Who Does Warren Buffett Report To?

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When you think about Warren Buffett and the company he founded, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), you might not realize that even Buffett has a boss.  

Sure, if you are a shareholder in Berkshire you do have some say, but that’s limited to the number of voting shares you own.  Those who really have the power to tell Buffett what to do are serving on his Board of Directors

Investors tend to overlook corporate boards.  We forget that it’s the board that approves dividends and buybacks.  It’s the board that gives its stamp of approval on a merger.  By knowing a little more about those serving on the corporate board of your investments, you’ll be ahead of most investors.

There are a dozen members of the Berkshire Board with backgrounds as diverse as the company’s conglomeration of businesses.  The background and related experiences of each director brings a unique skill set to Berkshire, which is important in understanding how the business will operate.

Warren Buffett has been a director since 1965 and has been the Chairman and CEO since 1970.  Mr. Buffett brings 42 years of experience leading the company as Chairman and CEO.

Howard Buffett has been a director since 1993.  Mr. Buffett is the son of Warren and for the past five years has been the president of Buffett Farms and the Howard Buffett Foundation.  He is also a director at both Coca-Cola (NYSE: KO) and Lindsay Corp.  He brings experience as a small business owner, public company director and foundation president.

Stephen Burke has been a director since 2009.  Mr. Burke has been the CEO of NBCUniversal and EVP of Comcast (NASDAQ: CMCSA) since 2011 and prior to that was the COO of Comcast.  He also serves on the board of JP Morgan Chase and the Children’s Hospital of Philadelphia. 

Susan Decker has been a director since 2007.  Ms. Decker spent nearly a decade serving in various capacities at Yahoo! (NASDAQ: YHOO), including serving as CFO.  She also serves on several corporate boards as well as previously serving a term on the Financial Accounting Standards Advisory Council.

William Gates has been a director since 2005.  Mr. Gates currently serves as Co-chair of the Bill & Melinda Gates foundation.  He is the founder of Microsoft (NASDAQ: MSFT) and is the company’s current Chairman of the Board. 

David Gottesman has been a director since 2003.  He is currently a principal the investment advisory firm First Manhattan Co. 

Charlotte Guyman has been a director since 2003.  Ms. Guyman was a general manager with Microsoft and a former Chairman of the Board of UW Medicine.   

Donal Keough has been a director since 2003.  Mr. Keough is currently Chairman of investment banking firm Allen & Company as well as a director of InterActive Corp and Coca-Cola.

Charles Munger has been a director and Vice Chairman of the Board since 1978.  He was the Chairman of the Board and CEO of Wesco Financial until last year when the rest of the company was acquired.  Mr. Munger is also a director at Daily Journal Corporation and Costco.

Thomas Murphy has been a director since 2003.  Mr. Murphy is the former Chairman and CEO of Capital Cities/ABC.

Ronald Olson has been a director since 1997.  Mr. Olson is a partner in the law firm Munger, Tolles & Olson LLP.  He is also a director of City National Corp., Edison International, Southern California Edison and The Washington Post Co.

Walter Scott has been a director since 1987.  Mr. Scott currently serves as the Chairman of Level 3 Communications. 

General Observations

You can make several interesting observations from that list.  Did you notice that there isn’t one board member with insurance experience?  Sure Warren and Charlie have a long history running the insurance businesses of Berkshire but no one else on the board has similar experiences. 

What you do find are directors with investment advisory and investment banking experience.  Managing an insurance business is as much as managing the float as it is managing risk, meaning these two board members bring a lot to the table.

You’ll also notice that two directors also serve on the board of Coke.  That should come as no surprise as Berkshire owns a 9% stake in the beverage giant worth about $15.75 billion.  With that much money on the table, the company is rightly served having two board members sit on the boards of both.

At first glance it might seem odd that Berkshire has three directors with experience in the media industry.  While Susan Decker’s Yahoo! background is on the financial side, both Thomas Murphy at ABC and Stephen Burke at Comcast’s NBC Universal have experience on the content side.  That is until you consider that Buffett has a vast print media empire.  With content being king, the insight of these three could prove invaluable as Berkshire continues to expand its media empire.

A final observation is that Berkshire has two former Microsoft employees on its board.  While Bill Gates is an obvious choice, Charlotte Guyman’s presence on the board is a bit more intriguing.  She spent 12 years at the tech giant where she is credited with selling Bill Gates on the idea that eventually became Expedia as well as managing the business unit that later became Xbox.  She joined Berkshire’s board four years after retiring from Microsoft.  Her experience in the tech world is nicely complemented by more recent experience on the UW Medicine Board and on the Board of Trustees at Save the Children.  She likely brings a unique mindset and voice to the board.

Bottom Line

You can learn a lot about a company by looking at who sits on its board.  While Berkshire’s board is balanced, simply noting that Warren Buffett owns 33.8% of the voting power and a 22.2% economic interest in the company makes it quite obvious who really calls the shots.  There’s nothing wrong with that -- as an investor you couldn’t have your investment dollars in more capable hands than Warren Buffett’s. 

latimerburned has the following options: Berkshire Hathaway and Microsoft. The Motley Fool owns shares of Berkshire Hathaway and Microsoft. Motley Fool newsletter services recommend Berkshire Hathaway, The Coca-Cola Company, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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