2016: Does Berkshire consider diversity when selecting directors?

ANDREW ROSS SORKIN: Thank you, Warren. The following question comes from Ariz Galdos (PH), and several other shareholders asked similar questions that are a part of this as well. It’s a bit of a multipart question.

WARREN BUFFETT: Uh-uh.

ANDREW ROSS SORKIN: “About two dozen men and women work with you, Warren, at our corporate office. I see from last year the quality of the picture has been improved in the annual report, so congratulations on that.

“However, looking at it, there is something that comes to anyone’s attention and is the lack of diversity among the staff. A 2015 analysis by Calvert Investments found that Coca-Cola was one of the best companies for workplace diversity while Berkshire Hathaway was one of the worst.

“You’ve explicitly stated that you do not consider diversity when hiring for leadership roles and board members. Does that need to change? Are we missing any investment opportunities as a result?

“And do you consider diversity, however defined, of company leadership and staff when analyzing the value of a company that you may want to purchase?

WARREN BUFFETT: Well, it’s a multiple part question. The answer to the last one is no.

What was the one before it? (Laughter)

ANDREW ROSS SORKIN: “You’ve explicitly stated you do not consider diversity when hiring for leadership roles and board members. Does that need to change, and are we missing any investment opportunities as a result?”

WARREN BUFFETT: No. We will select board members, and we lay it out. And we’ve done so for years, and I think we’ve been much more explicit than most companies.

We are looking for people who are business savvy, shareholder oriented, and have a special interest in Berkshire. And we found people like that. And as a result, I think we’ve got the best board that we could have. They’re not in it — they’re clearly not in it for the money.

I get called by consulting firms who have been told to get candidates for directors for other companies, and by the questions they ask, it’s clear they’ve got something other than the three questions we ask, in terms of directors, in mind.

They really want somebody whose name will reflect credit on the institution, which means a big name. You know, and one organization recently, the one that did the blood samples with small pricks, got — they got some very big names on their board. Theranos, I think, or — is that the way you pronounce it, Charlie? Theranos?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah. I mean the names are great, but we’re not interested in people that want to be on the board because they want to make 2- or $300,000 a year, you know, for 10 percent of their time. And we’re not interested in the ones who — for whom it’s a prestige item and who want to go and check boxes or that sort of thing.

So I think we’ve got — we will continue to apply that test: business savvy, shareholder oriented, and with a strong personal interest in Berkshire.

And every share of Berkshire that our shareholders own, they bought just like everybody else in this room. They haven’t gotten them on an option or they haven’t — I’ve been on boards where they’ve given me stock, you know, and they — I get it for breathing, basically. Half a dozen places that are — maybe three or four that I was on the board of.

We want our shareholders to walk in the shoes — I mean, our directors to walk in the shoes of shareholders. We want them to care a lot about the business, and we want them to be smart enough so that they know enough about business that they know what they should get involved in and what they shouldn’t get involved in.

The people in the office — I’m hoping that when we take the Christmas picture again this year, they’re exactly the same 25 that were there last year, even though we might have added 30,000 employees elsewhere and maybe 10 billion of sales or something like that.

It’s a remarkable group of people, and they — I mean, just take this meeting. Virtually every one of the 25, our CFO, my assistant, whoever, they’ve been doing job after job connected with making this meeting a success and a pleasant outing for our shareholders. It’s a cooperative effort.

The idea that you would have some department called Annual Meeting Department and, you know, you’d have a person in charge of it and she’d — or he — would have an assistant and then they would go to various conferences about holding annual meetings and build up — and then they’d hire consultants to come in and help them on the meeting. We just don’t operate that way. It’s a place where everybody helps each other, but — (Applause)

Part of the — what makes — part of what makes my — well, my job is extraordinarily easy, but the people around me really make it easy. And part of the reason it’s easy is because we don’t have any committees. Maybe we have some committee I don’t know about, but I’ve never been invited to any committees, I’ll put it that way, at Berkshire.

And we don’t — we may have a PowerPoint someplace, I haven’t seen it, and I wouldn’t know how to use it anyway.

The — we just don’t do — we don’t have make-work activities. And we might go a to a baseball game together or something like that, but it — I’ve seen the other kind of operation and I like ours better, I’ll put it that way. Charlie?

CHARLIE MUNGER: Well, years ago I did some work for the Roman Catholic Archbishop of Los Angeles, and my senior partner pompously said, you know, you don’t need to hire us to do this. There’s plenty of good Catholic tax lawyers. And the archbishop looked at him like he was an idiot and said, “Mr. Peeler,” he says,” last year I had some very serious surgery, and I did not look around for the leading Catholic surgeon.” That’s the way I feel about board members. (Applause)