McKenna Covers The Berkshire Hathaway Annual Meeting

Update November 5, 2018:

Evelyn Y. Davis, an investor renowned for scolding—and sometimes flirting with—chief executives at annual meetings, died Sunday at a hospital in Washington. She was 89.

There are many ways journalists, investors, and Warren Buffett himself refer to the Berkshire Hathaway Annual Meeting, held in Omaha, Nebraska. These short-cuts and sobriquets add a larger-than-life aspect to what is typically, for almost any other public company, a rather perfunctory affair. Barring any significant controversy, expected or unexpected, no one that doesn’t absolutely have to show up at an annual meeting usually makes the trip.

I had the good fortune to spend some time on Saturday with the New York Bureau Chief of The Economist Matthew Bishop. He’s a UK native and co-author of the book “Philanthrocapitalism”. This was also his first time at the “Woodstock for Capitalism.”

(That’s what Warren Buffet calls the event in his Annual Letter to Shareholders but I think this “Buffettism” is oxymoronic.)

Bishop told me that in the UK there used to be much higher attendance at shareholder meetings, usually for the banks. This reliable audience consisted mainly of retirees because the companies served a lovely lunch in the City. When that stopped, most budget-minded pensioners no longer attended.

Every once and a while someone calls me a “gad-fly” with regard to audit industry reform. I don’t much like that term because it makes a buzzing sound in my ears. When they also mention fabled shareholders’ activist Evelyn Y. Davis in the same breath, I warm to the label. You can still count on her to stir up a fuss at an Annual Meeting.

Ms. Davis is a corporate governance legend. Here’s her tombstone.

She’s still alive but clearly doesn’t want to leave her epitaph to chance.

The Berkshire Hathaway Annual Meeting draws a huge crowd because it features several hours of the wit and wisdom of Berkshire Hathaway CEO and Chairman Warren Buffett and his friend and Vice Chairman Charlie Munger. To say that Buffett, Munger, and Berkshire Hathaway have a cult-like following would be a significant understatement.

The atmosphere is a “Buffett-a-palooza” – a term used across the board by major media as well as bloggers.

Jeff Harding at The Daily Capitalist: I like the fact that our society elevates people like Buffett and Munger to celebrity status. After all, we don’t have kings to adore. We Americans like and respect money and we admire people who make money. Ask de Tocqueville who was amazed at the audacity of poor people who thought they could elevate themselves through diligence and hard work. We may love our athletes and movie stars, but we listen to the ultra wealthy.

This year there was more interest than ever in the Berkshire meeting because of the Sokol affair.

The Wall Street JournalThe New York Times, The Motley Fool, and assorted others such as WalletPop Canada’s Neil Jain live-blogged the meeting, which ran from 9:30am until 5:00pm. The most complete transcript of the Q&A I’ve seen can be found here: Notes from the Berkshire Hathaway 2011 Annual Meeting, prepared by a soon-to-be graduate who calls himself The Inoculated Investor.

Understand… The formal Annual Meeting with a legal recording of the votes on resolutions in the proxy, election of the slate of Board of Directors and confirmation of the auditor – Deloitte – was conducted during the last half hour of the day. The rest of the meeting was a Q&A session with Buffett and Munger, the two of them alone on a bare stage in front of 40,000 people. It was an example of high performance art, including Buffett playing straight man to Munger’s snappy jokes until Munger finally nodded off about 4:30pm – or, more accurately, carbo-crashed on stage, after munching constantly all day on See’s peanut brittle.

I’ll let The New York Times’ Michael de la Merced set the tone:

9:26 a.m. | Ladies and gents, take your seats

It’s almost showtime. A gravelly announcer – who sounds awfully similar to that guy from all the movie trailers – tells of those who have gathered for “one gloriously capitalistic weekend.” He further intones, “All roads led them to Omaha” before the big finish: “You’ve arrived at the Berkshire Hathaway shareholders meeting. The movie will begin in 10 minutes.”

Press were asked to arrive and check in between 5:45am and 6:30am. Yes, three hours in advance of the start time.  It was a good thing, too, that I already had my press pass.

I nabbed a prime seat, right in the middle of the row, six floors above the stage, before most of the journalists  – who probably went out drinking the night before  – even showed up. There was a delicious full breakfast – a chef made fresh eggs any style and a there was also a waffle iron – with lots of hot coffee, and tea for the foreign journalists of which there were many.

Speaking of the night before, I attended a dinner panel discussion sponsored by the Columbia Business School and Gabelli Asset Management. I wrote a post about it first thing Saturday morning for Forbes before any of the shareholders even arrived at the Qwest Center.

The audience was mostly money managers. Gabelli, a 1967 graduate of Columbia’s Business School, led a boisterous panel that was decidedly upbeat. No one, even when prompted, wanted to talk about any stocks to avoid.  And they encouraged the audience, as value investors, to look past macro issues like the debt ceiling, the collapse of the European Union, the Arab Spring uprisings, and Tokyo, and focus on company fundamentals…

So I asked the question, “What about financial services?  You haven’t mentioned any banks.”

The panelists unanimously advised the audience to avoid the big banks. They reminded the audience of the value investor mantra, “Don’t invest in what you don’t understand.”

That’s a Buffett aphorism as well. Banks’ balance sheets are especially opaque, and panelists expressed frustration at trying to make sense of loan quality and loan loss reserves.

I tweeted quite a bit throughout the day. If you’d like to see those tweets you can look them up via my Twitter ID, @retheauditors or via a Twitter search tool using #BRK2011 hashtag.

I wrote another post for Forbes about the meeting on Tuesday morning. I’ve spent a lot of time studying Hank Greenberg and his company, AIG. I was struck by the connections and the similarities between Greenberg and his fellow iconic insurance mogul Buffett.

Some have said Buffett is more honest than Greenberg ever was. After all, Eliot Spitzer never accused Buffett of accounting manipulation. But both Buffett and Greenberg have been very successful at creating plausible deniability when legal and regulatory failures occurred in their companies.

Hank Greenberg was recently duped by China Media Express (CCME), alleged to be a Chinese reverse merger fraud, and blames its executives and auditor, Deloitte China, for lying to him. It must be tough for the famously detail-oriented China aficionado with Buddha – like knowledge of Chinese business methods and mores – Greenberg was doing business in China before it was CHINA – to claim he was taken for a rickshaw ride.

I’ll have more to say later about Berkshire Hathaway’s corporate governance and its relationship with Deloitte, the company’s auditor, later.

Stay tuned.

5 replies
  1. Dave
    Dave says:

    Great work once again.

    I agree with Mr. Gabelli whom you quoted in your Forbe’s posting, the press is pre-occupied with the Sokol matter. And there is far too much speculation on the world after Buffet.

    What I wish someone would address is the contradiction in the philosophy that Mr. Buffet espouses and the experience of the Berkshire shareholder. Mr. Buffet has often characterized a good investment as one where you don’t care what the price is or what the next guy will be willing to pay. In other words, if the cash generated by the business gives you a good yield, why would you ever think of selling it. Yet Mr. Buffet and Mr. Munger seem to be dead set against dividends. That means the success of a Berkshire investor relies exactly on the principle Mr. Buffet eschews.

    All assets rely, in part, on an intergenerational Ponzi scheme to maintian their value. But this seems to be the most explicit case.

    At the next annual meeting they should hand out 40,000 sheets of papaer and pencils and have everyone complete this sentence “You should buy my share(s) of Berkshire because…..”

  2. Francine
    Francine says:


    Thanks so much for your comment. You raise an excellent point about Mr. Buffett’s schtick. “Do as I say, not as I do…”

  3. Nathan
    Nathan says:

    Mr. Buffett has also stated that Berkshire will pay a dividend as soon as the company cannot create the value for the shareholder as they could investing elsewhere. Considering the main goal for corporations is to increase shareholder value, he is one doing what they are suppose to do. And by saying “cash generated by the business gives you a good yield” you have to take into consideration gains or losses when you sell.

    In a side note, in a time when most investors us DRIP, I don’t see much of a difference.

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