At least one person is likely to buy Berkshire Hathaway Inc. stock sometime soon.
Meryl Witmer, an investment fund manager for Eagle Capital Partners in New York City, is the newest member of Berkshire's board of directors and, so far, the only one of its 13 members who doesn't own Berkshire shares.
Shareholders elected Witmer on May 4 to the board of the Omaha-based conglomerate headed by Chairman and CEO Warren Buffett. She disclosed her non-ownership status in a filing this week with the U.S. Securities and Exchange Commission.
The other 12 directors own Berkshire shares ranging from Buffett's $59 billion and Microsoft co-founder Bill Gates' $10.2 billion to the $350,000 worth of stock owned by Susan Decker, former president of Yahoo, who joined the board in 2007.
Altogether, Berkshire's directors own 27 percent of the company's stock, a larger share than at many publicly traded companies because of Buffett's 21.4 percent ownership. Requests for comment from Witmer and Buffett weren't returned.
Owning shares helps give directors an incentive to act in the best interests of shareholders who face the same risk of losses and the same possibilities for reward, said Lawrence Hamermesh, a corporate and business law professor at Widener Law School in Wilmington, Del.
“But I don't think any board, in thinking about its composition, ought to pass up somebody who brings important background or perspective to the board,” Hamermesh said. “You want to have someone with experience, who is knowledgeable and able to work with the other directors, even if they don't own any stock at all.”
The chance to serve on the Berkshire board with Buffett would be plenty of motivation for directors, he said. “Not all companies have the same reputation for good governance that Warren Buffett's boards do.”
But it's clear that Buffett likes Berkshire directors to own shares. In his 2003 annual report, he noted that the directors at the time, combined with their family members, each owned more than $4 million worth of Berkshire stock.
In 2002, when he asked for self-nominations to the Berkshire board, he indicated that only large shareholders should apply. All four people who became directors in 2003 and 2004 already were shareholders.
The idea, Buffett said, is that directors should be “shareholder-oriented,” benefiting as their shares grow in value just as other shareholders benefit, rather than from directors' fees.
He backs up the concept by paying Berkshire directors what he called “a tiny portion of their annual income,” $1,800 a year, plus $4,000 to four members who work extra on the board's audit committee.
By contrast, the highest-paid non-executive director of Chevron Corp. ranked ahead of Berkshire on Fortune magazine's list of the largest U.S. companies, received $331,476 in cash and stock options last year. Berkshire also does not award stock options.
“At Berkshire, board members travel the same road as shareholders,” Buffett wrote to his shareholders in 2004, adding in 2005, “I know of no other board in the country in which the financial interests of directors are so completely aligned with those of shareholders.”
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
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