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

[Mephistopheles]

 

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...

 

 

 

 

I think I may have been misinterpreted. I think Buffett is just as greedy as Winters or Icahn or Ackman. I think his abstaining from voting wasn't because he's a man of peace, but rather for self serving reasons. He's got enough of name, reputation and respect that just showing simple distaste or approaching the matter in a less confrontational way can do wonders for him where it doesn't with most other people. Don't forget that he did have private conversations with the CEO where he elucidated his views. I'm sure this had a significant impact.

 

I think it's the same logic as to why Berkshire's culture of trust works as well as it does. When you trust and praise people, rather than criticize, it can work in your favor.

 

But again, only he can pull that off at the magnitude that he does. And I think the Carl Icahns of the world do a fantastic job at keeping corporate America at check with their style too.

 

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.

 

 

I was referring to the executives and thousands of managers who would have received more options under the original plan. Probably wouldn't have been good for their morale if Buffett took a more critical and activist stance like Winters.

[Rainforesthiker]

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.

 

 

I was referring to the executives and thousands of managers who would have received more options under the original plan. Probably wouldn't have been good for their morale if Buffett took a more critical and activist stance like Winters.

 

You do raise a good point - some of the managers, perhaps many of them, may have been unhappy not receiving this higher compensation (their arguably unjust rewards). I think for the most part though that people know when they are reaching for too many cookies in the cookie jar.  The hue and cry from Winters, Buffett and others, would have signaled that this was overreaching.  Also, in my experience that vast majority of excessive stock options go to the top few executives, so perhaps many of the non top level managers would not have viewed this as a big deal.  Here is it a balancing of evils.  Do you do the right thing and vote your conscience, at the risk of upsetting some who are being unjustly enriched at your expense.  Or do you abstain so as to avoid "taking sides", and hence not risk offending people.  I tend to think the clear answer is the former.  Again, Buffett has historically shied away from confrontation within his owned companies, which explains his abstain vote.  I just think it was a cop out.

[Guest ajc]

 

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.

 

 

Great point.

With Buffett, it's like the opposite of damned if you do and damned if you don't.

Often, it's as if he can do no wrong.

 

I think it comes down to the size of Berkshire as much as anything.

How many places can he stash 10 billion dollars?

The guy probably only has a maximum of 15 stocks on the entire S&P500 which he perhaps sees as suitable candidates, so it's no surprise at all that he doesn't want to rock the boat.

Then you've got the problem of liquidating such a big position. The whole thing would be a complete shit-show.

 

So, I'm not sure those things he said in his annual letters apply much any more to his own positions.

If he has to choose between keeping one of the few remaining investment avenues open at the cost of some credibility and board influence, then I think he's going to do it for his sake and the sake of Berkshire shareholders.

It's just that I don't think too many of his fans are willing to accept that Buffett might consider any of these practical things in his decision-making process.

I guess they don't call them groupies for nothing.

 

 

[Guest longinvestor]

Fact check.

Wintergreen's position in KO is 5% of their portfolio of $1.7 B, so that's about $85 Million. Which is 0.053% of KO. Plus this rat can jump off the ship any time. BRK owns 9% for over 30 years. Activist investor my ass.