Warren Buffett, the longtime chairman and CEO of Berkshire Hathaway (BRK-A, BRK-B), pushed back against a shareholder proposal that would require the company to have women and people of color in any external search for directors and CEOs at its companies, but issued strong support for its goals.
After breezing through the first three “boilerplate” shareholder proposals at the company’s annual meeting in Omaha, Buffett spent 20 minutes on the measure, which was put forth by the New York City Comptroller’s Office, which holds 2.5 million class B shares that are worth over $455 million.
In the proxy statement, the proponents likened the initiative to something similar to the NFL’s “Rooney Rule,” which was enacted to require teams to at least interview a non-white or non-male candidate for coaching jobs. The proposal pointed out that “Berkshire Hathaway appeared to have no people of color” among its directors and CEOs,” though at the meeting Kenneth Chenault, former CEO of American Express, was elected.
Besides providing corporate leadership that matches the makeup of America, the supporting statement in the proxy cited studies from Credit Suisse and McKinsey that showed diverse corporate leadership was more likely to have better financial returns than the national industry median.
If approved, the measure would require the board of directors at Berkshire Hathaway to adopt a policy that requires initial lists of external candidates to fill open CEO or director positions to include "qualified female and racially/ethnically diverse candidates."
Against the motion, but supportive of it
Despite urging shareholders to vote against the measure, Buffett said he wanted to provide a platform for the proponents to speak about the issue, for which he repeatedly expressed its importance.
“We were hoping to have someone from the Comptroller’s office come and present the motion and then have a good discussion at the meeting of the pros and cons because it's a serious and important subject,” said Buffett. “I welcomed the idea of really presenting and having our shareholders [in Omaha] and hearing what they had to say and evaluating what our thoughts were.”
Because of COVID-19 and the associated shutdowns, no one could come to the annual Berkshire shareholder meeting, so Berkshire invited the Comptroller’s Office to send a five-minute statement, which was read by CFO Mark Hamburg. The statement echoed the contents of the proxy and praised the election of Chenault.
“I do hope shareholders will listen to what the supporting statement says and will also read the original arguments they made in the proxy for their proposal and will read our reasons for suggesting voting against,” said Buffett.
“I can tell you on a personal basis, I think I’m in sync with the Comptroller with how he wants the world... but I disagree with the specifics on this motion as it's applied to the board and to Berkshire in particular,” Buffett said.
Buffett has long been vocal about how board of directors operate and are selected, and quipped that no one in a public company has written more about the subject than he has over the years.
During the 20 minutes on the issue, Buffett elected not to waste time with a defense of his “Against” recommendation and vote. From the 7 to 1 ratio of nays to yeas, Berkshire shareholders largely agreed with him.
The reasons, included in the proxy statement, are essentially that Berkshire management’s methods work and should be trusted, and that non-male and non-white candidates are already included in searches.
“Berkshire’s Board hopes you will vote ‘no’ on this resolution, thereby indicating you agree with our long-standing criteria for selecting directors,” the company wrote. “In return, we promise you that all board and CEO candidates will be judged by high standards.”
Buffett ended the discussion of the issue by hoping that next year someone from the Comptroller’s office can come to further discuss the issue.