1996: Why can't shares owned in street name participate in Berkshire's charity scheme?

AUDIENCE MEMBER: My name is Carlos Lucera (PH). I’m from Idaho. And my question relates to street names.

Our stock at Berkshire Hathaway is in a family limited partnership. And in addition to that, it’s in a street name.

Now, what is the reason, and the rationale behind the reason, for street name shares not being able to participate in the charitable contributions by Berkshire Hathaway?

WARREN BUFFETT: Yeah. We submitted a request for ruling to the IRS — I don’t know, 15 or so years ago, in connection with the shareholder-designated contribution program.

And the ruling we received specifies record holders and not street name holders. Now, that doesn’t mean that a different ruling might not be obtained.

But frankly, when we get into the multitude of indirect holdings and the problems we have with those indirect holdings in other respects, I think it would be a bit of a nightmare for us to attempt to get that program extended through — into street name holders.

I think the costs would far exceed the benefits. And I think that it is the situation, and anybody with it in street name can move it into their own name if they want to.

So I think, with very small amount of effort on the part of an individual shareholder, it would offset an enormous set of problems that we would encounter at Berkshire.

We can handle the present system. We’ve got 12 people there. And they run the annual meeting. They make movies. They do all kinds of things. (Laughter)

And it would be — it would be very tough and — you know, if an extra 10,000 shares participated, it’d be $120,000 of contributions. I just don’t think it would be worthwhile.

Our ruling doesn’t presently cover the subject, in any event. It’s something we’ve thought about.

Charlie?

CHARLIE MUNGER: Yeah. I think even if they changed the ruling, we wouldn’t change the policy. It would be, administratively, very difficult.

WARREN BUFFETT: We run into other problems, in terms of people getting their material — just the material on the annual meeting.

And we’ve heard from a number of shareholders that they can’t get it from their broker, and they’re — they don’t know what the B is all about because they didn’t get their proxies. And it just — street name posed more problems.

Although, we have a — now we have — probably have more than — forget about the B. We have more than twice as many, I believe, holders in street name as in direct ownership. Although, the number of shares is far, far — I mean it’s — it’d be less than 20 percent of the shares. But it’s probably double the number of holders.