At Berkshire Hathaway's annual meeting on Saturday, CEO Warren Buffett responded to a question about diversity by bringing up Theranos, the once-red-hot biotech startup that has become a lightning rod for controversy.
The question originated with a reference to the most recent holiday photograph of the 25 employees at Berkshire (BRK-A) headquarters in Omaha, Neb., including Berkshire's 12 boardmembers. The question pointed out the lack of diversity in the photo and contrasted this with Coca-Cola (KO), which has earned praise for the diversity of its board.
"You've explicitly stated you do not consider diversity when hiring for leadership positions and board members," the question, relayed by reporter Andrew Ross Sorkin, stated. "Does that need to change, and are we missing any investment opportunities as a result?"
Buffett's answer began pretty directly: "No."
Then he explained why Berkshire doesn't prioritize diversity: "We will select boardmembers—and we lay it out and have done so for years, and I think we've been much more explicit than most companies—we are looking for people who are business-savy, shareholder-oriented, and have a special interest in Berkshire. And we've found people like that. And as a result, I think we've got the best board that we could have."
Buffett expanded his answer, and appeared to critiize companies that recruit big names for their board simply for the optics and buzz of big names.
"I get called by consulting firms who've been told to get candidates for directors for other companies. And by the questions they ask, it's clear they've got something other than the three questions we ask," he said. "They really want somebody whose name will reflect credit on the institution, which means a big name. You know, one organization recently, the one that did the blood samples with small pricks, they've got some very big names on their board. Theranos. I mean, the names are great, but we're not interested in people that want to be on the board because they want to make two or three hundred thousand dollars a year for 10 percent of their time. And we're not interested in the ones for whom it's a prestige item and who want to go and check boxes, or that sort of thing... I'm hoping that when we take the Christmas picture again this year, they're exactly the same 25 people that were there last year."
Theranos's board is certainly star-studded: It has three former members of presidential cabinets, two former senators, and two retired military officials. The list includes former secretary of state Henry Kissinger, former secretary of defense Bill Perry, former secretary of state George Shultz, and former U.S. senators Bill Frist and Sam Nunn.
But a Fortune story summarized the roster as, "Plenty of politican connections, little relevant expertise." And the big-name board has done little to stop the bleeding of the recent slew of setbacks for Theranos (perhaps it has even exacerbated the scrutiny, since expectations were so inflated). One year ago, Theranos had a $9 billion valuation, and founder Elizabeth Holmes was popping up on every list of the most impressive young entrepreneurs in the world. Now, after an October Wall Street Journal investigation exposed doubts about the company's technology, the FDA and the SEC are both investigating the company, and regulators have even proposed banning Holmes for two years from the company she founded.
In light of the mess, Buffett's implied opinion on big-name boards looks fair.
Click here to view a full replay of the 2016 Berkshire Hathaway annual shareholder meeting, which Yahoo Finance live-streamed exclusively. At this page you can also find our extensive coverage of the event.
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology.