Certain owners of substantial amounts of Berkshire stock also manage institutions whose clients, wealthy individuals and families, are large Berkshire holders. Berkshire director Sandy Gottesman, for example, personally owns shares yielding 2.02 percent of Berkshire’s voting power and 1.29 percent of its economic interest. Clients of First Manhattan, the firm Gottesman formed in 1964 and where his son Robert W. Gottesman is a senior manager, command another 1.91 percent of the voting power and 1.22 percent of the economic interest.
Berkshire director Bill Gates personally owns Class A shares with 0.45 percent of the voting power and 0.26 percent of the economic power, whereas the Bill and Melinda Gates Foundation receives and distributes the millions of Class B shares Buffett pledged to it (counting which would boost Gates’ voting power to 1.32 percent and economic interest to 3.70 percent).16 Meryl Witmer bought seven Class A shares shortly after being elected a director in 2013 and is part-owner of Eagle Capital, whose holdings include Class B shares with 0.16 percent of Berkshire’s voting power and 0.53 percent of its economic interest.
Among other Berkshire directors with meaningful stock ownership, Thomas S. Murphy commands 0.14 percent of the voting power and 0.08 percent of the economic interest (see table 14.1). Managers of Berkshire’s subsidiaries also own considerable Berkshire stock. Most are independently wealthy, and many own greater stakes in Berkshire than all but the most invested directors do. Like those directors, they believe in Berkshire culture and eat their own cooking.
Few investors will continue to own a stock for sentimental reasons, but many Berkshire stockholders are friends of Buffett’s, revere Berkshire culture, and, of course, are making a great deal of money from the investment. For example, Shelby Davis, who founded Davis Select Advisers in 1969 (now run by his son Christopher C. Davis), owns an undisclosed personal stake in Berkshire, and the firm’s clients own shares commanding 1.19 percent of Berkshire’s voting power and 0.79 percent of the economic interest. Other long-time shareholders own sizable blocks through firms with reputations in sync with Berkshire’s culture, including the sense of permanence: Ruane Cunniff & Goldfarb (1.15 percent and 0.85 percent, respectively); Gardner Russo & Gardner (0.53 percent and 0.40 percent); Brown Brothers Harriman (0.49 percent and 0.47 percent); Markel Corporation (0.21 percent and 0.21 percent); and Tweedy Browne (0.13 percent and 0.09 percent). (See table 14.2.)
Table 14.1
Berkshire Directors
Birth Year Election Year Class A Shares Class B Shares Voting Power (%) Economic Interest (%)
Warren E. Buffett 1930 1965 336,000 1,469,357 34.41 20.50
David S. Gottesman 1926 2003 19,538 2,393,398 2.02 1.29
Charles T. Munger 1924 1978 5,324 750 0.53 0.32
William H. Gates III 1955 2004 4,350 0 0.45 0.26
Thomas S. Murphy 1925 2003 1,376 26,976 0.14 0.08
Howard G. Buffett 1954 1993 1,200 2,450 0.12 0.07
Ronald L. Olson 1941 1997 306 17,500 0.03 0.02
Charlotte Guyman 1956 2003 100 600 * *
Donald R. Keough 1927 2003 100 60 * *
Walter Scott, Jr. 1931 1988 100 0 * *
Stephen B. Burke 1958 2009 22 0 * *
Meryl B. Witmer 1962 2013 7 0 * *
Susan L. Decker 1962 2007 0 3,125 * *
37.70% 22.54%
*Each is de minimis but together total 0.03% of the voting power and 0.02% of the economic interest.
Note: Class A shares have one vote per share and the equivalent right to dividends and other economic distributions; Class B shares have 1/10,000 the voting power of the Class A shares and 1/1,500 the economic interest. So any given director’s or shareholder’s voting power is the portion of Class A shares owned plus 1/10,000 of the portion of Class B shares owned, whereas the economic interest is the portion of Class A shares owned plus 1/1,500 of the portion of Class B shares owned. Data in the accompanying tables are as of year-end 2013. At that time, with Berkshire’s aggregate market value of about $300 billion, one basis point (0.01%) of economic interest represented $30 million.
Source: Berkshire Hathaway Annual Proxy Statement (2014); Bloomberg (year-end 2013).
Sophisticated investors generally follow conventional wisdom to avoid concentrating portfolios in the stock of one company. Among holders who publicly disclose stakes, for instance, few of the largest hundred shareholders of blue chip companies like Apple, ExxonMobil, and General Electric allocate more than 5 percent of their portfolios to that company’s stock.17 In contrast, many Berkshire shareholders concentrate in its stock, following the example of Berkshire’s own portfolio concentration. To illustrate, forty-four of the hundred largest publicly disclosed Class A owners hold more than 5 percent of their portfolio in the stock, starting with Buffett.18 Seventeen of the largest one hundred holders of the Class B are so concentrated, counting Buffett and seven others who also concentrate their wealth in Class A (see tables 14.3 and 14.4).