Warren Buffett's annual letters to shareholders, in advance of Berkshire Hathaway's festive shareholder meeting, are usually studded with nuggets of investment advice in between updates on how portfolio companies have fared. This year's letter is even more expansive than usual, being Buffett's 50th. The yearly gathering in May will also be marked by an early-morning parade of Texas Longhorns down 10th Street in Omaha, celebrating a half-century of arguably the country's most successful holding company.
But while much attention has centered on Buffett's hints about who'll convene those confabs when he's gone, perhaps the most interesting piece was a thought he had about last year's meeting. In 2014, a Cincinnati tax accountant named David Witt -- who owned only $9,000 worth of stock -- offered a proxy resolution asking Berkshire's board to consider paying a dividend. It read:
RESOLVED: Whereas the corporation has more money than it needs and since the owners unlike Warren are not multi billionaires, the board shall consider paying a meaningful annual dividend on the shares.
The board recommended against the resolution, as Buffett has long insisted that reinvestment is a better use of profits than payouts to shareholders. If people want to make money on Berkshire stock, he says, they can sell it. And Buffett has little interest in taking orders from shareholders generally. "Don't get any ideas!" he joked in the introduction to this year's letter.
The remarkable thing, however, is that shareholders agreed. In his letter, Buffett broke out the votes: Owners of the "A shares," which are more expensive and have more voting power, voted against the resolution by a margin of 89 to 1. And owners of the "B shares" -- including many more middle-class amateur investors like David Witt -- voted 660,759,855 shares “no” and 13,927,026 shares “yes,” or about 47 to 1. Everyone expected the resolution to go down in flames, but even so, that's still an overwhelming endorsement of Buffett's anti-dividend convictions.
"To have our fellow owners – large and small – be so in sync with our managerial philosophy is both remarkable and rewarding," Buffett wrote.
It's particularly exceptional considering the general trajectory of American capitalism, which has been toward paying more out to shareholders, and investing less in new and existing businesses. And it prompts the question: Why do shareholders so revere someone like Warren Buffett, while pushing companies to use their money in a way that's diametrically opposed to the philosophy that made him the wealthiest man in the world?