- Berkshire Hathaway has recommended investors vote against four upcoming shareholder proposals.
- One of those proposals seeks the separation of the CEO and Board Chair role, effectively removing Warren Buffett as Chairman.
- Berkshire Hathaway's annual shareholder meeting will be held in person on April 30.
Despite Berkshire Hathaway's significant outperformance relative to the S&P 500 over the past one-, three-, five-, ten-, and 20-year periods, one investor is calling for the removal of Warren Buffett as its chairman.
National Legal and Policy Center, which owns more than $2,000 of Berkshire Hathaway shares, would like to see Berkshire adopt new bylaws that would require an independent director to serve as the conglomerate's chair of the board of directors, according to a filing made with the SEC.
"Berkshire Hathaway Inc.'s Chief Executive Officer is also Board Chairman. We believe these roles – each with separate, different responsibilities that are critical to the health of a successful corporation – are greatly diminished when held by a singular company official, thus weakening its governance structure," the policy center argued.
The policy center backed up its view with an opinion from proxy adviser Glass Lewis that said, "an independent chairman…is better able to oversee the executives of the Company and set a pro-shareholder agenda without the management conflicts that exist when a CEO or other executive also serves as chairman."
But Berkshire Hathaway is sticking by its long-time CEO and chairman, recommending its investors vote against the proposal at the company's upcoming in-person shareholder meeting on April 30. Berkshire highlighted the fact that Buffett has a 32% voting interest in the company.
Buffett seems to be an exception to the company's view on this proposal, as Berkshire said that once he does steps down as CEO, the Board Chair should be an independent director.
"As has been stated on numerous occasions by Mr. Buffett in the past, once Mr. Buffett is no longer Berkshire's CEO, a non-management director should be named Board Chair," Berkshire said.
Other shareholder proposals up for vote at the upcoming meeting include the adoption of an annual company-wide assessment as to how the company manages risks and opportunities related to climate change. A separate proposal seeks that Berkshire disclose how it measures and reduces greenhouse gas emissions related to its underwriting and investment activities.
Finally, a shareholder proposal would require the company disclose how it is progressing in efforts related to diversity, equity, and inclusion among its employees.
Berkshire recommended investors vote "No" against all of these proposals. The company said it properly manages risks related to carbon emissions and that its businesses independently report and disclose their impact on sustainability.
The company also argued that due to its decentralized model, as it is a conglomerate that houses many businesses that are independently run, it has "minimal involvement" in daily operations of the companies it owns. Instead, each individual company owned by Berkshire is required to adopt its own policies related to the environment and diversity, equity, and inclusion.
Given that directors and executives of Berkshire Hathaway own 43% of the company, combined with Buffett's cult-like status among its shareholders, there is little chance any of these shareholder proposals pass, as similar ones have failed in the past.
