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Warren Buffett, Coca-Cola and the Not-So-American Dream
Posted by: Vitaliy Katsenelson (IP Logged)
Date: April 24, 2014 03:55PM

Next Thursday, for the seventh time, I am going to Omaha, Nebraska, for the Berkshire Hathaway annual meeting. But this is the first time that I find myself respecting Mr. Buffett a little bit less than the year before.

One of Berkshire Hathaway’s (BRK.A)(BRK.B) largest and oldest stock holdings, Coca-Cola Co. (KO), held a proxy vote yesterday, and its management clearly decided to award itself too much stock. Warren Buffett (Trades, Portfolio) acknowledged in an interview that he is against the plan: “We do not believe it would be consistent with Berkshire’s long-ingrained culture to support such a plan at any of your equity holdings.”

However, instead of expressing with his proxy ballot what he really feels, he abstained from voting against the plan, and explained: “I could never vote against Coca-Cola.”

By failing to vote against something that was clearly wrong, Buffett, who in my mind (until yesterday) used to be a moral compass for corporate America, became another middling American politician — the common type that all of us respect so little, the one that votes not for what he believes in but for what is going to keep him in the good graces of his party or get him reelected.

When your company owns 10 percent of another company (even if it is Coke), there is a responsibility that comes with the investment. But when you are Warren Buffett (Trades, Portfolio), who constantly speaks out against excessive compensation, that responsibility is even greater.

There should be no double standard for Coca-Cola or for Buffett. After paying its management millions of dollars to run a company “a monkey could run” (Buffett’s words, not mine), shareholders shouldn’t have to fork over an additional 14 to 16 percent over four years to management to incent them to do their jobs — running a company with such a significant competitive advantage (which was there long before these executives arrived) that any MBA student with a C- average could operate.

We don’t own Coke and probably won’t own it unless the price gets cut by half, so my tirade here is not as a wounded shareholder but as an American. It’s what Buffett said in a CNBC interview that bothered me the most: “It’s kind of un-American to vote no at a Coke meeting.” I would not want to live in a country where everyone always agrees with the powers that be, where people are afraid to speak up. I lived there once — in the Soviet Union.

I could not disagree more with Buffett. Coke’s compensation plan is unjust for the shareholders. It is American to speak up against injustice — yes, even if it is perpetrated by an American icon such as Coke. Let me correct that: especially if it is an American icon such as Coke. And let’s be honest: The shareholders, not the management, own Coke. An injustice is what transpired at the company, even if 83 percent of shareholders who voted were too indifferent to read the proxy.

It is unpleasant to write something negative about a person you respect and owe so much in your development as an investor and as individual. But I am sure the pre-Coke-vote Warren Buffett (Trades, Portfolio), the one who had such a tremendous impact on me, would want people to disagree with him if he were wrong.

That said, I am still making my annual pilgrimmage to Omaha. But as I’ve written in the past, going to the Berkshire Hathaway meeting is not really about Berkshire Hathaway and not even about Buffett or his right-hand man Charlie Munger (Trades, Portfolio). Omaha, for these few days in spring, becomes value investor central, giving me the opportunity to see my value investment friends from all over the world.




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
Stocks Discussed: KO, BRK.A, BRK.B,
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: jameshou (IP Logged)
Date: April 24, 2014 10:23PM

Well said, fully agree with your view




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: warrensc11@facebook (IP Logged)
Date: April 24, 2014 11:32PM

one does not need to be hostile towards its wonderful associate of 25 years to voice its view.. he abstained from voting is not a cowardly act but a balancing act between maintaining good relationship and voicing disagreement..




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: Investor77 (IP Logged)
Date: April 25, 2014 03:10AM

Sad but true...




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: vgm (IP Logged)
Date: April 25, 2014 06:18AM

The author is expressing the obvious, and expected, herd-like response. I disagree. When two of the greatest, most experienced and most ethical, investors and businessmen of all time (Buffett and Munger) take a considered decision on a major and very visible matter, then I try to look under the surface and understand their approach - and not just throw stones. Abstaining is not a cop out. It's a subtle but unmistakable expression of disapproval which Coca Cola will not have missed. Buffett also spoke with Kent to explain why he was abstaining and no doubt gave him a few pointers, thereby avoiding a public spat. Buffett, Munger and Kent are highly sophisticated and ethical operators. That has not changed for me. (Winters' mistaken claim of huge dilution was refuted by Buffett who also explained how the dilution could be mitigated by extending the timeframe)




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: SeaBud (IP Logged)
Date: April 25, 2014 07:04AM

VGM - you call somebody's opinion "obvious and herd-like" and say they are "just throwing stones." Why would you take a well-reasoned, calm analysis and attempt to denigrate it through aspersion rather than rationale? I happen to agree with the author based on two primary rationales:

- Buffett has long spoken against excessive executive compensation in America. 

- As a shareholder, would we be ok with granting across the board bonuses to delivery drivers that were not needed for retention? If wasting company resources is not ok, why is it ok when it comes to pay for executives?

You explain that Buffet still made his point by not voting - and voice your opinion that this approach is more effective. I respect your view - and address it respectfully - but, I respectfully disagree. To me, Buffett is at the forefront of the issues outlined above and as a major shareholder and leader in American business, I would have preferred he take a firm stand and am disappointed he did not.

Just can't fathom the need for you to attack the author not with facts but with derogatory comments.




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
Stocks Discussed: KO, BRK.A, BRK.B,
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: fekafiemd (IP Logged)
Date: April 25, 2014 09:00AM

agree 100 percent!




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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: vgm (IP Logged)
Date: April 25, 2014 09:03AM

Seabud -- Correction. I do not attack the author. My first line is clear on that. The opinion expressed by the author is one which is ubiquitous in the media. It's the first thought we all have about the matter under discussion.

When dealing with characters of the caliber and integrity of Buffett and Munger, we should be prepared to go deeper and give them the benefit of the doubt and think again. More than Buffett, Munger has been vocal, and often in an extreme way, about compensation. Do you think they don't see the obvious? The fact that they decided in unison on their chosen path to abstain tells us what they believed to be the superior course of action in this case. In my opinion, that's what should get our attention. That's what's fascinating here and worth pondering for me. I believe they saw the word as mightier than the sword, so to speak. Buffett will always do what's best for shareholders (including himself!) - in the long run. To believe he opted out of his responsibility is simply not a credible argument to me. 

The majority view is clear. I beg to differ. I know I'm in the minority. Thanks for commenting. 

"If everyone is thinking alike, no-one is thinking." Benjamin Franklin




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: jsoumilas (IP Logged)
Date: April 25, 2014 09:43AM

Totally agree with the author. Mr. Buffett's inaction on this specific issue is heart breaking.




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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Re Warren Buffett Coca-Cola and the Not-So-American Dream
Posted by: denarius (IP Logged)
Date: April 25, 2014 10:22AM

I think Warren may have had a "momentary lapse of reasoning" during which his actions did NOT follow his words. He is getting up there in age, so I'll have to give him a "pass" on this one.

I agree with Vitaly. 




Guru Discussed: Warren Buffett: Current Portfolio, Stock Picks
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