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 The investment guru was peppered with questions at the meeting, part
of a mostly festive weekend that Buffett calls "Woodstock for
Capitalists," following concerns that Berkshire last year missed
Buffett's five-year growth target for the first time in his 49 years
at the helm.
Buffett, 83, and Vice Chairman Charlie Munger, 90, took the stage at
a downtown Omaha arena as they faced off with the audience and a
hand-picked panel often excusing recent worries at the sprawling
conglomerate.
"Over any cycle we will over-perform, but there's no guarantee on
that," he said. Berkshire, he said, is designed to perform best when
markets are at their worst, unlike in 2013 when the Standard &
Poor's 500 <.SPX> rose 30 percent.
Buffett was immediately questioned about Berkshire's decision to
abstain from the shareholder vote on Coca-Cola's equity compensation
plan for executives, even though Buffett thought the controversial
plan was excessive.
That revelation drew sharp criticism in the run-up to the meeting -
particularly since Buffett has in the past called options wasteful
and akin to a free lottery ticket.
Seated with Munger at a table containing several bottles of Coke and
Cherry Coke, Buffett said that "going to war" would likely not have
been productive, and that Berkshire's abstention sent an even more
effective message.
"We made a very clear statement about the excessiveness of the plan
and, at the same time, we in no way went to war with Coca-Cola,"
Buffett said. "I don't think going to war is a very good idea in
most situations."
Buffett said he had conversations with Coke's chief executive,
Muhtar Kent, including one in Omaha, where he said he thought the
plan was excessive.
"I think the best result for the Coca-Cola Company was achieved by
our abstention, and we will see what happens in terms of
compensation between now and the next meeting of Coke," he said.
Wall Street also came under the spotlight from a person complaining
about why more individuals were not being held criminally
responsible for recent misconduct, such as from the 2008 financial
crisis.
"I don't think there's anything that changes behavior more than
prosecuting individuals," Munger said.
Buffett agreed, recalling his experience at Salomon Inc more than
two decades ago, when he became chairman to help clean up a Treasury
auction rigging scandal.
"I may be biased from my experiences at Salomon, but I lean more
toward prosecution of individuals than corporations," he said. "It's
way easier to prosecute corporations - it's somebody else's money,
and the prosecution knows it's going to get a win. (Corporations')
calculus is such that it just doesn't make sense to fight if you can
just write a check, while the individual is fighting to stay out of
jail."
WORKING ON THE RAILROAD
The questions came a day after Berkshire posted first-quarter
results that just missed analyst forecasts.
That report noted weather-related disruptions at railroad BNSF -
another topic of concern on Saturday. Buffett handed off, calling in
BNSF executive chairman Matt Rose to talk about the company's
service challenges.
"We're making significant investments," Rose reassured the audience.
Buffett added that Berkshire could spend "many, many billions" to
improve operations at the railroad, which is the country's largest
player in the booming oil-by-rail business.
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In contrast, he said a different business, Berkshire Hathaway
Energy, was more able to grow through acquisitions.
Indeed, much of Berkshire's growth as a company has come through
acquisitions, but it now takes bigger transactions to move the
needle.
Buffett signaled he would gladly partner again with Brazilian firm
3G Capital, with which he teamed up to buy ketchup maker H.J. Heinz
Co last year for $23.3 billion.
"We're very likely to partner with them, perhaps on some things that
are very large," Buffett said. "I think 3G does a magnificent job of
running businesses."
Later, he added: "What we really want to do at our present size and
scope (is) buy big businesses with good management and prices, and
then build them over time.
Last year, Berkshire underperformed for the first time in nearly 50
years by Buffett's own preferred measure: gains in the company's
book value, or worth, lagged the S&P 500.
Shareholders at the meeting also rejected a proposal that Berkshire
start paying a dividend, after having not made any cash payouts
since 1967.
GETTING THERE EARLY
The annual meeting in Omaha draws tens of thousands of people to
hear Buffett and Munger talk about business, the economy, and even
politics and life.
It includes a massive exhibit floor that highlights the breadth of
Berkshire's holdings, including Geico car insurance, Borsheim's
jewelry and Dairy Queen ice cream. Before the meeting, Buffett paid
$1 for a Dairy Queen vanilla orange bar.
As usual, hundreds of shareholders lined up outside the arena well
before the doors opened at 7 a.m. CDT.
Michael Rodin, owner of Impact Promotional Marketing Products in Des
Moines, Iowa, said he arrived at 1 a.m., after having attended more
than 20 prior meetings.
"The excitement, to get as close to the action as possible, and see
the man close, and not with his face on the video screen," Rodin
explained on his strategy.
At one point Buffett was asked if he had lost confidence in
Berkshire. In his annual letter to shareholders, Buffett disclosed
that he had suggested to his estate's trustee that money left to his
wife be largely invested in a low-cost S&P index fund.
The question posed: Why an index fund and not Berkshire stock?
Because, he said, he's unconcerned about maximizing the money he
will leave his wife after he passes away.
"There will be loads of capital left over" for her, Buffett said.
(Reporting by Luciana Lopez and Jonathan Stempel in Omaha, Nebraska;
Editing by Bernard Orr)
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