Buffett offers advice at shareholders meeting

Buffett offers advice at shareholders meeting

Says you don't need Ph.D. to make rational judgments about markets

Dear

Buffett offers advice at shareholders meeting

Dear

Buffett and Munger on the economy

Warren Buffett and Charlie Munger also weighed in on broader economic topics at Berkshire Hathaway annual shareholders meeting:


Inflation: Buffett predicted the dollar will buy less in five or 10 years, maybe substantially less, depending on what happens with other currencies. Governments around the world are electing to run large deficits to offset reduction in demand by their citizens.


Housing: It’s a simple matter of supply and demand. Obviously, there was an oversupply across the nation. In time, as inventories decline and lower prices, buttressed by the stimulus package, the outlook for an improved housing sector will improve by 2010. (On May 5, the stock market increased by 3.4. percent largely because of U.S. home sales rising more than forecast.)


Corporate Policies: Both Buffett and Munger also spoke about their Berkshire Hathaway corporate policies on executive compensation, the role of consultants and board compensation. They recommended that corporations should take the following steps:


• Abolish the compensation committee on a board of directors. Instead, let the whole board deal with the issues of executive compensation. The idea here is that if I sit on the compensation committee with you, as chief executive officer appointee, then I’ll favor your ever-increasing wage and you’ll make sure I get extra compensation as a committee chair.



•Abolish board members’ compensation.



•Be cautious about hiring consultants. What do they know about your business? How are they rewarded?



•Be leery of Ph.Ds, the world of academe and MBAs who boast of arcane, mysterious, highly technical, incomprehensible theories. (On the other hand, the Buffett reinsurance business and derivatives are plenty complex.)



•Give full power to your managers. Let them manage the business. "We don’t tell Burlington Northern what safety procedures to put in or AmEx who they should lend to," Buffett said.



•Make more chief executives responsible for losses as well as gains.



•A half dozen giant firms with major holdings could very well influence corporate policies to correct policies that reward losses unduly by providing for unearned compensation.

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