Berkshire Hathaway 2018 Annual Meeting Audience Question # 43

Warren will let Berkshire’s managers decide how to invest their employee’s retirement savings fund

Warren Buffett:

OK, Andrew.

Andrew Ross Sorkin:

OK, this question comes from someone who says, “I am a Berkshire employee and shareholder.”

Warren Buffett:

Uh huh.

Andrew Ross Sorkin:

“I read an investigative article from ProPublica and The Washington Post that many of Berkshire’s various units only offer 401 plans with high fees that are actively managed rather than the low-cost indexes you have advocated as the best path for savings for retirement.”

“The article’s author said he contacted the company and nobody would comment.”

“Will you do something to improve our 401 offerings to match your investment philosophy? And from an operational perspective, how did this happen, given your strong views on the topic?”

Warren Buffett:

Well, I’ve absolutely said what… many, many times through annual reports…and our managers know what I think about the attractiveness of having an index fund option. But they all have different plans, different histories. And they run their businesses.

And who knows, you know, which particular… if you go back to the older businesses, they have defined benefit pension plans, generally. Nobody puts them in anymore. And then the question is, you know, do you transition to something else.

In the end, we overwhelmingly thought our managers make those kind of decisions and others. And my guess is that a very high significant percentage of people who have… who work at a company that has a 401 plan will have an index fund option, but they may not, in some cases.

The only thing we… I think we have asked the companies to have a limit on the percentage, I think, that they might put in Berkshire’s stock through the 401. We don’t want people to lose jobs who are tied to Berkshire.

We certainly don’t want to be in the position of encouraging to put 100 percent or something of their savings in Berkshire itself. I don’t want to be in that position.

But I don’t think even there we’ve insisted on any company doing that. I think we’ve probably made that, when we’ve been asked about it once or twice, I think we’ve given that suggestion.

But the managers will run the companies. The employees, if they feel… and some of our companies have human relations departments… if they feel that they’d like different options or something like that, you know, they should make those views known to the managers. And in some cases the managers, I think, will pay attention to them and in others they probably won’t.

We’ve got a wide variety of managers that run our businesses. And we’re not going to start trying to run them from Omaha.

Charlie?

Charlie Munger:

Well, you’re right. That has happened. That business of the high-fee choices, because we’ve delegated the whole subject to the managers of the subsidiaries. And so no attention at all is being given to the employee choices at headquarters.

And what you’re pointing out is that a lot of the employees in the subsidiaries would do better if they indexed instead of choosing what they did choose. My guess is you’re absolutely right about that. You know.

Warren Buffett:

Yeah.

Charlie Munger:

And if there are any people, managers, in the business today, I hope we’ll do a little better at encouraging better choices.

Warren Buffett:

Yeah, although we don’t want them to interfere too much in…

Charlie Munger:

No.

Warren Buffett:

… directing what they, you know, we can take over human relations.

Charlie Munger:

No, it’s up to the managers. But we wouldn’t object to a little different viewpoint.

Warren Buffett:

And we have made it very clear what we think. I mean, some of them don’t listen to us.

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