The critical takeaway from the recent annual meeting of Berkshire Hathaway BRK.A, -1.36% BRK.B, -1.12% has been the least reported: the shareholder base has changed radically and the only way to assure that Berkshire endures beyond Warren Buffett is for his controlling stake be preserved after he leaves the scene.
Buffett spent his life cultivating a high-quality shareholder base at Berkshire, mostly individuals and families who shared his specific views of corporate life. It starts with viewing Buffett and the shareholders as co-owners of a partnership. It includes unusual practices such as having a board of intelligent businesspeople knowledgeable about the company, giving managers extraordinary autonomy, holding acquired companies forever, and reinvesting all capital rather than paying dividends.
So long as those shares come to rest with such high-quality shareholders, they can be relied upon to elect a board that also understands and embraces those principles which, in turn, would appoint managers who do so. The trouble is, Berkshire’s shareholder base has changed radically in the past several years and transferring the shares as is currently planned would put control in the hands of asset managers whose indifference or ignorance would kill Berkshire as we know it.