Berkshire Hathaway to Formalize Director Nomination Procedure
Warren E. Buffett's company was asked by the SEC to set up a formal policy.
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Saturday, January 12, 2008
Warren E. Buffett's Berkshire Hathaway will establish a formal procedure for shareholders to nominate board candidates after the Securities and Exchange Commission faulted how the company selects directors.
Berkshire didn't interpret the rules as requiring a formal policy, Chief Financial Officer Marc Hamburg said in a letter to the SEC dated Sept. 18 and released Thursday. The company previously considered shareholder recommendations mailed to the corporation's secretary, Hamburg wrote. A formal procedure should be adopted before it files the 2008 proxy, he said.
Buffett has built Berkshire into a $200 billion investment and holding company over four decades. He owns about 32 percent of the Class A shares and takes $100,000 a year in pay.
"Every bit of infrastructure they build in now will lessen the blow in the marketplace when he finally steps down," said Patrick McGurn, executive vice president of Institutional Shareholder Services, a proxy adviser.
The SEC began an effort in 2007 to review the annual proxy filings of companies from "a wide cross-section of industries," said John Nester, an SEC spokesman. Board selection and executive pay are addressed in those documents.
"The nominating committee does not have a formal policy by which shareholders may recommend director candidates," the SEC wrote in a letter to Hamburg dated Aug. 21. "Please state why it has no such policy, as required."
Hamburg responded that company policy "will provide that Board of Director candidates recommended by shareholders will be evaluated using the same criteria as are applied to all other candidates." Hamburg didn't return a call seeking comment.
A subsequent SEC letter to Hamburg, dated Nov. 27, said its review of Berkshire was complete, with no further comments.
Buffett, who serves as chief executive and chairman, increased Berkshire's board from seven members to 11 in 2003, with new regulations on director independence looming. Previously, the board included Buffett, his wife, a son and people with close business ties to Berkshire. Of the four new members, at least three had longtime personal or business relationships with Buffett.
Buffett serves on The Washington Post Co.'s board of directors.
