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I disagree with Buffett abstaining from voting against Coke's compensation plan


LongHaul

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I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

As a rational shareholder he still should have and this is terribly weak.

 

I think he just valued the friendship much more than the amount of money he loses because of this (which is negligible compared to his vast wealth).

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I think it's being pragmatic vs. dogmatic, and quite wise in an effort to achieve the best outcome for the long term good of the company.  Creating an acrimonious environment is not good for the company any way you cut it.  There are many shades of grey in how the corporate boardrooms function.

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I for one do not agree with outrageous pay packages and if I was an individual shareholder I would have voted against the deal.  The difference is, Buffett/ Prem are looking to acquire businesses to be run independently and self managed. If they start interfering with compensation, owners/CEOs would be reluctant to sell them their businesses since they would be concerned they may interfere in not only compensation but other matters.

 

At the Fairfax shareholder dinner, management at Fairfax did not agree with TW compensation but considered it part of doing business.  They work in the background to address these issues then airing dirty laundry in public.

 

Tks,

S

 

I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

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Guest wellmont

If you start voting no to executive comp, does the company start having recruiting problems as people would prefer to go to companies whose largest shareholders were not actively voting no?

 

maybe at very high levels. but at mid/lower levels I don't believe the thinking goes that far. I think most people think in terms of salary vacation time health care, etc.  And many are simply thankful to have a steady paycheck, which is a valid way to feel btw. The average person has no idea what a proxy is, a comp plan is, etc. When I was working in industry, I often knew more about this stuff than newly minted MBAs, who actually had very little idea about what drives stock prices.

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I for one do not agree with outrageous pay packages and if I was an individual shareholder I would have voted against the deal.  The difference is, Buffett/ Prem are looking to acquire businesses to be run independently and self managed. If they start interfering with compensation, owners/CEOs would be reluctant to sell them their businesses since they would be concerned they may interfere in not only compensation but other matters.

 

At the Fairfax shareholder dinner, management at Fairfax did not agree with TW compensation but considered it part of doing business.  They work in the background to address these issues then airing dirty laundry in public.

 

Tks,

S

 

I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

Is it your impression that Buffett leaves existing compensation plans in place when BRK acquires publicly traded companies???

From my reading over the years it seems clear that he changes them from options to cash.  He also is involved in capital allocation.  If they can't meet a certain hurdle they send cash up to the parent.   

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I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

Isn't that a conflict of interest though?

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I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

Isn't that a conflict of interest though?

 

Yeah, one reads all the blah, blah,blah in annual reports about how independent the directors are and all. Then someone, who is a vocal opponent of all the largess, won't even fulfill his fiduciary duty to look out for the best interests of the common shareholder. Some days it's hard to spot the difference between the Russian oligarchs and corporate executives. 

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Guest deepValue

I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

Isn't that a conflict of interest though?

 

Yeah, one reads all the blah, blah,blah in annual reports about how independent the directors are and all. Then someone, who is a vocal opponent of all the largess, won't even fulfill his fiduciary duty to look out for the best interests of the common shareholder. Some days it's hard to spot the difference between the Russian oligarchs and corporate executives.

 

Once again, easy for little people to say.

 

If only Buffett would cast aside all of his relationships in pursuit of some greater ideal, then all of his followers would be happy knowing that he's making a sacrifice that they'll never have to. It's always easier to put aside pragmatism for theoretical obligations when you're not the person who has to do it.

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I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

Isn't that a conflict of interest though?

 

Yeah, one reads all the blah, blah,blah in annual reports about how independent the directors are and all. Then someone, who is a vocal opponent of all the largess, won't even fulfill his fiduciary duty to look out for the best interests of the common shareholder. Some days it's hard to spot the difference between the Russian oligarchs and corporate executives.

 

Once again, easy for little people to say.

 

If only Buffett would cast aside all of his relationships in pursuit of some greater ideal, then all of his followers would be happy knowing that he's making a sacrifice that they'll never have to. It's always easier to put aside pragmatism for theoretical obligations when you're not the person who has to do it.

 

You're right there are countless little people throughout history who put the pursuit of a greater ideal ahead of pragmatism. I don't now if I would react that way until put in the position they were. But I have the utmost respect for them in their anonymity.

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Guest deepValue

I don't understand why people are justifying WEB's abstention, or calling it clever.

 

 

Why didn't he just vote "no", and call them out publicly on it? I think it's fairly straightforward...

 

He's friends with the CEO and various board members. It's easy for us to say he should've rebuked them...

 

Isn't that a conflict of interest though?

 

Yeah, one reads all the blah, blah,blah in annual reports about how independent the directors are and all. Then someone, who is a vocal opponent of all the largess, won't even fulfill his fiduciary duty to look out for the best interests of the common shareholder. Some days it's hard to spot the difference between the Russian oligarchs and corporate executives.

 

Once again, easy for little people to say.

 

If only Buffett would cast aside all of his relationships in pursuit of some greater ideal, then all of his followers would be happy knowing that he's making a sacrifice that they'll never have to. It's always easier to put aside pragmatism for theoretical obligations when you're not the person who has to do it.

 

You're right there are countless little people throughout history who put the pursuit of a greater ideal ahead of pragmatism. I don't now if I would react that way until put in the position they were. But I have the utmost respect for them in their anonymity.

 

That's not what I said.

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What I don't really understand is that WEB abstains from voting but then trashes the compensation scheme on television .. If you consider the executive team your friends I'd say that's even worse than just voting 'no' and shutting up about it. Is it a bit of 'social blackmailing'? I really wonder what was discussed during board meetings.

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I think this vote is classic Buffett. With Schroeder's character description in Snowball in mind, this is exactly the reaction you would expect from him. She described Buffett's board activity as being unobtrusive, rarely criticizing management openly. Buffett hates confrontation – not only confronting management – but people in general. To confront a manager that he obviously thinks of as being a great one must be especially difficult for him.

 

Maybe he was also afraid of the consequences of management not succeeding? This could have forced Kent to resign which certainly is neither what Buffett nor Munger would have wanted. Buffett made very clear that he didn't want to send this signal.

 

I would like to hear what Charlie really had to say about it.

 

Buffett told Becky Quick that he consulted Munger and at least got his view on the plan (being excessive).

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  • 5 months later...

Abstaining by Buffett was a genius move. Had he gone the Wintergreen route, it would have damaged morale at KO, ultimately costing shareholders more than the plan. Instead, he leveraged his reputation and the business world's enormous respect for him by only minimally verbalizing his disappointment without creating enemies by voting against or being overly critical.

 

In this case, less is certainly more.

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"Genius"....a little excessive no?

 

Well most people (myself included) wronged him in the very beginning for not taking charge and we thought it was just plain old Buffett being non-confrontational, but I think he had a very deliberate strategy here. Genius because most people didn't see it that way yet so simple.

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Whatever you think of Winters, he deserves the most credit here.

It was his activism that shook things up, and without it there seemed like no real likelihood of a change happening.

 

You can argue that Buffett played it smart by eventually being the seemingly neutral and objective party in this, but really he was given a whole lot to work with by Winters. Anyway, it wouldn't surprise me if some people wanted to give Buffett the Nobel Peace Prize after this but in reality you need people like Winters or Icahn in a capitalist system in order to keep most management honest.

Coca-Cola's compensation issue, is a great example of well-written annual letters from some guy in Omaha just not cutting it.

 

People like Buffett would probably just get kicked in the nuts and pushed aside if they were on their own, but at least with a bunch of self-interested and even greedy activists who are willing to aggressively stand up to overpaid managements you can get some sort of balanced tension which keeps both sides vigilant and incentivized.

 

So really, most of us probably should not be wishing for more Buffett-like behavior overall in these situations (even if it has its benefits), unless you'd like to see shareholder rights get trampled on over the next few decades.

And what would he really care by that point in time anyway, seeing as he'd be long gone by then...

 

 

 

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Guest longinvestor

 

Whatever you think of Winters, he deserves the most credit here.

It was his activism that shook things up, and without it there seemed like no real likelihood of a change happening.

 

You can argue that Buffett played it smart by eventually being the seemingly neutral and objective party in this, but really he was given a whole lot to work with by Winters. Anyway, it wouldn't surprise me if some people wanted to give Buffett the Nobel Peace Prize after this but in reality you need people like Winters or Icahn in a capitalist system in order to keep most management honest.

Coca-Cola's compensation issue, is a great example of well-written annual letters from some guy in Omaha just not cutting it.

 

People like Buffett would probably just get kicked in the nuts and pushed aside if they were on their own, but at least with a bunch of self-interested and even greedy activists who are willing to aggressively stand up to overpaid managements you can get some sort of balanced tension which keeps both sides vigilant and incentivized.

 

So really, most of us probably should not be wishing for more Buffett-like behavior overall in these situations (even if it has its benefits), unless you'd like to see shareholder rights get trampled on over the next few decades.

And what would he really care by that point in time anyway, seeing as he'd be long gone by then...

 

Maybe Winters (and the other media pundits) should go after other companies as well, to push against excessive executive compensation.

That should not be hard at all. All he has to do is throw a dart at about 500 companies that make up the S&P. Focus specifically on stock options. He won't miss. He surely won't, now that he has indignantly exited his BRK position

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Buffett has historically tended to avoid confrontation, going back to his days running Dempster when he laid off a lot of workers and was perceived as a liquidator.  IMO, his abstaining from voting on Coke's compensation was a poor decision.  He should have stepped up to the plate and voted the way he believed.  To me the situation is fairly simple - when someone clearly tries to take more money than they deserve, those whose money (and decision) it is should step up and say "No that's too much"; they should NOT instead say "uhh, I think they are taking too much, but I don't want to take a position on it because it might hurt someone's feelings."  His "abstain" vote went against many of the things that he has preached over the years.  His voting "No" on executive compensation would not have harmed Coke's "morale" - it mostly likely would have raised the morale of the rank and file employees.

 

That Buffett's decision here could somehow be perceived as "genius" because others put pressure on the company and got the right result shows what a large "halo effect" Buffett receives.

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