Value Investing

4 November 2003

Here is the pdf file of Berkshire Hathaway’s news release concerning the expansion of the board of directors to eleven people. To understand some of the background for this expansion, take a look at this excerpt (then, read the 2002 Letter to Shareholders):

At Berkshire, wanting our fees to be meaningless to our directors, we pay them only a pittance. Additionally, not wanting to insulate our directors from any corporate disaster we might have, we dont provide them with officers and directors liability insurance (an unorthodoxy that, not so incidentally, has saved our shareholders many millions of dollars over the years). Basically, we want the behavior of our directors to be driven by the effect their decisions will have on their familys net worth, not by their compensation. Thats the equation for Charlie and me as managers, and we think its the right one for Berkshire directors as well.

To find new directors, we will look through our shareholders list for people who directly, or in their family, have had large Berkshire holdings in the millions of dollars for a long time. Individuals making that cut should automatically meet two of our tests, namely that they be interested in Berkshire and shareholder oriented. In our third test, we will look for business savvy, a competence that is far from commonplace.

Finally, we will continue to have members of the Buffett family on the board. They are not there to run the business after I die, nor will they then receive compensation of any kind. Their purpose is to ensure, for both our shareholders and managers, that Berkshires special culture will be nurtured when Im succeeded by other CEOs.

Warren Buffett
February 21, 2003
(this links to a pdf file)

Filed under: