VOL. 129 | NO. 88 | Tuesday, May 06, 2014
Buffett Defends How He Runs Berkshire Hathaway
JOSH FUNK | AP Business Writer
OMAHA, Neb. (AP) – Warren Buffett remains confident in the long-term future of his company, and on Monday he again defended the quiet way he handled his objections to Coca-Cola's compensation plan.
Buffett appeared on CNBC and Fox Business Network after spending the weekend meeting with shareholders of his Berkshire Hathaway conglomerate.
Critics who think it would be best to break apart Berkshire's 80-odd subsidiaries to make them easier to manage are wrong, he said.
"There are real advantages to having the company together," he said.
Over the past 50 years, Buffett has grown Berkshire Hathaway from a floundering New England textile mill into a wide-ranging conglomerate that employs more than 330,000 people.
One of Berkshire's key advantages is its ability to shift money between its subsidiaries or invest it elsewhere to generate the best returns, Buffett said.
He is regarded as one of the best at deciding where capital should be used, and Buffett said Berkshire's board won't pick a CEO that isn't terrific at allocating capital.
The 83-year-old Buffett says he doesn't intend to retire, but Berkshire is nonetheless planning for the day when he's no longer at the helm. The company plans to split his job into three parts – chief executive officer, chairman and several investment managers.
Buffett said again Monday that all of the current CEO candidates are men who already work at Berkshire and understand the company's culture. Buffett said his successor will do some things differently, but won't change Berkshire's key principles.
"We're a certain type of business," Buffett said. "That's not the only way to run things, but it is the way we run things at Berkshire. And I can't imagine a successor changing that in a material way."
As the biggest shareholder in Coca-Cola Co., Berkshire had the opportunity to have a major influence on last month's vote on an executive compensation plan that Buffett called excessive.
But Buffett abstained from voting Berkshire's 400 million Coca-Cola shares on the compensation plan because he didn't want to fight with the company. Then he met with Coca-Cola's CEO to express his concerns.
"I'm sure we have the right leader in Muhtar Kent so we have no desire to go to war," Buffett said. "But we did think the program was excessive."
Billionaire activist investor Carl Icahn criticized Buffett's decision not to vote against Coke's compensation plan in a separate interview on CNBC Monday and in an opinion article in Barron's.
Icahn said that if Warren Buffett won't vote no because he doesn't want to offend management, how can board members be expected to stand up to CEOs?
Buffett said he believes Coca-Cola will do what's right and that his approach was the best one. He said he and Icahn, who are friends, have different approaches.
Coca-Cola can make the compensation plan acceptable by spreading the stock options granted to executives over more years than the four initially proposed, he said.
Coca-Cola spokesman Petro Kacur reiterated Monday that the company respects Buffett's views, but didn't say whether the compensation plan would be changed. The company said the compensation plan includes flexibility, but no changes have been made at this time.
Nearly 40,000 people attended Berkshire Hathaway's annual meeting in Omaha on Saturday to hear Buffett spend several hours answering their questions.
Buffett on Monday also praised General Motors' new CEO, Mary Barra, and said she is the best person to handle the company's recall problems.
"I think she's terrific. She could run any company that Berkshire does," he said.
In January, Barra became GM's top executive and the first woman to lead a major automaker. That's when a deadly ignition switch problem began to surface.
GM has recalled 2.6 million cars and admitted knowing about the problem for more than a decade. Barra says she learned of it in December.
"She's basically on a hot seat, but it's not a hot seat of her own making," Buffett said. "And I don't think there's anybody that's going to be better at handling it."
Buffett's Berkshire Hathaway Inc. owns 40 million shares of General Motors Co. stock, but Buffett said he didn't make that investment. One of Berkshire's two other investment managers, Ted Weschler, did.
Buffett addressed a number of other topics in interviews:
– He said he thinks U.S. companies will continue to try to move their official domiciles to other countries to reduce their tax bills as long as the option remains available in U.S. law. Buffett said he thinks Congress should eliminate that loophole.
– Berkshire Hathaway held Washington Post stock for four decades before Amazon founder and CEO Jeff Bezos bought the newspaper. "I hope he succeeds like crazy," Buffett said. "If anybody has a chance to do so I bet on Jeff."
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