That quality attracts an interested shareholder constituency to Berkshire, which flocks to its annual meetings in increasing numbers every year. The directors can take matters directly to the controlling shareholder when disagreement arises.
The most common situation, however, is a corporation without a controlling shareholder.
The defenses run from an impassioned refutation of modern finance theory, to convincing demonstrations of the deleterious effects of using stock options to compensate managers, to persuasive arguments about the exagger- ated benefits of synergistic acquisitions and cash flow analysis.
What matters is selecting people who are able, honest, and hard-working.
Berkshire does things differently. This is an imaginative practical re- sponse to a tension that is at the core of the management-share- holder relationship.
Berkshire retains and reinvests earnings when doing so deliv- ers at least proportional increases in per share market value over time. Buffett tells it like it is, or at least as he sees it.
They unfailingly think like owners the highest compliment we can pay a manager and find all aspects of their business absorbing. Here I put some of the most sali I started with this book with a sort of apprehension. It would be helpful if directors could sup- ply necessary discipline, but board congeniality usually prevents that.
When disagreements arise between the directors and management, there is little a director can do other than to object and, in serious circumstances, resign. The first is not dwelt on in the essays but rather permeates them: Evaluating CEO performance is even harder than it may seem. Special attention must be paid to selecting a CEO because of three major differences Buffett identifies between CEOs and other employees.
Aug 27, Uday Sikand rated it it was amazing The Oracle at his brilliant best. Whether Buffett would approve of Dunlap-style short-termism is not clear, but his own style of balancing short-term results with long-term prospects based on community trust is certainly differ- ent.
Much of that teaching and practice eclipsed what Graham and Dodd had to say; Buffett is their prodi- gal pupil, stalwartly defending their views. It may give us the chance to buy more of a good thing at a bargain price. None of these innovations has solved governance problems, however, and some have exacerbated them.
In achieving this goal, Buffett foregoes ex- pansion for the sake of expansion and foregoes divestment of busi- nesses so long as they generate some cash and have good management. An astute approach to market up and downs: Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.
We do not have in mind any time or price for sale. This introduction to the major themes encapsulates the basics and locates them in the context of current thinking. Stock options for management were touted as one method; greater emphasis on board processes was another.
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