1995: Could you elaborate on the logic of adding two family members to the board?

AUDIENCE MEMBER: My name is Fred Elfell Jr. (PH) from Sacramento, California.

And I wanted to ask if you could elaborate upon the logic of adding two family members to the board of trustees?

WARREN BUFFETT: Well, it’s terrific for family harmony, just to start with. (Laughter)

The — as I’ve talked about in the annual report, the — if I die tonight, you know, my stock goes to my wife, who is a member of the board of directors.

And she will own that stock until her death, when it will go to a foundation. So, there is a desire to have as long a term and permanent ownership structure as can really be done, in terms of planning, and the tax laws, and so on.

I mean, I — we have invited people like Helzberg’s to join in with Berkshire into what we think is a particularly advantageous way for them to conduct a business and to know the future that they’re joining.

And part of knowing the future that they’re joining involves knowing that the ownership is stable. And it will be stable for a very long period of time in Berkshire, probably about as long as you can — anybody can plan for in this world.

After my death, the family would not be involved in the management of the business, but they’d be involved in the ownership of the business.

And you would have a very large concentrated ownership position, going well on into the foundation, that would care very much about having the best management structure in place.

And to, in effect, prepare for that over time, I think it’s very advisable that family members who will not be involved in management, but who will have a key ownership role to play, become more and more familiar with the business and the philosophy behind it.

I discussed that some in the — I guess, it was the 1993 annual report, because I think it’s important that you understand.

And anybody that wants to sell us a business — if you’ve built a business since 1915, and you care enormously about it, and you care about the people that you’ve developed, but you’ve got something else you want to do in life, it’s more than, you know, advertising your car in the paper to sell it.

I mean, it is an important — a very important transaction to you. Not just in terms of how much money you receive, but in terms of who you deliver thousands of people that have joined you — who you deliver them to.

And I think we have a structure that is about as good as you can do. Nothing is forever.

But we have a structure that’s about as good as you can do, in terms of people knowing what they’re getting into when they make a deal with us and being able to count on the conditions that prevail at the time of the deal, continuing for a long period in the future.

Many people — I had a fellow tell me the other day about a business where he’d been wooed by the acquirer. And, you know, the day after the deal, they came in and fired the top half-dozen people. They had a secret plan all along. Well, I don’t think you run into much of that.

But what you do run into is the company that’s the acquiring company, itself, either being acquired or some new management coming along, or some new management consultant coming along, and saying, “Well, this doesn’t fit our strategic plan anymore, so let’s dump this division.”

And people that join in with Berkshire can be relatively, I think, comfortable about nothing like that happening.

Charlie, you want to elaborate on —

CHARLIE MUNGER: No. (Laughter)

WARREN BUFFETT: I was hoping Charlie would have a near-life experience this morning. (Laughter)

Keep encouraging him.