Jan. 11 (Bloomberg) — Warren Buffetts Berkshire Hathaway
Inc. will establish a formal procedure for shareholders to
nominate board candidates after the U.S. Securities and Exchange
Commission faulted how the company selected directors.
Berkshire didnt interpret the rules as requiring a formal
policy, Chief Financial Officer Marc Hamburg said in a letter to
the SEC dated Sept. 18 and released today. The company
previously considered shareholder recommendations mailed to the
corporations secretary, Hamburg wrote. A formal procedure
should be adopted prior to filing the 2008 proxy, he said.
Buffett, 77, built Omaha, Nebraska-based Berkshire into a
$200 billion investment and holding company during four decades.
He owns about 32 percent of the Class A shares and takes
$100,000 a year in pay. Buffetts reputation for probity, and
his stocks average annual gains of more than 27 percent over
the past 31 years, more than twice the return for the Standard %26amp;
Poors 500 Index, have made him an idol to many investors.
“The market applies a different set of rules to Berkshire
than to other public companies because people believe in
Warren, said Patrick McGurn, executive vice president at proxy
adviser Institutional Shareholder Services, a unit of New York-
based RiskMetrics Group Inc. “Every bit of infrastructure they
build in now, will lessen the blow in the marketplace when he
finally steps down.
SEC Review
The SEC began an effort in 2007 to review the annual proxy
filings of companies from “a wide cross-section of
industries, said John Nester, an SEC spokesman. Board
selection and executive pay are addressed in those documents.
“The nominating committee does not have a formal policy by
which shareholders may recommend director candidates, the SEC
wrote in a letter to Hamburg dated Aug. 21. “Please state why
it has no such policy, as required.
Hamburg responded that company policy “will provide that
Board of Director candidates recommended by shareholders will be
evaluated using the same criteria as are applied to all other
candidates. Hamburg didnt return a call seeking comment.
A subsequent SEC letter to Hamburg, dated Nov. 27, said its
review of Berkshire was completed, with no further comments.
Buffett has been a critic of corporate Americas ethical
lapses. Speaking to Congress in 1993, Buffett said he doubted
legislation could fix ineffective boards, and that media
attention, public embarrassment and peer pressure were better.
“There are certain areas in which laws dont work, Buffett
told a House committee.
Family Ties
Buffett, who serves as chief executive officer and
chairman, increased Berkshires board from seven members to 11
in 2003 with new regulations on director independence looming.
Previously, the board included Buffett, his wife, a son, his
longtime partner, Vice Chairman Charles Munger, and two others
with close business ties to Berkshire. Of the four new members,
at least three had longtime personal or business relationships
with Buffett.
Berkshire “A shares fell $2,100, or 1.6 percent, to
$132,100 in New York Stock Exchange composite trading at 4:11
p.m.
To contact the reporter on this story:
Josh P. Hamilton in New York at
