Warren Buffett rebuked the institutions that sought to oust him last year as a director of Coca-Cola Co., Atlanta, because of what they consider his lack of independence on Coke's board. The $186.9 billion California Public Employees' Retirement System, Sacramento, and the $70 billion State of Wisconsin Investment Board, Madison, withheld votes for him, while Institutional Shareholder Services recommended its clients withhold their votes. Mr. Buffett, chairman of Berkshire Hathaway Inc., Omaha, didn't name any of the dissenting institutions in his annual letter to shareholders of Berkshire Hathaway.
"So far, however, the moves made by institutions have been less than awe-inspiring," wrote Mr. Buffett, chairman of Berkshire Hathaway. "Usually, they've focused on minutiae and ignored the three questions that truly count. First, does the company have the right CEO? Second, is he/she overreaching in terms of compensation? Third, are proposed acquisitions more likely to create or destroy per-share value? ... Instead, many simply follow a ‘checklist' approach to the issue du jour.
"Some institutions questioned my ‘independence' because, among other things, McLane and Dairy Queen buy lots of Coke products." Berkshire Hathaway owns stock in both companies.
"In our view, based on our considerable boardroom experience, the least independent directors are likely to be those who receive an important fraction of their annual income from the fees they receive for board service (and who hope as well to be recommended for election to other boards and thereby to boost their income further)," Mr. Buffett wrote. "Yet these are the very board members most often classed as "independent." Most directors of this type are decent people and do a first-class job. But they wouldn't be human if they weren't tempted to thwart actions that would threaten their livelihood. Some may go on to succumb to such temptations."
Brad Pacheco, CalPERS spokesman, said the fund opposed Mr. Buffett because he is a member of Coca-Cola's audit committee, which approved the auditor that also performs non-audit consulting work for the company. He said the CalPERS board is expected to decide next week how to approach the auditor independence issue this year. In general, he said the CalPERS boards expects to take a narrower approach on particular companies in its proxy voting this year.
Patrick McGurn, ISS special counsel and vice president and director-corporate programs, said, "We'll examine Coca-Cola when its proxy statement comes out." Vicki Hearing, SWIB public information officer, said fund officials would have no comment.