THIS IS THE TENTH PART OF A TRANSCRIPT OF WARREN BUFFETT'S SERIES OF LIVE APPEARANCES THIS MORNING (MONDAY, MARCH 3) ON CNBC'S SQUAWK BOX.
ANNOUNCER: Live from Omaha, Nebraska, here again, Becky Quick with special guest Warren Buffett.
QUICK: Welcome back, everyone. We are live in Omaha, Nebraska, at the Nebraska Furniture Mart, which is one of the many companies that Berkshire Hathaway owns. We've been asking Mr. Buffett questions all morning long, and at this point we're turning the show over, once again, to you. Warren, we have a lot of questions that are coming in, and one of them comes from Larry Beckler from New York. He asks that, `Given the board of directors are normally quite chummy with their CEOs, how can shareholders get some kind of accountability for CEO pay, particularly when the company's stock has not appreciated or decreased in value?'
BUFFETT: The only real way, in my view, is to have a few of the very largest shareholders--I mean, you would need--you would need the CalPERS, the Vanguards, the Fidelities. If a half a dozen of those, when they saw something really that they felt was outrageous, would simply withhold their votes and explain why, that would get through. You know, the--you've got a bunch of big shots on the board, and they don't--they don't like criticism. And they particularly--they don't like criticism when it would come from a group that would not look like a bunch of hot heads or anything of the sort.
BUFFETT: So I would--I would say that if four or five of the largest institutional investors--and they don't have to give an opinion on every one or anything like that. If they saw something really egregious, they just simply said, `We're withholding our votes,' and...
QUICK: They do that from time to time, right?
BUFFETT: They--but they don't--they don't speak out. It just would take four or five of them, practice would change, then, in some cases. I'm a big fan of pay for performance. We pay people a lot of money at Berkshire when they perform. But we don't--we don't let them--we don't let them shoot the arrow and then paint the bull's-eye after it lands.
QUICK: OK, Allan from Manchester writes in with a question--Manchester, New Hampshire, I should say--writes in with a question that we heard in a lot of different forms. He says, `I'm a shareholder of Berkshire. How can you assure me that Berkshire Hathaway will not change the way it is now after you're gone? In other words, will corporate culture change or will the company be split into different entities when you're no longer in charge?'
BUFFETT: Yeah. I think it's--I think there's more chance of our corporate culture being maintained intact for many decades than any company I can think of. I mean, we have a board that's bought into it entirely. They're big owners themselves in almost every case. They've seen it work. We've got 70 managers at 76 businesses out of--out there. They've come to us because of that culture, in many cases. They've seen it work, too. So you've had this--you've had it communicated through annual reports, at annual meetings. I mean, it is--I think it's as strong a culture as you could possibly have. And I think that anybody that tried to fool with it would not be around here very long.
QUICK: Because of the board and everyone else involved.
BUFFETT: Because of the board, and the fact that I would come back and haunt them, too.
QUICK: Peter Knoll writes in from Minneapolis, and this is another question that we got a lot of similar questions. He says, `As shown in your appearance on CNBC, you've been taking a much more public role in the past few years. Why, and what's the benefit to shareholders?'
BUFFETT: Yeah. Well, I think, you know, today is a good chance to explain things that I may not have communicated perfectly in the annual report. And people can ask questions about it, and I like talking about Berkshire. I like--at the annual meeting, you know, they have to use a hook to pull me off. I mean, it--so I've always been very open about talking about Berkshire. I haven't gone out to sell it to anybody, I never will, but I like--I think you should be able to defend your policies. I think you can do it through various kinds of communications. And if you--if you can't defend them, you know, you better--you better re-examine them. So I kind of enjoy it in that respect.
I am not saying that Berkshire stock is a buy. I never--you know, I don't know whether it is or not. And I--and I never will get into that. But if anybody wants to understand the philosophy, we have a section in the back of our annual report, the economic principles of Berkshire Hathaway. We've run that now for over 25 years and they don't change, because they're principles. And I want people to know what Berkshire's all about, and I--frankly,, I want people that might sell us their business to know what Berkshire's all about, because for some people we are the right choice.