In the past few months I’ve read various articles—see here, here and here—asking whether Warren Buffett and Berkshire Hathaway are past their prime. Looking at Berkshire’s fundamentals, the obvious answer is no. Net income per share has doubled since 2002, while $86 billion has been spent on investments in the past 5 years alone. So what’s changed?
Warren Buffett got political. Ok, he’s always been a little political, but after introducing the Buffett Rule, he has dug himself into a dangerous hole. Buffett is one of the most respected investors of all time (my personal favorite), yet in the past year, his very public stance on taxing the rich has stirred up controversy in all corners of the country. More importantly, it has alienated conservative investors and future business partners.
From Slate
The Buffett Rule fuels a perception that the Berkshire boss has chosen sides - not just on taxes, but in a take-no-prisoners political battle being waged far from America’s heartland. That isn’t necessarily good for Berkshire. The company’s stock has underperformed the S&P 500 index this year, a disturbing trend that is already making shareholders cranky. Throw in a piece of contentious legislation bearing Buffett’s name that looks designed solely to score points on the campaign trail and it could tip the scales for many investors.
Should CEOs steer clear of controversial political issues? As a shareholder, how would you feel if the head of your company was so vocal over issues like abortion, gay rights and tax hikes?
At Berkshire’s recent annual meeting, far too many questions focused on the Buffett Rule and its implications. Those are questions that could have been better spent focusing on the primary business activities of the company itself—takeovers, new investment opportunities, etc. Similarly, Goldman CEO Lloyd Blankfein has admitted that he has already lost one major client over his stance on gay marriage, which he supported in a series of YouTube spots a few months ago.
On the flip side, investors who shy away from great companies because of petty political divisions could be missing out on future returns. Berkshire is a company with a very bright future headed by one of the most intelligent investing minds in history. A shareholder may disagree with the Buffett Rule and sell, but that just means there will be more cheap shares for everyone else. But as the political issue more heated and divisive, more and more people will sell. That could be a problem.
So what do you think? Could CEOs’ political convictions alienate investors and end client relationships? Would you sell shares of a company too involved in politics?
I liked his response to a question regarding whether he was getting to political: “When Charlie and I took this job, we did not agree to put our citizenship in a blind trust.”
With regards to his own investing choices: “I don’t know the politics of Muhtar Kent, Ken Chenault, Ginni Rometty — I don’t know her politics or religion,” referring to the chiefs of Coca-Cola, American Express and I.B.M., among Berkshire’s biggest holdings. “It doesn’t make any difference and I just want to know how he or she will run the business,” he said. “I don’t think it makes sense to make investment decisions based on politics.”
It's silly not to invest in a company like Berkshire because of the CEO's political affiliations. It's not like he's investing in companies that are only geared toward liberal ideals and only have liberal CEOs. That being said, I can see how some irrational investors may not pick up the stock because of this and how that might hurt the share price (I suppose the markets really aren't efficient, EMT lovers... get off me!).
the CEO = great leader meme is yet another product of the republican think tank complex.
Whether or not people think a CEO should keep their mouth shut usually depends on whether they agree with them or not. I didn't hear this question asked of the Koch brothers when they poured millions of dollars into funding the creation of the national Tea Party fad. Wait until the likes of Mark Zuckerberg develop an awereness of the larger environment their business operates within...Buffet isn't controversial, you ain't seen nothin yet!
Well we should be clear also that this isn't exactly separation of church and state we're talking about here.
Government enters business every day - I'll hold on whether this is a good or a bad thing but I don't think there's anything inherently wrong with each opining and discussing intelligently on the other's affairs. The fact that biz and gov are more intertwined than ever (see: Eurozone crisis, Lehman Brothers, GM, TARP...) means that more than ever the two need to understand each other.
As far as leaders go, I'd rather have Buffett commentating than Santorum and Bachmann.
And as far as the efficient market goes...well...come on...if there are many "emt lovers" on here I may need to consider new fora.
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