(BRK.A), (BRK.B)
Having Bill Gates on your board of directors would seem to be a plum thing for any corporation, and for Berkshire Hathaway it’s something they have enjoyed for the last twelve years since he was elected to the board in 2004.
However, according to a report in the Financial Times, UK-based asset management companies Legal & General Investment Management and Aberdeen Asset Management have announced they will vote against board members that have been serving more than fifteen years.
The move is no threat to Bill Gates at this time, but would impact three of Berkshire’s board members that have been serving for more than fifteen years.
Paul Lee, head of corporate governance at Aberdeen, feels that board members “go a bit stale” if they serve for an extended period.
The view that long-term board membership makes a board of directors to compliant and lacking in independence is at the heart of the move to create more turnover. Another issue that often cited is to foster more board diversity, which at most U.S. corporations is overwhelmingly male and white.
Berkshire Hathaway’s thirteen member board has three women, with the most recent one to join being Meryl Witmer, an investment fund manager for Eagle Capital Partners.
So, should you toss Bill Gates off your board after fifteen or twenty years because you have an arbitrary policy on the length of board membership?
Doesn’t make much sense to me.
Corporations should be looking for board members that provides the best advice and oversight. Berkshire’s board will play a key role in the selection and oversight of Warren Buffett’s successor. A deep knowledge and belief in Berkshire Hathaway’s corporate culture is one of the key things they can contribute. They also need to weigh the value of having stability, and in the case of Bill Gates, having a high-profile board member that gets listened to every time he comments, whether it is in the boardroom, or in the press.
© 2016 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.