Berkshire Hathaway 2018 Annual Meeting Audience Question # 49

Berkshire will not make hostile tenders

Warren Buffett:

OK, Becky.

Becky Quick:

This comes from John Hegarty at Brightstar Capital Partners, who writes, “Warren, you’re stepping down from the Kraft Heinz board at a time when the company’s looking to do a large acquisition: Unilever, for example. Do you fundamentally disagree with the combative nature of hostile bids, activist investing, and competitive proxy contests?”

Warren Buffett:

Well, we will not make hostile tenders ourselves. I do not believe that there’s anything fundamentally wrong with the idea. I mean, if you take the Fortune 500 companies, I’m sure that all 500 are not managed by the best, or in some cases even the friendliest to investor managements in the world.

So I don’t think it’s evil or anything to conduct a hostile offer for a company. It’s just we won’t do it, and we don’t want to get into that. We like being liked by the managements that we join, because we’re counting on them to run the company, and we’re not bringing in a whole bunch of people that know how to change businesses.

We seldom take a position opposite the management… very seldom… on anything involving a proxy, but… contest of sorts. But we don’t rule it out. We don’t think every management is entitled to be… you know, they don’t have a lifetime hold on their business. But it’s not our style at all to… well, we won’t do it in terms of initiating it ourselves, and we’d be very, very, very unlikely to support a contest.

But we have voted against a couple of propositions over 50 years that managements have had… made… in relation to stocks options. We withheld a vote at Coca-Cola a few years ago to express our opinion.

But we don’t think it’s evil for the shareholders, in some cases, to have different opinions about who should run the company, or whether compensation’s appropriate, or matters of that sort.

The stockholders still own the company.

Charlie?

Charlie Munger:

I’ve got nothing to add to that. I don’t envy these people that are in these unfriendly uproars all the time. Imagine doing that after you’re already rich. It’s insane.

Warren Buffett:

Yeah. Yeah, we are definitely not looking for it. We don’t…

There are certainly companies that deserve challenge. And they propose things that deserve challenge occasionally. But again, it’s not our main activity.

And incidentally, this has… the question was asked in reference to Kraft Heinz.

The people at 3G are great, great managers. They’ve been wonderful partners. I had made a determination, before we got involved there, I was going to be on no more public boards. I’d been on 19 of them, and it takes a lot of time. And they asked me if I’d go on for a while, and I did.

But it really is, like, seven-and-a-half days or something. And if you’re on a bank board, it may be quite a bit more than that. I mean, there just…

Being on a public board usually means quarterly meetings plus maybe an extra one. And, you know, at 87, I think I’ve now learned what happens, and it’s fine, but I don’t want to spend seven-and-a-half days a year when I… maybe I can call up people that I trust and admire who are on the board in five minutes, you know, and find out what’s going on or whatever it may be, any questions that come up.

And so we are their partners, and delighted to be their partners. And now we have two people on the board of Kraft Heinz, and they can do the traveling and I can stay home.

Charlie, how many public… you’re on Costco, of course, over the… your lifetime, how many public boards?

Charlie Munger:

Oh, I… Costco… except for something…

Warren Buffett:

Kansas City Power.

Charlie Munger:

… like The Daily Journal where I own part of it, Costco’s the only public board…

Warren Buffett:

You were on Kansas City Power.

Charlie Munger:

… if it wasn’t Berkshire or something I owned personally.

Warren Buffett:

Yeah.

Charlie Munger:

I was on Kansas City Power and Light. Boy, that goes way back. But basically it hasn’t happened. I don’t envy people who float around to a lot of different board meetings.

Warren Buffett:

No, generally speaking you have very little influence and spend a lot of time. And the trouble is, if you’re going to a board meeting, particularly if you get to the international, and sometimes they feel they have to have one that’s international, you know, they feel they have to take up a fair amount of your time or it wouldn’t have been worth coming, you know, thousands of miles for.

So you get a lot of the show and tell stuff and… that… I find my mind drifting. OK.

Click here to return to the Q&A topic list. Alternatively, you can proceed to the next or go back to the previous question.

Don`t copy text!