At Berkshire Annual Meeting, Questions for Buffett About Coca-Cola and Deals

OMAHA â€" Every spring without fail, tens of thousands of investors flock to Berkshire Hathaway‘s annual meeting here, hoping to ask just one question of its famed chief executive, Warren E. Buffett.

That tradition played out again on Saturday, as the billionaire answered roughly six hours’ worth of questions â€" including a few pointed queries about his opposition to a controversial executive pay plan at the Coca-Cola Company.

The question-and-answer session is the highlight of one of the biggest annual celebrations of American capitalism, as Berkshire shareholders come from around the world to partake in three days of revelry. Nearly every year’s iteration is light and buoyant, with questions usually efforts to seek advice from one of the most famous businessmen in the world.

This year proved largely the same, with no major controversy hanging over the proceedings. The closest was Mr. Buffett’s abstention from voting over a proposal by Coke to bolster stock-option grants to top management. The move was notable given the Berkshire chief’s longstanding opposition to such plans, though critics asked why the executive did not take stronger action.

With roughly 9 percent of Coke’s stock, Berkshire is the drinks giant’s biggest investor, and its voice would carry significant weight. Moreover, its leader is regarded as one of the foremost advocates for good corporate governance.

Mr. Buffett responded that he had indeed found the plan “excessive” and had taken action â€" but behind the scenes, expressing his displeasure with Coke’s chief executive, Muhtar Kent. The beverage company reportedly is weighing alterations to the proposal.

When asked why he didn’t raise the issue publicly, the Berkshire chief said that he had no desire to go to war with Coke, drawing a clear delineation between himself and activist investors who loudly agitate for change at corporate targets.

“It was the most effective way of communicating for Berkshire,” Mr. Buffett said. “We had no desire to go to war with Coca-Cola.”

That desire for a low-key approach also extended to Mr. Buffett’s son, Howard, whom he has designated as his successor as Berkshire’s nonexecutive chairman. In defending Howard Buffett, who as a Coke director went along with the compensation plan, the elder Mr. Buffett argued that corporate boards are built largely on co-operation and not conflict.

Many directors are chosen not because they are “Dobermans” but because they are “cocker spaniels,” he argued. And raising a fuss was the equivalent of belching at the dinner table â€" and liable to lead to exile in the kitchen.

Yet none of that meant that Howard Buffett will not be a forceful protector of Berkshire’s culture once he takes over as chairman, Mr. Buffett contended.

Mr. Buffett also delivered a seemingly unusual take on corporate pay disclosures. When asked whether companies should disclose the compensation of more executives beyond what’s legally required, the billionaire argued that revealing that information wouldn’t necessarily lead to lower compensation packages. In fact, he argued, it might lead to higher payouts as individuals sought to one-up their competitors.

Beyond corporate governance, other single issue dominated Saturday’s meeting, with the bulk of questions centered around the usual cluster of topics: who will be Berkshire’s next chief executive, what sort of deals will Mr. Buffett pursue, what the billionaire thinks of any number of current events.

As expected, Mr. Buffett dropped no hints about who will replace him as the top corporate steward of the colossus he has built over decades. He did allow that his eventual successor would be able to persuade acquisition targets with intelligence as well as with the company’s enormous war chest, worth $48 billion as of March 31.

Of course, Berkshire needs to do deals now, and the conglomerate’s leader said that he was again on the prowl for a signification acquisition that could bolster its earnings power. He hinted that such transactions could be made through its burgeoning energy arm, which announced a $2.9 billion takeover a little over a day before the annual meeting.

On the other hand, Berkshire would likely spend money on its railroad division, Burlington Northern Santa Fe, to provide upgrades rather than acquisitions.

Several times, Mr. Buffett took time to lavish praise on 3G Capital, with which he partnered to buy H. J. Heinz for $23 billion. He noted that the investment firm, which was founded by longtime friend Jorge Paulo Lemann, was a highly efficient cost-cutter and corporate operator.

“They’re very smart, they’re very focused,” the Berkshire chief said. “They’re very determined. They’re never satisfied. And as I said earlier, when you make a deal with them, you make a deal with them.”

So highly did Mr. Buffett think of 3G that he unhesitatingly said that he would partner with the firm again on another large deal. And he touted a book about the investment concern, which was on sale at the annual meeting.

Other topics that Mr. Buffett addressed ranged from corporate taxes (he’s in favor of Berkshire paying its fair share) to the Federal Reserve (he defended former chairman Ben S. Bernanke) to what his weakness was (he’s too slow to change personnel).

As always, the Berkshire chief answered questions alongside his longtime business partner, Charles Munger, with the two men sharing the easy rapport of longtime friends.

Responding to one question about differences between the two, Mr. Buffett said that he was quicker to take action. When asked if he agreed, Mr. Munger dryly answered, “Well, you once called me the Abominable No Man.”