Buffett set for 59th shareholder marathon as big questions loom
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[May 06, 2023] By
Jonathan Stempel
OMAHA, Nebraska (Reuters) -Warren Buffett is set to preside over
Berkshire Hathaway Inc's annual meeting for the 59th time on Saturday as
investors make their pilgrimage to hear the investing legend, at a time
of turmoil for the banking industry and as trouble looms for the
economy.
Tens of thousands of people are flocking to Omaha, Nebraska this weekend
for the extravaganza that Buffett, 92, calls "Woodstock for
Capitalists." Attendance is expected to be up significantly from last
year, which was the first in-person meeting since the pandemic began,
Buffett's assistant said.
While Berkshire has a succession plan in place, with Vice Chairman Greg
Abel slated to succeed Buffett as CEO, investors know that their time to
see and hear Buffett and longtime Vice Chairman Charlie Munger is
limited.
"Even though I've gone for 32 or 33 years, it's enjoyable, uplifting,
and you're always learning something new," Paul Lountzis, who makes
Berkshire his largest investment at Lountzis Asset Management LLC in
Wyomissing, Pennsylvania.
"Charlie is 99 and Warren turns 93 on Aug. 30," Lountzis added, "and you
just don't know how many more you're going to have."
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Buffett and Munger are due to answer five hours of shareholder questions
at the meeting. Abel, who oversees Berkshire's dozens of non-insurance
businesses, and Vice Chairman Ajit Jain, who oversees insurance
operations, will join in the morning.
Berkshire has had a succession plan since at least 2006 when Buffett,
then 75, told shareholders his board would "show me the door" if his
"decay" required it.
Under that plan, Buffett's eldest son Howard would become non-executive
chairman, in part to preserve Berkshire's culture. Todd Combs and Ted
Weschler, who oversee some of Berkshire's investment portfolio, may take
over all of it.
INVESTMENT QUESTIONS ARE LOOMING
Buffett may be asked to address recent U.S. bank seizures, Federal
Reserve efforts to fend off inflation while avoiding recession, and the
potential fallout if lawmakers in Washington do not raise the ceiling on
how much debt the federal government can take on.
Among Berkshire's largest bank and financial services investments as of
Dec. 31 were Bank of America Corp, American Express Co, Citigroup Inc
and Bank of New York Mellon Corp.
Other questions may address Buffett's own huge investments in Apple Inc
and Occidental Petroleum Corp, or his now-uncertain bet that video game
maker Activision Blizzard Inc can be acquired by Microsoft Corp.
While Berkshire no longer far outperforms markets over long periods as
it did in Buffett's early days, in the past decade it has slightly
outpaced the Standard & Poor's 500 including dividends, often with less
volatility.
And Berkshire has kept growing, with Buffett spending $19.7 billion
since October to buy the Alleghany insurance company and a larger stake
in truck stop operator Pilot Travel Centers.
Analysts expect Berkshire on Saturday to report more than $7 billion of
first-quarter profit from its dozens of businesses including the BNSF
railroad, Geico car insurance and many energy, manufacturing and retail
operations.
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![](../images/050623PIX/busine97.jpg)
Berkshire Hathaway Chairman Warren
Buffett walks through the exhibit hall as shareholders gather to
hear from the billionaire investor at Berkshire Hathaway Inc's
annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019.
REUTERS/Scott Morgan/File Photo
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Morningstar analyst Geoffrey Warren this week lauded Berkshire's
"decentralized business model, broad business diversification, high
cash-generation capabilities and unmatched business strength," while
lamenting its "lack of engagement and opaqueness" on governance
issues.
While it is unclear whether Abel could ever command the trust that
investors have in Buffett, many hope he would maintain the culture
that Buffett views as a key to Berkshire successes.
"It is precisely because Berkshire is decentralized and its
businesses have their own CEOs that the company will do well in the
post-Buffett era," said James Armstrong, who runs Henry H. Armstrong
Associates in Pittsburgh and first invested in Berkshire 35 years
ago.
SIX PROPOSALS TO BE PRESENTED
Still, some shareholders do want change.
At the meeting, shareholders are due to present six proposals for
Berkshire to address including on climate change, diversity and
political advocacy, and a renewed call for Berkshire to install
someone other than Buffett as chairman.
Buffett opposes all six proposals.
The largest U.S. public pension fund, the $455 billion California
Public Employees' Retirement System (CalPERS), for a third straight
year wants Berkshire to report annually on how it addresses climate
change. Just over a quarter of votes in 2021 and 2022 supported the
idea.
"CalPERS views climate risk as a risk to our portfolio over the long
term," and is not singling out Berkshire, Drew Hambly, a CalPERS
investment director and head of corporate governance in equities,
said in an interview.
Meanwhile, a proposal from Illinois state Treasurer Michael Frerichs
asks Berkshire's board to disclose how the company governs climate
risks, including through its audit committee.
"We believe in constructive engagement and dialogue, whether it's
Warren Buffett or another company," Frerichs said in an interview.
"By the nature of who he is, a lot of investors would follow his
lead. We would like to see him lead."
Buffett's control of 32% of Berkshire's voting power makes passage
of the proposals an uphill battle.
Not all shareholders consider such proposals necessary.
"They are important issues but they are not paramount," Lountzis
said.
(Reporting by Jonathan Stempel in Omaha, Nebraska; Editing by Will
Dunham and Megan Davies)
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