision, but that was very much as one-off.

It’s as clean of a place as you can get. The charge of the board is to keep these lunatics away from Berkshire for as long as possible and allow the culture of the place to persist for as long as possible. It’s really going to be interesting when he is gone, because these climate nut jobs and these ESG nut jobs are not going to go away and they’ll continue to come with full force and fury. It’s just maddening. Yeah, it’s the same proposal. Did you guys go to the Chuck E. Cheese when you were kids, that whack a mole?

Jake: Yeah.

Christopher: Well, it’s like your rats. They keep coming at you every cycle. They come at you every year. They come at Berkshire. You hammer them back down into the peg, and they crop up the next year with the same damn proposal.

Jake: I like when they– because they used to do that part, the vote part earlier at the beginning of the meeting. The crowd would just cheer when it would announce that it was voted down. [laughs]

Tobias: [laughs]

Christopher: Yeah. Well, hopefully, more stick around and cheer this year. These things have never come close to being passed.

Jake: Yeah.

Christopher: Berkshire has just got such a unique culture. You do have so many individuals and families that own the shares that really think about governance through a proper lens, rather than CalPERS dictating to you that, “You’ve got to fill out some checkbox form to make them all feel good and sing Kumbaya.”

Jake: I don’t know if we’re getting our $100,000 worth out of the guy at the top. I don’t think he’s working that hard every day.

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